In the late 1960s in Accra, Ghana, Keith Hart coined the term “informal sector.” At that point in time, the informal sector was viewed as the "traditional" counterpart to the "modern" industrial economy. The former was characterized by low-income activities such as selling food and wooden carvings by unskilled and illiterate migrants from mainly rural areas unable to find formal employment in the city. Hart wondered if such activities possessed some autonomous capacity to generate growth for the urban poor’s income, and if the “reserve army of urban unemployment and underemployed’’ constituted a passive, exploited majority in urban cities. By 1987, Richard Hosier opined that Hart’s concerns had not received clear-cut answers despite much research. However, things are different today.
In September 2021, my colleague Manu, and I visited Technotech Energy Systems(TES)at Kariobangi market, one of Nairobi's informal sectors. TES deals with energy-saving stoves (locally known as “Jikos”), water heating systems, baking ovens, institutional furniture, and general metal fabrications. After a brief stint with the TES boss, Mr. Yegon, I gathered that he was a climate change enthusiast, and graduate in marketing. “Most of the business owners here are university graduates who left formal employment for entrepreneurship while those in full-time employment have employees running their businesses,” explained Yegon. Then with a broad smile as though to validate his choice, Yegon quipped "I cannot complain. I generate better income from my business here than when I was in full-time employment.” Most of Yegon’s customers are drawn from government and private institutions, donor-funded climate change projects, and the middle-class population.
We then shifted our conversation to matters of local labour. “The type of skill, nature of specialization, and experience of workers are key to attracting the kind of market and clients who can pay us a premium for our goods,” explains Yegon. “As such, I look out for these qualities when hiring workers to enhance efficiency, quality, and income necessary for the growth and survival of my business” asserted Yegon. Then as though to support their boss, two of Yegon’s workers praised this “new” business era for multiple work opportunities, flexibility in working hours, and better income. Evidently, both the employer and employee have a voice in this current business culture.
How about Hart's concern about the contribution of the informal sector to the urban economy? According to Guven and Karlen, the informal sector accounts for 80.8% of the urban jobs in African cities. Additionally, 95.8% of the workers are young people aged 15-24 years while 92.1% are women. The pivotal role of the informal sector in job creation and urban economy is expected to remain considering the on-going growth in urbanization and Africa's working population.
What are the future implications of the current and other emerging business cultures in the African informal sector? How will things play out by 2035?
The informal sector will be the economic hub in African cities. Some of the key drivers will be integrated medium-sized manufacturing industries, service industries such as food supply and transport, construction, and technology.
A large percentage, (probably over 60%) of the business owners and managers in these informal sectors will be young to middle (15-45 years) aged colleges and university graduates. As such, the governments of the day will prioritize the development of the informal sector as a means to addressing unemployment and economic growth.
Specialized skills, innovative capabilities, and technological use will be pivotal in enhancing efficiency, innovation, quality, cost of goods, and customer preference. As a result, these informal sector human resource demands will shape technical and college education in Africa.
Gender parity in the informal economic sector will drastically improve as more graduate young women become entrepreneurs, project managers, planners, and policymakers. Such women will influence government policies towards better planning and more gender equity over time.
In conclusion, the current business culture in Africa's informal sector is characterized by growth in business types and scope, multiple and better incomes for skilled workers, high literacy levels among business owners, as well as an increasingly youthful population and gender equity. How will things pan out by 2035? The informal sector will become Africa's economic hub in urban cities as regards job creation and contribution to the urban economy. Additionally, youth and women will comprise the largest percentage of entrepreneurs. Specialized skill and innovation will fetch premium income, while higher education programs will align with job needs in the informal sector.
References:
https://www.wiego.org/keith-hart-coiner-term-informal-sector https://www.jstor.org/stable/4191591 https://blogs.worldbank.org/africacan/supporting-africas-urban-informal-sector-coordinated-policies-social-protection-core
© Anne Kyoya 2021