Ignore the informal sector at your own peril

By Antony Mutunga The World Bank last December forecasted a rise in the Kenyan economy from 5.6% to 6% in 2016. Tourism, trade and infrastructure are identified as the important players that will attract more investors to our shores. Even though these are considered the main players to economic growth rate in 2016, one other important sector that is assisting in the economic growth is the informal sector. According to the International Labour Office (ILO), informal sector is all the economic activities by workers or economic units that are in law or practise and are not covered or sufficiently covered by formal arrangements. In Kenya, an example of such is the ‘Jua Kali’ industry, which is believed to have come up in the 1960s. Jua Kali is Swahili for hot sun. The name was attributed to the people who worked and toiled under the raging sun in open air. As years went by, and the industry began to incorporate machinery and advanced technologies in the process of making items and products, the term ‘Informal sector’ started becoming synonymous with Jua Kali in Kenya. The Jua Kali sector is the king of the hill when it comes to making, creating or copying innovative new designs with a twist. The sector ensures they can imitate as well as create new designs as fast as they come up and thus attract more customers. This is how the Jua Kali has been able to survive and grow to where it is today with the praise going to the courage and the creativity of the people in the sector. According to data from Kenya’s Economic Survey 2015, the informal sector is the leading sector in creation of employment as it created almost 83% of jobs in Kenya. Since 2010, the informal sector employed 11.8 million people against 2.4 million in the modern or formal sector. The wholesale and retail trade put together with hotels and restaurants form the largest part of the informal sector with almost 7million people employed, followed by manufacturing with almost 2.5million people while the community, social and personal services sub sector employs more than 1million people. There are also almost 1million more people employed in the transport and communications sector. The growth of the informal economy is often attributed to changing social or economic environments. For example, with the adoption of more technologically intensive forms of production, many workers have been forced out of formal sector work hence resulting to an increase in employment in the informal sector. The informal sector also has a great advantage in that the government does not closely monitor it. The sector is able to operate to its full potential and the people in the sector get to enjoy all the fruits of their labour without any interference from government more so the heavy taxation. The sector is also responsible for bringing in some foreign exchange for through the goods they create sell abroad; quality wood furniture, artistic doors and amazing pieces of art created from scrap metal. These commodities are mostly destined as art for export trade, which in turn brings in the foreign exchange. The main reason behind the lack of adequate support from government to the informal sector is the fact that they do not pay tax hence the reluctance by government to use its funds to assist the industry. International organisations such as the World Bank and the international monetary fund (IMF) are also usually antagonistic towards the sector instead of being supportive, especially for the sector’s notoriety in use of child labour. Richard Attias, former executive producer at the Davos forum, said, “Africa’s informal economy is one of the most innovative and inventive environments in the world. Yet it is an environment with little regulation in which workers are often exposed to hard conditions and live without a safety net.” Besides abuse of child labour, the sector’s other elephant in the room is the association with low wages. This has often been due to high competition and poor marketing strategies. The other problems bedevilling the sector include lack of enough space and terrible working conditions. “There are many problems here, there is too little space and we are squeezed together. If you look at these buildings you would be afraid to stay and work inside,” says Jua Kali worker, Martin Aloo. The people also lack opportunities to market their products abroad and hence, they want to be advised by entrepreneurial experts on how to penetrate these markets. Joseph Omondi, a Jua Kali artisan who creates pans and pots in Nairobi, says that if people in the sector were to be given the opportunities to showcase their products in international markets then the small-scale enterprises in the Jua Kali sector would be a booming business. Although, even after all the hardships the people in the sector face, the World Bank report points to the trend that most people with higher levels of education are turning to the informal sector as a career of choice. This is because of the myriad opportunities the sector offers According to Kenyan economics expert, James Shikwati, the country needs to stand on its own two feet. The local industry, he says, needs to be given room to establish itself, as it is the key to a growing economy adding that it is time African governments and leaders strategised in order to release their citizenry from the indignity of poverty and economic deprivation. The informal sector is an important prospect that should be nurtured, as it may be the key to taking Africa to the top as the future belongs to the informed and courageous. The government needs to encourage an infusion of the informal and formal sector in order to have the two sectors work together to promote the local industry. The recent move by the government to boost the informal sector by committing Sh2 billion shillings is a step in the right direction and it will really help the sector to grow and reduce the level of unemployment in the country. Proper structures to monitor the sector will not only mean the Government ropes it in in the tax bracket, but it will also solve the youth unemployment puzzle leading to a stronger economy

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