The informal sector in Africa is one of the largest in the world. It contributes between 25 and 65 percent of Africa’s GDP and accounts for between 30 and 90 percent of total non-agricultural employment. 9 in 10 rural and urban workers have informal jobs. Most are women and youth. They do not have adequate legal or social protection. If they are injured at work or can no longer work tomorrow- what will happen to them? How will they provide for their families?
The applicable Sustainable Development Goals for the informal sector are:
SDG 8 – Decent work and economic: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage formalisation and growth of micro-, small- and medium-sized enterprises including through access to financial services.
SDG 10: By 2030 empower and promote the social, economic and political inclusion of all irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status
Before we jump into the list, first thing is first – what is the informal sector?
“All economic activities by workers or economic units that are – in law or practice – not covered or sufficiently covered by formal arrangements”, includes legitimately-produced goods and services that do not necessarily follow formal processes such as standards regulations, business registration or operational licenses. – International Labour Organization
The informal sector consists of “upper tier” – those who voluntarily chose to be in the informal sector and the “lower tier” – people cannot afford to be unemployed but do not have access to more productive employment in either the formal or the informal sector.
Here are 10 ways how formalising the informal sector will benefit women and youth in Africa
- Increase social security: the informal sector is a social challenge as informal workers are vulnerable and exposed to extreme risks due to lack of social security mechanisms. Women and youth will be socially secure if the sector is formalised.
- Decrease poverty: the informal sector is also an economic challenge because it is linked to poverty. 82 percent of African workers are “working poor.” 70% of Africa’s youth live on less than US$2 per day. Formalising the grey sector will regulate wages and offer security that will decrease poverty.
- Increase wages: jobs in the informal sector are associated with low wages. Formalising the sector will increase pay for workers, who are mainly youth and women.
- Create better business environment: formalisation will make it easier to start and run businesses. For example, informal cross border trade constitutes 30-40 percent of total intra SADC trade. ICBT in SADC is valued at $ 17.6 billion. 70 percent of ICBT in Africa is done by women trading in a variety of commodities either in raw or semi-processed, including basic to luxury goods produced in other countries. In this regard formalising ICBT will empower traders, mainly women, by providing a secure operating environment that triggers increase in trade and higher income.
- Eliminate exploitation: it is much easier to exploit vulnerable groups in the informal sector as there are no proper regulations or monitoring. Women and youth are vulnerable groups in Africa. Formalisation will stave off exploitation and protect these vulnerable groups.
- Create more jobs: Africa has the youngest population in the world. There 200 million Africans between 15-24 years. This number will double by 2045. Already the youth constitute 60 percent of the unemployed in Africa. What work opportunities do the youth have now? What will happen in 2045? Formalising the informal sector could avert this ticking time bomb by creating job opportunities in this sector. Building stronger institutions will create more jobs in this sector for the unemployed and secure the future of the coming generations.
- Better quality jobs: young women are more likely to have poor-quality jobs compared to their male counterparts because of gender specific constraints and discrimination. Formalisation will improve the nature and content of the work performed, working-time arrangements and workplace relationships. Overall this will improve women’s lives and their well-being.
- Increased access to finance: Approximately 70 percent of women are financially excluded. Further women’s access to finance and financial services is consistently behind that of their male counterparts. Women will have more access to formal finance channels (e.g micro-credit) through formalizing their businesses.
- Foster development: Formalizing the informal sector will create stronger institutions through taxation, private property rights and regulation. Stronger institutions cause development and growth in the economy for all. Formalising the grey sector will increase tax revenue and raise GDP. This will grow the economy and foster development that will ultimately benefit women and youth.
- Increased access to education: women and girls have less access to education in Africa. Formalising the informal economy will increase their access to education and access to information.
African leaders and the AU have largely ignored addressing the informal sector. Understandingly it is an enormous task. However it must be undertaken to protect and empower vulnerable groups in society and close inequalities in society. Gradually transforming the informal into a semi-formal sector, then eventually formal, will benefit women and youth.
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