1. Zimbabwe was once a breadbasket exporting agricultural commodities but its economy has declined since 2000 due to lack of development assistance and low economic activity. 2. Domestic resource mobilization is now key for economic growth but faces challenges including low savings, capital flight, a large informal sector, and poor tax administration. 3. Improving domestic resource mobilization in Zimbabwe will require expanding the tax base through technologies like mobile money, rationalizing tax incentives, and improving tax collection and savings in the informal sector.

1. FROM BEG BASKET TO BREAD BASKET THROUGH
DOMESTIC RESOURCE MOBILISATION
Zimbabwe

2. OVERVIEW
 Zimbabwe was the breadbasket of Africa, exporting wheat, tobacco, and corn to the rest of the continent and
beyond. Zimbabwe contains the most fertile farmland on the continent. Wikipedia
 A Bread basket is a situation where a country, by its own critical momentum and effort, is able to produce
agricultural commodities in such excess as to have enough for domestic consumption, while exporting to
neighbouring countries. Zimbabwe was such a vibrant economy, but, the economy has gone south since the turn of
the millennium, official development assistance has gone down and economic activity is low.
 Ever since the introduction of multi currencies the goal for every citizen is to get Zimbabwe moving again. The
biggest challenge to efforts aimed at setting Zimbabwe back on a sustainable path to economic recovery and
growth after a decade of recession until 2008 is lack of access to affordable funding.
 Economist believe that no matter how brilliant Government policies are, without access to affordable long term
finance, economic recovery or even development will be a challenge. Billions of dollars are required to rehabilitate
and put new infrastructure from water and sanitation, health and child care to roads and power generation.
 As such Zimbabwe has resorted to domestic resource mobilisation for economic growth due to the drying up of
official development assistance and the unwillingness of donor countries to engage Zimbabwe.

3. THE CHALLENGE
In sub-Saharan Africa domestic resource mobilisation constitutes about 70% of development finance which means
there is a deficit of 30% usually filled by loans or Aid or other forms of public finance. In Zimbabwe the statistic for Aid
has gone down to less than 10% thus over 90% percent is DRM.
The economy is characterised by the following:

4. 1. LOW SAVINGS
 A serious problem confronting Zimbabwe is the savings gap, this essentially means that many households are not
saving.
 This could be as a result of low disposable incomes, however, this may also be as a result of the banking crisis that
happened recently in Zimbabwe, households no longer trust bank and would rather keep their money at home
under mattresses.
 The main problem with mobilization of resource in Zimbabwe is that not enough savings are generated to facilitate
the required investments.
 The low saving rate in Zimbabwe also explains the low level of economic activity in the country and the slow pace of
growth and sometimes negative growth.
 To compound the problem those that have resources to save, prefer to save outside Zimbabwe.

5. 2. CAPITAL FLIGHT
 “Zimbabwe’s macro-economic policies need to be re-aligned to decisively plug-off the high incidence of capital
flight characterising the economy. Estimates as at June 2015, based on a combination of balance of payments
analysis against Zimbabwe’s potential equilibrium performance (macro-economic steady state growth path) indicate
that annually, Zimbabwe lost an average of $1.5bn through capital flight between 2012 and June, 2015,” Munyaradzi
Kereke MP. That means to date Zimbabwe has lost in excess of 5 billion.
 Capital flight remains a stumbling blocks to D.R.M. Tax flights from Zimbabwe are obviously several times higher
than aggregate inflows from official development assistance. Capital flight severely weakens D.R.M and it
undermines social contracts and damages good governance thus exacerbating our situation.

6. 3. TAX INCENTIVES AND EXEMPTIONS
 Zimbabwe tax office website state that, “Like many other developing countries, Zimbabwe offers a number of tax
and customs incentives in the form of tax holidays, reduced tax rates, and accelerated depreciation. The incentives
are given by sector, type of activity, form of organization, and geographical location of investment”
 In a wide-ranging survey of taxation challenges facing developing countries, Bird (2008) made a convincing
argument for minimizing exemptions or completely eliminating them. Exemptions shrink the revenue base,
complicate tax systems, and open the door to political capture (the party or group in power could use discretionary
exemptions to retain power or undermine businesses linked to the opposition)
 Research has shown that Tax incentives are not the primary determinants of the decision to invest. With the number
incentives that Zimbabwe has, if incentives were a determinant we would have a new international company every
month.

7. 4. POOR TAX ADMINISTRATION
 Due to complex tax system and inefficient tax administration, most small enterprises prefer to remain informal.
 The failure to adequately remunerate the skilled staff in tax offices is a major impediment to tax collection in
Zimbabwe which is leading to bribes and corruption.
 There is a culture that is growing in Zimbabwe, a culture of non-compliance which accounts for the low D.R.M.

8. 5.THE INFORMAL SECTOR
 Zimbabwe has a vibrant informal economy that is the biggest employer at the moment which is a major obstacle to
broadening the tax base and collecting direct taxes.
 It poses a wide range of economic challenges, taxes are not collected in that informal economy, and informal
entrepreneurs’ production is not measured and there are no labour and social protection schemes for workers.

