An analysis of the perceived benefits of, and barriers to formalisation among the informal entrepreneurs in Harare metropolitan area

Abstract

There is growing evidence that many entrepreneurs are engaged in informal work in Zimbabwe. The scale of their business activities makes them an important part of the national economy. Government’s policy response has been mainly deterrence through pursuing and punishing which bred animosity. This research analyses the perceived benefits of and barriers to formalisation among informal entrepreneurs in Harare Metropolitan area in order to gain a better understanding of the most effective ways to enable formalisation for the benefit of both government and the informal business people. The study adopted a descriptive quantitative research design. Out of a population of 12000 vendors, the number affiliated to the Vendors’ Union, 180 questionnaires were administered of which 163 were responded to and returned for data analysis. Factor analysis was used in order to extract the dimensions of barriers and benefits of formalisation. The process extracted six dimensions for benefits and three dimensions for barriers to formalisation of business. The results confirmed the proposition that the perceived barriers to, and benefits of formalisation have an influence on the willingness to formalise their businesses. The results can serve as a guide to government in its bid to help informal entrepreneurs to legitimise their businesses for the good of not only the economy but the same. The major conclusions were that while informal entrepreneurs in Harare Metropolitan area appreciated the benefits of formalisation, they lamented the existence of regulatory, bureaucratic and administrative barriers to formalisation. It is recommended that authorities should enable formalisation through fostering compliance as opposed to eradication through pursuing and punishing.