Ease of doing business: Charity begins at home

The old saying “charity begins at home” must certainly guide the ease of doing business reforms government is preaching almost on a daily business.

By Muchesa Chatsama

So much talk has been going on with regards the ease of doing business in Zimbabwe. Much of this talk has been focussed on foreign investments. Much as it is aimed at making Zimbabwe an attractive investment destination for foreign investors. It is also critical to ensure doing business is also easy for nationals of Zimbabwe; indeed, charity must begin at home.

A number of local small and medium enterprises (SMEs) are struggling with compliance issues, not so much because they are not interested in compliance, but rather because the compliance processes or requirements are either unclear, cumbersome or expensive to follow.

Here I will enumerate some of the bottlenecks that SMEs are experiencing as they endeavour to be compliant with start-up requirements. I am writing some of the issues from an experience point of view. I am surely expecting the responsible institutions to exercise their right of response.

Let me begin by listing some of the fundamental start-up requirements in Zimbabwe. These include: company registration, Zimbabwe Revenue Authority (Zimra) registration, council licencing, bank account opening, to name but a few. Please note that the list above concerns generic requirements across businesses. There are other sector-specific requirements.

The time taken and the resources expended in starting up a business in a compliant manner are so straining and require people to be strong and patient. Those of weak dispositions can give up and start playing hide and seek. More often they find a way of beating the system and “surviving”. It gets into their business blood system and they begin thinking it is the normal way of doing things.

Such consequential habits are enduring and they die hard. The multiplier effect is loss of revenue for the government in terms of potential taxes. Also, corruption is bred as those non-complying will always devise ways of accessing certain business deals for which they have no prior compliance. Blame them as we may choose to, but I think it is so critical that we seriously introspect our compliance requirements and/or processes. Are they friendly and effective enough as to entice business starters to take them up? I am going to highlight below some areas that seem to have posed a lot of challenges for the formalisation of SMEs.

Let us start by looking at the Zimra tax clearance certificate (ITF263). This is a requirement for every business. Is there a well-outlined and explained process of acquiring it? At what point in time should one get it and how? What are the requirements for having it? Are SMEs aware of the inherent benefits of acquiring the ITF263?

There has been talk that the whole process of acquiring an ITF263 has been automated and that those in need can interface with the Zimra website. This is a good initiative in my view but, has Zimra taken the initiative to assess how this is working.

How many people are able to make use of this system without hassles? What are the challenges being experienced in using this online tool? More importantly, how can the system be improved so that it impacts in a way that is intended?

It is imperative to attend to these issues time and again. In fact, once a new system has been launched there must be a concurrent evaluation system which will always provide significant information that then can be used to improve it. It is, therefore, not enough just to initiate and implement a system.

To get the co-operation of the SMEs, the system must not be perceived as a hindrance or a burden to business progress. What I have gathered is that a number of people seem to be experiencing challenges in registering with Zimra through this online system. Maybe the server is failing to cope with the demands or it is just not the appropriate system for the purpose. I suggest Zimra takes audit to establish the levels of utilisation of this system.

The revenue authority must also embark on awareness campaigns to ensure SMEs are made seriously aware of the need to register and how best they can interface with the online system. This awareness programme should not be seen as a once-off thing but rather a continuous process until such a time when the impacts are easily noticeable and sustainable.

The other thing is the opening of business bank accounts. This has also become so nightmarish for business rookies.

Some of the demands are so difficult as to become almost impossible. We know banks have to comply with (know your customer) KYC requirements, but honestly there must be a way of striking a balance without causing those making compliance efforts to give up.

An account opening process which is supposed to take just a day can be as long as a month or even more. Let us not forget here that we are dealing with SMEs who are operating without the proper papers. The thrust here is to make them appreciate formalisation of their operations. This means the formalisation process must be seen to be friendly if we are to buy their cooperation.

What is paradoxical is how much talk has been made with regards financial inclusion, but on the ground there seems nothing concrete to help the issue, save for the financial literacy programmes conducted by various institutions.

What is needed is a simplified process that encourages the unbanked to open bank accounts. The multiplier effect of banking SMEs is that it becomes easy for Zimra to collect taxes and it also becomes easy for SMEs to apply for the ITF 263. The whole process is intertwined.

The council licencing system also needs to be friendly. Local authorities must have all-inclusive and integrated solutions to business licensing. They should also find a way of educating the SMEs on business licensing process and the inherent benefits therein. Making the process automated, like Zimra, will save time and effort, provided the system is made user friendly and that those who interface with it are properly trained. Going forward, I think it is important to come up with a National Compliance Agency which is tasked with looking at this critical aspect of Zimbabwe’s economic development.

As part of its fundamental responsibility this agency must come up with sector-specific dashboards which must then be communicated clearly to Zimbabweans so that they are aware of the clear guidelines when one intends to start a business. It must be a one-stop shop with all relevant institutions represented. We must not really be looking at complicated things when we are talking of the ease of doing business. It is those little things that should be taken seriously. The compliance agency can then come up with a number of generic and sector-specific initiatives of improving business start-ups.

In my view, the ease of doing business does not entail all the complicated and expensive things being done. It just requires a change of behaviour. All that is needed is an implementation matrix and a serious conviction to do the outlined activities. It is high time we drifted from the culture of just talking to a culture of doing things. It is all about doing, doing and doing and nothing less.

We know exactly what we want and let us stop mere talk and start doing. Let us just do what is required. I repeat, let us just do what we are supposed to do. Institutions must be assigned tasks that they should do and be made accountable for results. An implementation matrix must always be accompanied by a monitoring and evaluation plan. We need to see the outputs, outcomes and impacts of all the activities being done to that effect.

Chatsama is the leading organisational development and training and leadership development consultant with ProSource Global Consultants. He is passionate about entrepreneurship development and can be contacted on +263 732 521 579.

These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society.

E-mail: kadenge.zes@gmail.com, cell +263 772 382 852

One thought on “Ease of doing business: Charity begins at home”

  1. Charles Frizell says:

    I could write a book on corruption in Zimbabwe – in fact, long ago I did, but withdrew it from publication out of fear.

    It is also almost impossible to start and run a legitimate business in Zimbabwe. Way back in 2001 a “trip to the bank” involved driving to Bulawayo to change a huge bundle of Z$ into a very small pile of US$, then driving to Lusaka to deposit it in my account there, and then back home again. So a drive of about 2,000 kilometres and 3 days – to make a bank deposit?

    This was because some genius in the Reserve Bank had decided that we could not pay our Chinese component suppliers on presentation of a Pro Forma invoice as we had always done before. All over the world everyone knows that China requires Cash With Order, and most especially when it comes to an African country with a very dodgy record of payment.

    This is just one of the countless hurdles, and the difficulty in dealing with civil servants who have not the faintest idea of how business works, nor the understanding that every business creates desperately needed employment.

    A further disincentive is that if you do manage to succeed despite all the impediments, some “connected” individual will contrive to take your business from you on one pretext or another, reaping where they did not sow.

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