Informal Economy

Dialogue Aims to Unlock the Informal Economy in Africa

A policy dialogue titled: "Informal Economy in Africa - Why Way Forward," has brought together stakeholders from different sectors to discuss how to make economic policy responsive, inclusive, and sustainable in Africa.

Press release | 11 May 2022
Facing challenges and finding solutions
Whilst the informal economy has become the largest source of employment in most economies in Africa, the sector is still not taken seriously as it is regarded as transitory and on the fringes of formal employment.
“Most people enter the informal economy not by choice but because of a lack of opportunities in the formal economy and in the absence of other means of livelihood,"
said Cynthia Samuel-Olonjuwon, the ILO Assistant Director General and Regional Director for Africa.

The regional conference, convened by the African Union Commission (AUC), the United Nations Development Programme (UNDP) and the International Labour Organization (ILO), aimed to gather multiple perspectives to codesign and cocreate solutions to bolster the role of the informal economy in Africa.

According to Sabelo Mbokazi, the Head of Labour, Employment and Migration at the Africa Union,
"... in sub-Saharan Africa, the formal segment of the economy does not employ more than 10 per cent of the labour force, and has not been expanding in the recent past, and extreme poverty has increased in contrast to other regions’ making the challenge of the informal economy and poverty reduction inseparable twins."

Ojijo Odhiambo, Senior Economist at UNDP said that COVID-19 pandemic has brought to the fore the vulnerability of workers and enterprises in the informal economy and the significant contribution the informal economy makes to income, and employment in Africa.
"The informal economy is inextricably linked to the rest of the whole economy. We must, therefore, begin to think of counter policy narratives that challenge the status quo and unleash the immense potential of the informal economy,”
said Odhiambo.

Participants highlighted the decent work deficits abound in the informal economy such as absence of social protection, access to business development services, finance, infrastructure, markets, technology, education and skills programmes and property rights. This is a sector where women and young people are particularly vulnerable; with noticeable child labourers participating in this sector. There was a clarion call for action and urged policy makers and all concerned to move away from the usual rhetoric by most of the speakers.

The policy dialogue session is the beginning of a series of solution-driven policy dialogues that will culminate in a detailed strategic action plan and practical policy interventions to realize the potential of this segment of sub-Saharan economies.

Among the ingredients to achieve this according to research findings by Professor Erika Kraemar-Mbula from the University of Johannesburg are:
  • recognition of the informal economy at policy level;
  • make formalisation a goal;
  • create platforms for knowledge exchange for policy development;
  • proactive and reactive policy approaches as well as
  • reduce the digital divide in the informal economy and include it in mainstream technological developments.
Zimbabwe's Permanent Secretary in the Ministry of Public Service, Labour and Social Welfare, Simon Masanga, said the government of Zimbabwe is cognisant of the importance of contributions of the informal economy despite decent work deficits which are common in Africa.
“We have since directed that there be a strategy for formalizing the informal sector and with the support of ILO and UNDP, we did all-inclusive consultations which will lead to a strategy to enable the transition to formal arrangements,"
he said.