9. POLICY RECOMMENDATIONS TO IMPROVE DRM IN ZIMBABWE
 It is a fact that much of the challenge of enhancing the role of domestic resources rests with national policymakers,
the domestic private sector, and citizens more broadly.
 It however has to be a collective effort it will not be fair to leave the agenda to a few individuals or a few sectors of
the economy.
 We need all inclusive policies to ensure Zimbabwe attains the SDGs by 2030. Research has shown that financial
inclusion leads to economic growth.
 In fact there is a general believe that “there is a fortune at the bottom of the pyramid” yet private sectors in
Zimbabwe has not been able to come up with products or services that excite the bottom of the pyramid.
 We recently formed an organisation called Financial Inclusion for sustainable development Zimbabwe (FISDZim). We
are advocating not only for financial inclusion but for sustainable financial inclusion.
 We believe that financial literacy is a bridge between financial inclusion and sustainable financial inclusion.
 We believe we can use the few aid funds to help Zimbabweans to become more self-reliant through for instance
increased domestic revenue mobilization through the use of mobile money technology.
 We recommend the following

10. 1. MICRO SAVINGS
 In our paper mobile money: promoting a culture of savings in Zimbabwe, we realised that Zimbabweans are saving
but the challenge is that they do not trust the banking system anymore.
 A disruptive mobile money savings account will encourage the poor to save on a more secure platform than under
the pillow and mattresses.
 The poor are already saving through burial societies, rotating savings and credit associations, accumulating savings
and credit associations and savings clubs. Such funds if formalised will be available to finance domestic investment.

11. 2. MICRO INSURANCE
 Research has shown that the needs of those in informal employment and at the bottom of the pyramid are exactly
the same as the needs of those in formal and at the middle or top of the pyramid.
 Social security organisations should probably start looking at micro-pensions.
 These would make it possible for men and women in informal employment to easily, safely and at low cost make
contributions toward their retirement. This will add to what is already there from pension funds thereby enhancing
DRM.

12. 3. BROADENING THE TAX BASE
 Zimbabwe like Most African countries is overwhelmed with very large informal sectors and underground economies
where cash transactions do not leave any audit trails for tax purposes. It will therefore be necessary to find ways of
taxing the informal sector.
 There is need for government to embrace technology and adopt and start using and encouraging the use of mobile
money in the economy.
 Zimbabwe has an estimated $7 billion that is circulating in the informal sector and there is no record for those
transactions and they are not taxed.
 According to Zimstats labour force survey, 94.5% of the employed population in Zimbabwe is in informal
employment and 5.5% are in formal employment. Zimbabwe’s economy is now more informal.
 However it is worrying to note that our social security, pension funds and the tax man are still concentrating on the
5.5% in formal employment and not thinking about the majority in informal employment.
 Enhancing DRM implies looking for new types of taxes and expanding the revenue base.

13. 3. BROADENING THE TAX BASE

14. 4.IMPROVEMENT IN TAX ADMINISTRATION
 There is the need to automate the business processes and procedures of tax administration in Zimbabwe.
 We can only imagine how much more the government would collect if tax remittances were paid through mobile
money.
 Some companies end up not complying because of the hassle of having to look for a government office to remit. By
using mobile money government can reach out to many businesses.
 Tax Administrations should be restructured to address the issue of a large informal sector in our country.

15. 5.RATIONALIZATION OF TAX INCENTIVES
 As mentioned earlier, Tax incentives are not the primary determinants of the decision to invest.
 Most investors base their investment decisions on economic, commercial and political factors.
 Most start- up companies in Zimbabwe make losses for several years and do not benefit from tax exemptions
offered by government.

16. CONCLUSION
 Within our own limits with our own resources we can help Zimbabwe survive until such a time that ODA starts
flowing to Zimbabwe again.
 In the absence of official development assistance Zimbabwe needs to find ways to enhance DRM.
 As Financial Inclusion for Sustainable Development Zimbabwe we propose the following.

17. 1.PUBLIC, PRIVATE-CORPORATE AND HOUSEHOLD
 Increased (public, private-corporate and household) savings mobilization through the trusted mobile money
accounts.
 Recently we read in the news that Kenya launched its first government bond offered exclusively through mobile
phones thus, taking advantage of the country's booming mobile money market.
 There is no doubt that for economies that are recovering, mobile money is playing a major role in economic
development by bringing access to finance at the bottom of the pyramid.

18. 2.MORE EFFICIENT INTERMEDIATION
 More efficient intermediation so that domestic savings are invested.
 With the cell phone informal sector employees can contribute at any given time and from anywhere at their own
convenience. With over 5.9 million currently in informal employment a minimal contribution of say $0.25 towards
retirement per day can lead to huge collections by the pension funds and social security organisations.
 Such funds with relevant national policy can then be used to support the same informal sector to grow through
bank managed loans that are disbursed through mobile money.
 This will lead to domestic investment from DRM that has the potential of changing the shape of our economy and
steer it towards recovery.