I am sure you have heard the phrase “informal sector” mentioned several times in “third-world” development discourses. I regard this construct as third-world nonsense because the activities it describes are the building blocks of economic independence in so-called developing economies.
Unlike in the ‘first world,’ where the informal sector is often an illegal endeavor, in the ‘third world,’ with Africa in focus, this sector encompasses the economic activities of most of the citizenry. Activities such as agriculture, construction, transportation, automotive, electronic, and mechanical repairs, production, wholesale, retail, distillation, catering, and various other services fall under this description.
Data abound, though they may be understated, they still demonstrate the significant impact of the so-called informal sector. The informal sector not only includes low-skilled, primitive technology, and underpaid activities, but also a system that has built generational wealth and incorporates moderate to high analytical skills.
The sector remains the highest employer and income earner in Ghana. However, its impact is calculated without factoring in Agriculture, the nation’s highest employer, which is dominated by informal players, making it folly to call that an informal sector. Does that mean we have an informal economy as a country?
It’s said the construct evolved from what was regarded as the traditional economy. Well, conventional economic activities have evolved to build world superpowers. Private fried chicken and kitchen-experimental sweet syrups have become global brands.
My mother is a trader. She began her career by hawking food and then went to a secondary school campus where my father taught. She later established herself at a location she still currently occupies. Her business evolved from hawking to an eatery (chop bar) to an eatery and mini-mart (selling groceries, cosmetics, wax print, and cookware), then to a restaurant, mini-mart, and bar. She later dropped the eatery due to work stress, then went strictly to bars for a period, and was one of the main spots for a long time. She recently brought back the grocery section when stronger competition popped up.
Like the regular corporate, my mother, with a basic education, started a business, grew it, diversified, consolidated it to maximize profits, made acquisitions, and diversified again to ensure continuity. Apart from the bar and grocery shop that she runs from a location she has operated for over 30 years, she has a purified sachet water business with my retired father and owns terraces of single- and two-room apartments. This is not peculiar.
There’s a disconnect when it comes to development in Africa. Mainly due to colonization and the continued existence and influence of imperialist institutions that research or pay to be researched, and in turn mainly ‘identify’ and define our problems, a lot of the details get lost in the agenda and semantics.
Why don’t we factor agriculture into the general equation when calculating the impact of the informal sector?
While doing casual viewing and reading for this article, I realized the construct was primarily defined by unorganized, under-skilled, low-paying, and unsafe working conditions. Perceptions that lead to the usual basic remedy submissions.
I considered it a no-brainer when Mobile Money transactions began to outweigh bank transactions in Ghana. I think it is a core pillar of my argument when you consider the fact that a financial instrument created for the ‘informal sector’ has become the dominant one.
This sector has been the engine of growth, sustaining this country through its turbulent years. While Ghana has been on the decline, the informal sector, which others refer to as their “small businesses,” has kept the fabric of society in seam. It has kept food on most tables, clothed, sheltered, and educated the majority of Ghanaians.
In fact, there are accounts of how this sector helped keep souls afloat in the supposedly developed worlds when “shit hit the fan.”
These informal players understand the economics of our society. That’s why they have created wealth through the so-called traditional economic activities. Due to bureaucracy, unnecessary procedures in registration, and the predatory nature of the tax authority, many well-educated individuals, including legislators, run their businesses informally.
Many of our indigenous ventures, such as artistry, brewing, distillation, clothing and fashion, food, and agriculture, have remained at a primitive stage of development. Although still a good earner, imagine the scale effect of proper attention.
I have no genie nor a crystal ball, though I may have sipped on the devil’s juice and smelled his incense at some point in writing this article, but you need no soothsayer to tell this tale.
Fortunately, it is not rocket science. All the mistakes have been made, and the lessons are there to be noted. I have always maintained that new first-worlds have emerged in record times because the wheels have already been invented.
