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Street vendors: Lessons from Mauritius

ARVIND Modi (25) started vending in the beautiful streets of Port Louis, Mauritius, at the age of 17 after dropping out of high school and has only known that job in his life.

Hazel Ndebele recently in Mauritius

He says selling on the streets is more profitable than working for someone in a shop.

Modi told the Zimbabwe Independent recently in Port Louis that hawking in the streets of one of Africa’s rare economic success stories is profitable than working in some sectors. He said vending in Mauritius is organised and structured as shown by the situation on the streets and operating methods of the vendors.

“Almost everyone here pays tax and has a bank account,” Modi, who sells a wide range of fake and original goods including footwear and sunglasses, told this reporter.

“I bank my money every fortnight because I would want to get a loan from the bank some day. In order to achieve that I have to make frequent deposits as the bank will take this into consideration when I eventually apply for a loan.

“Shop owners here underpay their workers and that is the major reason why working on the streets is better as you make more and are free to manage your cash.”

Modi makes a profit of about 1 000 Mauritian rupees (US$28) every three days. On average he makes 9 780 rupees (US$280) per month in a country where average monthly income is 18 300 rupees (about US$520) a month.

As you walk along the streets of Port Louis you come across hordes of vendors selling different wares on street pavements as is the case in Zimbabwe’s cities. Although vending is a common feature of the two African countries there are remarkable differences in this informal sector activity.

Port Louis is the Mauritian island’s economic, cultural, political centre and most populous city. It is a busy city with many tall buildings, lots of traffic and a large number of people from diverse cultures and religions, mainly Indians. A surprising feature despite the hustle and bustle of the city, and in contrast to Harare, is its cleanliness despite almost three quarters of its population working and living there in both the formal and informal sectors.

Mauritius, whose unemployment rate is 7,5%, is one of Africa’s thriving economies. Benefitting from a long history of political stability, good governance and progressive leadership as well as an open and flexible regulatory system, it is now Africa’s most competitive economy with a GDP of over US$10 billion.

The tiny island country, located 2 977km from Zimbabwe in the middle of the Indian Ocean, enjoys the best business environment in Africa, according to the World Bank, which ranks it tops on the ease of doing business index in the continent.

While some African countries like Zimbabwe have regressed since independence from colonial rule, Mauritius, like neighbouring Botswana, has grown from a low-income, agriculturally-based to a middle-income diversified economy with growing industrial, financial and tourist sectors.

Surrounded by stunning coral reefs, palm-fringed beaches and cobalt blue seas, Mauritius spans less than 800 square miles and is home to over 1,3 million people, mainly an ethnically and religiously diverse mix of people of Indian, African, French and Chinese heritage. The country, dotted with sparkling lagoons and jagged volcanic mountains, attracts nearly a million tourists annually.

Mauritius’ economic freedom score is 76,4, making its economy the 10th freest in the 2015 index. It is ranked first out of 46 countries in the sub-Saharan African region, and it scores well above the regional and global averages.

Adherence to stable fiscal policy and openness to global trade and investment have established Mauritius as one of the world’s 10 freest economies. Economic progress in Mauritius has been facilitated by a stable macro-economic environment, prudent policy decisions and openness to competition. Adoption of open-market policies has been accompanied by growth of financial and tourism sectors. The rule of law has been enforced effectively within a framework of transparency and accountability, although corruption remains a concern.

In an interview, Mauritius Investment and Trade consultant Dev Chamroo said: “The informal sector is very rampant in Africa. In Mauritius all hawkers need to have a licence; all economic operators have to be registered either with the Small and Medium Enterprise Development Authority, Registrar of Companies or with the local authorities.”

“Applicable tax here is 15% on profits. Most of the vendors pay and only a few escape the tax net through non or under-return.”
This contrasts to Harare, formerly referred to as the Sunshine City due to its weather and cleanliness, which has lost its lustre in tandem with the country’s economic decline which has seen many companies close or retrench, resulting in an unemployment rate of over 85%.

