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 atoms of economic independence of so-called developing economies.
Unlike in the ‘first world,’ where the informal sector is largely 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, transport, auto, electronic and mechanical repairs, production, wholesale, retail, distillation, catering, and various 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 does not only include 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 although its impact is calculated without factoring in Agriculture – the nation’s highest employer and dominated by informal players makes 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, traditional 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 to a secondary school campus where my father taught. She later established 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 an eatery, mini-mart, and bar. She later dropped the eatery because of work stress, then went strictly bar 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 basic education started a business, grew it, diversified, consolidated it to maximize profit, 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 dad and owns terraces of single and two-room apartments. This is not peculiar.
There’s a disconnect when it comes to development in Africa. Largely due to colonization and the continued existence and influence of imperialist institutions that research or pay to be researched and in turn mostly ‘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 largely 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 and has sustained 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 the bureaucracy, usually unnecessary procedures in registering, and the predatory nature of the tax authority, a lot of well-educated individuals including legislators run their businesses informally.
A lot of our indigenous ventures such as artistry, brewing, distillation, clothing and fashion, food, and agriculture have been kept 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 a point of making 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 highest employer, the informal sector representing 80% of total employment only contributed 27.4% to the Gross Domestic Product during the same period. Though I have my issues with these figures, the report signifies the effect 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 oil it to take us to the state of 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 deliberately working to effect attitudinal change. We must identify our problems and work to invest in our own solutions.
There must be policies that will provide incentives in terms of tax breaks and financial assistance. Deliberate efforts at improving the ease of doing business not only for multinationals but local startups and businesses 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 get institutionalized so the government can rip from a bigger growth basket.
The government must avoid lazy-minded pick-pocket 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, speed up our cashless efforts, build credit systems, track transactions, and ultimately improve government tax collection at multiple levels rather than the 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 existing society. District, Municipal, and Metropolitan assemblies must develop plans that properly zone developments and insist on developments that will properly 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 properly built.
The government must devise schemes to provide skills advancement. Local craft men/women and artisans should be trained on 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 keeping financial records and tax filing. The government must employ effective development communication to inform the wider populace of the benefits of properly registering and institutionalizing their practices and businesses. Benefits such as access to cheap capital and free business management advice, newly developed infrastructure, tools and technologies, tax incentives, and other ease-of-doing-business improvement initiatives.
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 true. 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 cocoas 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 get practical entrepreneurs and professionals who can take this country, and this continent to the next level.
These people have done magic with the primitive settings that they have been offered. They solve problems in society, the basics of development. So why not empower for scale effect?
Colonization and the continued imperialist agenda and geo-political 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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