By Tanu Jalloh
I am certainly not enthusiastic about the hope to prop up the informal sector in Sierra Leone. When I set out to do my piece on the said issue for my Business and Economy column, most of the references I contacted stood out in my favour. I mean, almost all of them had findings that support my belief that very little efforts were being made to deliberately bring up to speed the informal sector with the formal sector.
The last time I discussed microeconomics, I explored some of the foundational relevance the informal sector could add to the overall implementation of macroeconomic policies of a low income country with prospects to grow.
In this article I have tried to study some documents which have tried to contextualise what was largely loosely dealt with as a case of neglect by the very policymakers who decide on the country’s economic health and wealth. Some of the points I raised might be sparse but all of had converged on key issues for deliberations; opening up the debate in favour for informal sector as a microcosm of a microeconomic effort. Probably the only visible attempt at extending support to the informal sector could be confined to microfinance schemes.
According to ILO’s Dr Sher Verick (2009), the ultimate aim of any African government must be job creation and poverty alleviation, and the policy response for this objective has to address both the removal of the barriers that constrain the participation of enterprises and workers in the formal economy, as well as extending assistance to those in the informal sector. However, he noted, this poses a particular challenge for policymakers, namely the trade-off between the ability of the sector to generate jobs and the level of benefits and protection provided for informal workers.
In fact since the “discovery” of the informal economy in the beginning of the seventies, many observers subscribed to the notion that the informal economy was marginal and peripheral and not linked to the formal sector or to modern capitalist development. Some continued to believe that the informal economy in developing countries would disappear once these countries achieved sufficient levels of economic growth and modern industrial development (Kristina Flodman Becker, March 2004). Yet In all developing countries, self-employment comprises a greater share of informal employment than wage employment. One of the most important characteristics of the labour market in Africa is the prevalence of informal employment, which according to some figures now accounts for 72 percent of non-agriculture employment in sub-Saharan Africa (Verick, 2009).
The situation is almost the case in Sierra Leone. But some findings have come to question the sincerity of whatever assistance there has been to the sector in terms of the level of benefits and protection provided for informal workers in the post conflict nation. How the country has ignored the rudiments of microeconomics and seemingly sentenced them to the real sense of the expression ‘small scale matters’, is the very reason we might come back someday to start anew. Before that day comes, the progress would remain on the high side while the low side would always be the microeconomics and the informal sector. Thus, I have the feeling that we can use this occasion as an opportunity to bring some relevance to bear on the little we already know about microeconomics and the informal sector of the economy and how they may serve as pillars condiments to Sierra Leone’s economy.
But what is being done for the informal sector of the country’s economy? So far players in that sector, most of them small scale businesswomen, have had their ability and capability deliberately limited to dealing with micro-credit schemes and the uncoordinated arrangement of adult literacy programmes, just enough to help them manage whatever money they get from the schemes. It is on record that the combined impact of past macro-economic policies and globalisation has resulted in a number of adverse consequences. The informal sector, according to Verick, has not only persisted but actually grown in many developing countries, particularly in Africa where it dominates the economy both in terms of output and employment. His enthusiasm is probably informed by the considerable proportion of work and commitment across the continent. The situation here is yet to catch up with the rest of other low income countries.
In Sierra Leone, where the informal sector is crowded by small scale businesswomen, the preoccupation of rural women is agriculture and petty trade, both of which are out-of-the-option measures to sustain routine sustenance of family welfare to which they are only a part. And in a subsistence economy, that usually characterises rural settings especially in the north, women spend most of the day maintaining the home. They fetch water, keep a small garden of vegetables (condiments for plasas, a Sierra Leonean recipe), carry fuel wood and above all provide supervision (parenting). In some cases they are responsible for agricultural production and selling to buy those things they could not grow.
In April 2006 the Foreign Investment Advisory Service (FIAS), at the request of the Government of Sierra Leone, undertook a Survey of the Characteristics and Sources of Informal Economy Activity in the country. A study of administrative barriers in Sierra Leone (FIAS, 2005) revealed that in every aspect of the investment process (start-up, locating, and operating), most firms find it simpler and more cost effective to remain in the informal sector than to comply with licensing, tax, and other official requirements to start and operate a business. The objective was to report the findings of the survey of informal and formal businesses in Sierra Leone to identify the main policy and administrative barriers to business formalisation.
Finally, the FIAS report found out that activities in the informal sector are less productive and employees do not benefit from social protection. This is almost akin to the concern of the minister of youth, Paul Kamara, who once told a dialogue forum for youth leaders in West Africa at the British Council Hall in Freetown that “local petty traders were not protected at all” by the laws of the country.
He blamed all efforts to retain the Petty Traders Act of 1964 if it could not sufficiently ensure that “foreign businessmen whether black or white must do wholesale and not retail.” In essence, “foreigners” must not do retail as well as wholesale at the same time, thereby undermining small scale local entrepreneurs. He recalled that in the 1970s, when bad businesses erupted with foreign dominance in Sierra Leone, it resulted in the undermining of state economy and inducing unemployment. That was his idea of how far the country is to looking into the constraints of the informal sector of the economy. In Ghana, the government at least was protective of petty traders by invoking Section 19(3) of the country’s Investment Promotion Centre (GIPC) Act 478, 1994, that safeguards, if not protects, Ghanaians from being pushed out of the retail trade, the informal sector.