The once thriving city’s streets are now litter-strewn and congested by human and vehicular traffic and choking with uncollected garbage. The vendors, who now include degreed failed job-seekers, have largely resisted attempts to force them to register and sell only at designated points, and are the starkest and ubiquitous manifestation of the country’s economic crisis that has lasted for well over a decade.

In a surprise move this week, the country’s military on Monday ordered vendors operating at undesignated sites in all urban areas to vacate by Monday next week or face unspecified action. This has set the vendors on a collision course with the authorities, with sections of the opposition and civil society throwing their weight behind the vendors that have earned sympathy as victims of the country’s economic mismanagement.

The involvement of the military is seen as a political and security measure to clear vendors from city centres to prevent a potential street explosion by volatile masses of the unemployed and disgruntled teeming towns.

The Tunisian uprising and the Arab Spring in 2011 was sparked off by an act of self-immolation by a vendor after municipal officials confiscated his wares.

In Port Louis most vendors who spoke to the Independent were school dropouts and those of poor education. Most vendors are at designated selling points, although a few occupy space illegally in the street pavements. But even these help maintain the cleanliness of the streets as there is order: all those selling vegetables and fruits are only found at a large market in the central business district (CBD).

According to the National Vendors Union of Zimbabwe (Navuz), Harare, with a population of two million, has more than 20 000 vendors on street pavements in the CBD. On the streets of Harare at almost every corner one can find everything from clothing to vegetables and raw meat.

In Mauritius the informal sector contributes significantly to economic development as vendors pay tax to both municipality and the Mauritius Revenue Authority. It is estimated that between US$3 billion and US$7 billion is circulating in the fast-expanding informal sector in Zimbabwe — a figure the broke government is anxious to lay its hands on through taxes.

According to a report titled Harnessing Resources From the Informal Sector For Economic Development, done by the Zimbabwe Economic Policy Analysis and Research Unit, and Bankers Association of Zimbabwe, the formal sector is being replaced by the fast-growing informal sector, hence it has to contribute to economic development.

“Harnessing resources from the informal sector is a critical pillar in the inclusive financial sector development agenda. Deep financial markets play a critical role in the supporting economic growth and development in the country. Policy makers are interested in formalising the informal sector; the revenue authorities faced with a shrinking formal sector tax base are exploring ways of increasing the contribution of the informal sector to tax revenue,” the report says.

The taxing of vendors in Zimbabwe is an emotive issue and continues to be debated heatedly, with Finance minister Patrick Chinamasa last week emphasising during a parliamentary session the taxation of informal traders was vital.

“We cannot afford not to follow where the money now is, which is in the informal sector,” said Chinamasa. “What I would say to the honourable Members (of Parliament) is that if they are already making income, all we want to know is what level of income.”
He however added that if the informal sector players were forthcoming with their books and showed they were not making any profit government would not tax them.

“The tax system has got tax bands and there are thresholds of income which are not liable to taxation. Like I said, you can do your books very simply, very elementary and show the taxman,” Chinamasa said.

But economist John Robertson says it would be improper to further burden vendors with tax since most of them are already struggling to earn a living.

“It is a very difficult situation to tax Zimbabwean vendors because these people, whom government intends to tax, do not have a choice; if they had, they would rather be formally employed,” said Robertson.

Chipo Msindo (36), a Harare vendor who sells ladies shoes, says she hopes government would spare vendors from tax as they make very little.

Msindo said she had never owned a bank account and does not see the point of opening one in an environment where banks are reluctant to lend.

“Mabank acho anongomuka akavhara saka better kuto chengeta zvangu mari yangu kumba pasi pemattress (Zimbabwean banks are not to be trusted as they can close anytime so it is better to keep my money under the mattress),” she said.

While the anti-tax campaign among vendors strikes an emotional chord and may fuel a taxophobia in the sector, the broke government is unlikely to back down as it argues everyone involved in meaningful economic activity must pay tax to enjoy services — erratic as they are — the state provides.

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