Taking it to the streets: Can the informal sector feel Africa's good economic vibe?

Remember those hawkers who were kicked off the streets of Dakar because they were creating a nuisance?

It’s been a busy few days for them. On Wednesday, Nov. 21, the hawkers protested the measure by taking to the streets, blocking traffic, attacking cars, burning tires, damaging business and ransacking the mayor’s office along with the local electricity company. Police responded with teargas and made an estimated 200 arrests. One report claims that two people were injured by bullets.

On Thursday, the government temporarily backed off the ban and allowed hawkers to return to the streets. The compromise could last until the end of December when the predominantly Muslim Senegal celebrates Eid-el-Adha, the Islamic festival, due this year around December 20.

It sounds like an eerie calm has descended upon Dakar.

The economy of informals
We never got into this during the past post, but it’s a good time to discuss the issues surrounding the informal sector.

When the term was first introduced, the “informal sector” encompassed the great many enterprises in the developing world not registered with a governmental authority. These entrepreneurs steered clear of their governments because:

1. the process is too time consuming, sometimes taking up to 180 days in certain cases; or,
   
2. The expense is too prohibitive, occasionally cost as much as three months salary.

These ideas were first popularized by the Peruvian economist Hernando de Soto who claimed that by forgoing licensing with the state, businesses remain locked outside the legal formal economy, unable to benefit from its rights and protections, like selling shares, applying for formal credit, possessing legal safeguards from fraud or purchasing insurance. Without these protections, business owners keep their firm underground, stunting its growth and paying heavily to steer clear of the long arm fo the state.

Due to the casual nature of these businesses finding their role in economies are obviously difficult. Researchers have settled on these statistics regarding the informal sector:

• It makes up 72 percent of non-agriculture employment throughout sub-Saharan Africa;
  
• 90 percent of the continents’ new jobs will be created in this sector;
  
• In Senegal alone, the informal sector churns out more than 40 percent of the country’s GDP.

While impossible to back these claims up, one must read de Soto’s countless examples of the small boutiques, the little bars or even tailor shops tucked inside houses to understand the reach of the informal sector. (You could also just walk around my neighborhood.) If the governments of the developing world could find a way to bring in these businesses from the cold, de Soto argues, they would unlock a great potential in economic growth (and an increased tax base).

Many reasons exist for the massive growth of the informal sector. Researchers claim that African private sector isn’t creating many jobs. In Africa, generally, it is difficult and expensive to fire full-time workers, so employers hire contract workers or temps – which officially place them in the informal sector. (My feeling is that governments in countries with high unemployment rates making firing difficult to protect workers from malevolent employers who fire people at will just to engage others to work at lower wages.) Secondly, researchers point out that even 15 or so years after the World Bank’s structural adjustment programs, governments remain the largest employer in many African states. However, the government workforces have stagnated.

Temp Slave
In the case of Senegal, however, we’re speaking of informal workers, who account for 7 out of every 10 jobs in Africa. Like the informal businesses they most often work for, workers are locked out of government-sponsored privileges like sick leave, defense against wrongful termination and social protections like social security. Most often, informal workers are made up by self-employed folks who don’t collect salaries – if they don’t work, they don’t get paid.

Speaking generally, informal sector workers trail their formal counterparts in education levels and hours worked. Wages are normally lower for informal workers, and their incidences of poverty are often higher, especially for families whose primary breadwinner belongs to the informal sector

If collecting information on the informal sector is difficult, the transient nature of street vendors makes gathering data near impossible. Leveraging information from Benin and Niger and extrapolating it, researchers can say with some probability that street hawkers make up 30 percent of informal activity in urban settings around the region.

One interesting fact: The caveat of small sample sizes aside, researchers found that street trade incomes are generally larger than the legal minimum wage. Tellingly, at least 40 percent of street vendors in Niger and Benin claimed they were not searching for work in the formal sector. Of those who were, most preferred securing employment in a shop, which most likely also resides in the informal sector.

Here’s what I can add from what I know of street hawkers in Ouagadougou. Most are quite young, recent arrivals from the countryside and understand that toiling a few years in the sun will be paid off by (hopefully) landing a job in the shade. They remain diligent workers in expectation of catching the eye of a boutique owner who will hire them.

In the IRIN story, which covered the riot and its aftermath the most thoroughly, it didn’t come across these hawkers from Dakar were demanding employment aid – just the right to continue selling on the street. "We are not against [the president's idea], but on the condition they give us a space to set up our stalls and sell our things," Fallou Seck, delegate of the collective of street hawkers told IRIN. "We are citizens who have the right to work."

If the above findings on vendors’ relatively higher salaries are true, then we are not speaking of people working to survive, but successful entrepreneurs, a fact researchers point out comprise the majority of informal businesses. The overall theme of the media coverage, however, points to people living pretty much on the edge. Perhaps this stems from issues brought up in the Associated Press story of beggars, most likely talibé, providing much of the daily nuisance on the streets of Dakar.

Marchand ambulant, où tu vas?
Senegal’s government is literally between a rock and a hard place. The government claims between 50,000 and 100,000 vendors clog up Dakar’s streets, harassing pedestrians and slowing down the city’s already snail-pace traffic. This adds up to $226 million in losses per year for the government – although the stories don’t investigate that claim. While meeting with members of the vendors’ union, the Prime Minister and Dakar’s mayor proposed limiting street hawking to three specific geographic areas and opening up a few other streets on the weekends. They’d also like to register the vendors with the city.

Let’s take this issue from a different point of view. Granted, traffic in Dakar is terrible and the touts are worse than obnoxious. (Admittedly, I got pick pocketed in Dakar, but it was my fault.) The bottom line is street vendors fulfill a specific need. If they would disappear from downtown Dakar, how would the city’s thousands of professional commuters purchase cell phone minutes, newspapers and even fruit? For those who have sat in most bars and restaurants know that West Africans have long been accustomed to young vendors marketing products at tables. What will customers think if this service is taken from them?

Another issue I have not seen raised is how Africa’s expanding economy affects this issue. Senegal’s economy grew at healthy four percent between 2000 and 2006, but the country is bracing for widespread protests against raising prices and falling wages. (Public unions organized nonviolent marches Wednesday.) Is this proof that Senegal’s newfound economic expansion is not trickling down to the neediest? Or, is it true that workers with the lowest wages are last in line to feel the benefits of globalization?

Stay tuned for more. Somehow Africa must figure out how to benefit the growing members of the informal sector.