According to a recent report by the Ghana Statistical Service, the country’s largest employer, the informal sector, which accounts for 80% of total employment, contributed only 27.4% to the Gross Domestic Product during the same period. Although I have my issues with these figures, the report highlights the impact of the long-term neglect of the sector.
We seem to have been locked in a cycle of perpetual need because we have failed to identify our engine of growth. How can a country break from the quagmires of poverty when its highest employer represents less than 27.4% of its GDP? It must be an owned state because it clearly does not own the majority of its wealth.
To address this, we must be serious. We must consider it as an existential challenge and address it accordingly. This crisis transcends generic industrialization and band-aid remedies such as workplace condition improvement and general business registration.
First, we must ditch the construct of the informal sector and regard it as our engine of growth. We must service and maintain it to achieve economic independence.
The government must ensure the implementation of viable existing policies and formulate new ones that will establish working institutions tasked not only with creating structures, registering, and ‘formalizing’ the sector, but also deliberately working to effect attitudinal change. We must identify our problems and work to invest in our own solutions.
There must be policies that provide incentives in the form of tax breaks and financial assistance. Deliberate efforts at improving the ease of doing business not only for multinationals but also for local firms and startups whose progress will result in a real positive impact on the economy. We shouldn’t only seek to register players for tax revenue, but also give them a reason to become institutionalized so that the government can tap into a bigger growth basket.
The government must avoid lazy-minded, pickpocket revenue streams such as E-levy. I stated in an earlier article that it’s akin to killing the goose for a one-time meal rather than raising it for centuries of celebrations. Mobile Money should be viewed as the gateway to financial inclusion. We must spur its growth to aid in our quest to bring the masses under a regulated system, accelerate our cashless efforts, establish credit systems, track transactions, and ultimately improve government tax collection at multiple levels, rather than relying on narrow-minded pickpocketing. And the best part is that all of these will be built on a local system with endless possibilities.
Infrastructural developments should be built around our communities. We must build facilities that will accommodate and integrate into the existing society. District, Municipal, and Metropolitan assemblies must develop plans that properly zone developments and insist on developments that will adequately accommodate the vulcanizer, mechanic, hajia’s waakye joint, the fufu chop bar, drinking bar, the rice and salad joint, the fried rice place, street hawkers’ market, and the grocery shop. Our markets must be built appropriately.
The government must devise schemes to provide skills advancement. Local craftsmen/women and artisans should be trained in finishing their work. They must be introduced to new tools and technologies to meet current standards. They must be exposed to the concept of branding and proper packaging.
We must provide education on record-keeping and public officers to assist in maintaining financial records and filing taxes. The government must employ effective development communication to inform the broader populace of the benefits of properly registering and institutionalizing their practices and businesses. Benefits include access to low-cost capital and free business management advice, newly developed infrastructure, tools, and technologies, tax incentives, and other initiatives that improve the ease of doing business.
American politicians often say, “Small businesses are the backbone of our economy.” While this may seem more like a rhetorical statement nowadays, it doesn’t make it any less accurate. It’s just the sad result of the general decay in leadership across the world. And yes, our small businesses are the so-called informal sector.
Instead of indebting ourselves to buy the cocoa we grow, we can encourage the establishment of local confectioneries so we can make more chocolates from the “world’s best cocoa.”
I understand the importance of multinationals in the current age of global economics, but they have a role, and that’s not to build nations. They are there to leverage growth. So, it’s up to you to decide if you come to the table as a meal or a guest.
Small businesses build nations. That’s how we cultivate practical entrepreneurs and professionals who can take this country —and this continent —to the next level.
These individuals have made the most of the limited settings they have been given. They solve problems in society, the basics of development. So why not empower the scale effect?
Colonization and the continued imperialist agenda and geopolitical shenanigans have their effects, but that can no longer be an excuse in the age of wisdom.
I say every oppressed is always the victim, but the victor is an oppressed who seized destiny to prevail.
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