Acknowledging Africa’s informal sector


The African continent’s informal sector is gaining legitimacy as “the new normal” in driving forward the economy.

Ghana’s Vice-President, Kwesi Amissah-Arthur spoke at the World Economic Forum on Africa that informal producers and traders are, in fact, the mainstream of many economies throughout the continent, and governments must respond with policies that recognize that fact.

Amissah-Arthur drove this statement home when he cited an example from his home country, “In Ghana, farmers in rural areas are, in effect, an informal economy, yet they are large contributors to the country’s foreign earnings.”

While informal economies in Africa exist, they should never be seen as illegitimate or marginalized as the future of Africa lies in self-employment and creativity.

“What is required is a policy crossover. We cannot assume such activities are illegitimate when making policy. We need to make legitimate activities in the informal sector quantifiable so that we can respond adequately,” he explained.

Mandla Sibeko, Chairman of Mineonline Africa in South Africa, said that the informal sector is increasingly a youth demographic due to the very limited employment opportunities being created in the formal sector.

Sibeko added that, in order to meet the number of young people reaching the work age, South Africa needs to create 80 million jobs. “The young are forced to be in the informal sector, so their future has to be self-creation,” said.

Sibeko believes there are huge opportunities for such ‘self-actualization’. “More than 80 per cent of what we consume in South Africa, for example, comes from outside the continent. So there are obvious opportunities there for people to make many products,” he said.

John Veihmeyer, Global Chairman of KPMG International USA, said, “There is a tremendous amount of interaction between the formal and informal sectors in Africa – making it difficult to distinguish between the two.”

He added that policy initiatives that aim to build economies should not seek to differentiate between these two elements. It is not an either-or situation. “Growth should be about lifting all boats in the sea.”

Winnie Byanyima, who is the Executive Director for Oxfam International raised her voice for poor communities outside the formal sector to be given more access to the supply chain.

She asked that governments to ensure that, with such access, fair prices are paid, there is protection against low wages, there is risk insurance against changing weather and a system of credit access is introduced.

With the ultimate aim to bring the informal sector into the formal sector and into the tax base, said Amissah-Arthur, the Ghanaian government has set up a pension system for rural farmers.

“They are small steps, but they are progress towards bringing the informal sector closer to the formal,” he added.