The informal economy in Africa still accounts for up to 50% of the GDP of some countries. These activities carried out outside all regulations are often the only means of subsistence of the population. The structuring of the economy is Africa’s great current challenge. A delicate subject, as the balances are precarious on the continent.

The streets of African metropolises bear witness to this better than the most scholarly studies, the informal economy is omnipresent in Africa. Street hairdressers, telephone sellers, fruit vendors, motorcycle taxis… all these activities are indeed often carried out outside of all regulations. This lack of rules (registration of businesses, registration of employees, taxes, levies, social contributions) is what characterizes the informal economy. Unlike the underground economy, which concerns illegal activities, the informal economy groups together all legal activities carried out outside any regulations.

90% of the workforce

The weight of this economy can represent 30 to 50% of the GDP of African countries, according to studies carried out by organizations such as the World Bank or the African Development Bank. In some sectors, the informal economy can even concentrate 90% of the available workforce. Often practiced by precarious people, without training, the informal economy invaded the African streets during the crises of the 1980s. It represented for a large part of the population abandoned by powerless and (or) corrupt states, the only chance to be able to meet the most basic needs. In this sense, the informal economy testifies to the great dynamism of African populations despite often contrary conditions.

But this informal economy comes at a price. Without structuring the economy, states cannot initiate the major reforms Africa needs. Development of education and training, development of infrastructure (electricity, roads, transport), development of social health services.

informal economy africa

Riots in Senegal

The strong growth recorded by African countries at the turn of the twenty-first century may have made many observers optimistic. But the current situation calls for more caution. The IMF thus forecasts growth rates for 2017 of between 3% and 6% depending on the country, against 10% at the start of the 2000s. Institutions such as the African Development Bank or the ILO (International Labor Organization) have taken the lead. measure of urgency. African countries must structure their economies in order to sustain the continent’s current development.

But if the observation is shared by a large majority of the continent’s economic players, the solutions to be implemented are complex. We remember the clashes between the police and street vendors in Dakar, in June 2015, when the Senegalese authorities wanted to ban informal activities. The informal economy remains mainly a subsistence economy that could not survive if we applied to it the trade rules in use in Europe or the United States.

African solutions for Africa

In fact, the solutions envisaged by States, companies, experts and unions must be innovative. For Youssouf Maiga, an independent expert based in Burkina Faso, these solutions cannot be found in Geneva, Paris or New York in the offices of major international institutions. They must mature in the arteries of African cities. “We do not ask telephone repairers who work in the streets, to pay taxes and duties overnight. But we can imagine forms of certification of their activity, of their know-how as the basis for the creation of a real corporation “.

In fact, for many observers, the structuring of the African economy must first demonstrate its benefits in terms of health, education and unemployment coverage in order to be accepted by the population. In short, African states will have to demonstrate their capacity to organize the development of countries. This is not the least of the challenges that the informal economy poses in Africa today.

 

Source: Africa Economy

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