Because of the nation’s high unemployment levels, a significant number of the township population have become entrepreneurs – successfully operating in the “informal” economy. I call it the second economy – but apparently it has now been termed System D, meaning the DIY system where individuals are highly creative and flexible in delivering products and services to a market that they truly understand. System D is made up of inventive, self-starting, entrepreneurial merchants who are doing business on their own, without registering or being regulated by the bureaucracy and, for the most part, without paying taxes,
I would estimate that this economy, which occupies a significant portion of the 90% of our unemployed population, is worth quite a few billion dollars per annum and cannot continue to be ignored. I also estimate that this economy is probably more active than the first economy, with significant amounts of cash changing hands every day.
To give my readers some perspective, according to Robert Nuewrith, the American journalist and author who described system D, the global “informal” market is worth a staggering $10 trillion per annum and employs an estimated 1. 8 billion people. It is the third largest economy in the world and is expected to surpass the US economy in about 15 years time.
In other words, it will be the biggest economic sector in the world. According to Neuwirth, it is the economy of aspiration characterized by intelligence, resilience, self-organization, and group solidarity. Smart international conglomerates and brands are already accessing this market by distributing their products directly through vendors and not through shopping malls. It is an inclusive economy that has few barriers to entry and allows an estimated 2/3 of the world’s population, who are excluded from the formal economy, to make a decent living.
In my opinion, corporate Zimbabwe is missing a golden opportunity to access this market segment, where goods are imported from South Africa or China and distributed quite effectively and cheaply directly to the consumer, thereby sidelining the local big brands who remain in the traditional shopping malls, waiting for customers to come to them.
Ecocash, the money transfer system, has changed the game in the way that money is exchanged in this economy. I am not surprised by the loud protest from our traditional commercial banking sector, which still believes that ATMs and banking halls are the only way to deliver services. That is just not the case any more, and the sooner our banks realize it the better!
Zimbabweans no longer trust banks. If they can avoid them, all the better. That’s where Ecocash has come in. Instead of fighting technology, banks must be more creative. I agree with Arthur Mutambara on this issue. Ecocash is definitely in the right place at the right time and is poised for an interesting growth explosion. I just hope that corporate greed through excessive transaction charges will not destroy what is a unique social development technological platform. As we all know, monopolies suck.
Another interesting phenomenon in system D, is that customers now prefer getting things made as opposed to buying finished products from the shops. Because of our high unemployment levels, a lot of technicians are now self-employed and are quite flexible when it comes to supplying services to this market. They get the customer to buy the materials and they will make whatever the customer wants according to the customer’s specifications at a fraction of the price of the finished products offered by some of our local companies. Electricians, plumbers, carpenters, painters, mechanics, builders, tailors, cobblers and more are interacting directly with this market on a daily basis. Business is no longer in the high rise offices in town but in the dusty streets of our townships.
What we t need to do is to harness the creativity in this market and facilitate its development. In the many economic blue prints that I have read, I have noticed an incessant focus on the aim to integrate the informal market into the formal market, but this need not be the case. We need to focus on further enabling the “informal” market to grow because it is inclusive in nature and has a much higher social impact potential than the first economy. For example, our local authorities are using old licensing laws that sought to protect the first economy by arresting and harassing vendors while discouraging entrepreneurship and creativity. This is an old economic model.
We need an intelligent and new approach that appreciates that it is no longer business as usual. What we need to ask is; how can we nurture this new phenomenon, while still ensuring that taxes are collected? The future is not for the faint hearted. – Join the debate. Send your comments to: vtmusewe@gmail.com
Post published in: Analysis