In Africa, a lot of countries have rapidly progressed in terms of improving the governance of the informal economy.
Most governments have come to the realisation that, with policy and legislative support, the informal economy can become a vital cog in the development of their national economies.
This opinion contribution makes a critical analysis of some of the interventions that were made in Mali, Kenya and South Africa, to improve the governance of the informal economy
Case study of Mali
Delegating the management of markets to informal traders: the informal sector has been recognised in Mali since the 1970s. The management of the informal economy is essentially the responsibility of local governments.
The state of Mali recognised the need to support micro enterprises. This was brought about by implementing a support mechanism and enabled a dialogue between two parties. In 2009, the Malian government also adopted a national policy on professional training that considers informal economy.
In support of the government’s actions, other programmes within the framework of international cooperation and making a substantial contribution to the improvement of professional training in the informal economy are established. These training interventions aim at better skilling micro-entrepreneurs.
The delegated management approach transforms the authority of managing the market and collecting taxes to an independent entity. This delegation of authority to an independent legal person is done by signing a contract with a list of clear and precise obligations for each of the parties.
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The delegated management contract aims at the sustainable and optional utilisation of market facilities through taxes levied and the maintenance of sites. This approach appeared as an alternative to the direct management of markets by the municipality itself.
With a direct management approach, markets are typically managed directly by the Finance Committee and the municipality. The results of this type of management have long been below expectations both in terms of resource mobilisation and maintenance of commercial facilities.
The delegated approach has helped to establish a precedent of cooperation between local communities and informal traders for the development of the locality. The organisations of traders in a formal structure helped them to become a partner of the municipality and to be able to articulate and defend their interests more effectively.
The above is a model that can be adopted in Zimbabwe with pilot projects in major cities. It has benefits for the informal traders in that they become recognised and are integrated into the greater economy. This means they can start to access finance and other banking services to grow their businesses. On the other hand, the Government will have a mechanism to collect taxes and other levies used for development of cities.
Nairobi: Case for public participation
Upon realisation of the importance of the informal sector, there was a need to create a relationship between the government and the informal economy. This relationship was manifested through the notable legislation initiatives such as the Micro Small & Medium Enterprises Act of 2012 which created a governing council to oversee the regulation of all informal enterprises.
The authorities of the Micro and Small Enterprises authority comprise the umbrella organisations of traders who have four seats reserved. The authority’s mandate is to facilitate the relevant government ministries and other agencies in providing suitable infrastructure, including worksites.
The authorities are also empowered to formulate and review policies and programmes for micro and small enterprises, coordinating, harmonising and facilitating the integration of various public and private sector activities programmes and development plans in relation to the micro and small enterprises.
Such a development that was done in Kenya enables inclusivity and devolution of power to those in the informal sector. The relationship between the government and the informal sector also enables the economy to grow at the national level and the informal sector is being pro-actively considered in national policies such as the Kenya Revenue Authority’s turnover tax that brings the informal sector into the tax bracket.
The Nairobi city council through the local authority service delivery plan enabled public participation in urban planning. This enables informal sector representatives to air out their views although at times the informal sector representatives have been excluded from policy-making due to the continued belief that the informal economic activities are temporary.
Creating orgs that enhance talks
Due to the continued battles between the city council and the informal sector, organisations such as Nairobi Central Business District Association, Nairobi Informal Sector Confederation, Kenya Private Sector Alliance and the National Taxpayers Association have been formed to enable dialogue which has brought stakeholders to the negotiation table.
Lessons can be learnt from the building of the Muthurwa market in Nairobi which has been criticised for lack of the informal sectors’ voices at the planning stage. There is a need to integrate the informal economy operators meaningfully in urban market development planning by treating them as an integral and legitimate part of the urban distribution system.
In Zimbabwe Vendors Initiative for Social and Economic Transformation (Viset) is at the centre stage and is the best organisation to be able to negotiate for some of the changes and adoption of best practices in Kenya.
The enactment of the Business Act in SA repealed numerous restrictive laws and secured a more liberal approach to business licencing, premises, hours for both informal and informal business. This legislation was a key measure of removing barriers to the operations of informal activities and was in effect a complete reversal of the apartheid approach.
Informal trading is expressly recognised in terms of the Business Act 71 of 1991. The Business Act Amendment No. 86 of 1993 gave provinces the discretion to develop their own legislation and allowed local authorities to formulate street trading by-laws and outlining what is allowed and deciding prohibited trade zones. The amendment enabled devolution of power from the central government to the local government.
Section 6A(2) of the Act sets out a detailed process that a municipality must follow in order to legally restrict or prohibit trading in an area or when a municipality seeks to relocate existing informal traders from one area to another. Among other processes that the municipalities must follow, the municipalities have to carry out public consultations and they are mandated to consider every objection against the plan.
Failure by the municipality to follow the due process in their plans results in the proposed plan being set aside by the court. This Act enabled public participation in the planning system by municipalities.
Municipal by-laws: Municipal by-laws regulate informal traders. Informal traders are dealt with at a local level. Any municipal by-law must comply with the provisions of the Constitution and the Business Act. All municipal councils and officials must consider their constitutional obligations in the context of policy formulation and its implementation on informal trade. This is very progressive and good practice.
The eThekwini by-laws flow from an informal trading policy adopted by the municipality following a broad consultative approach. The by-laws entrench the right to engage in informal trading, provides for the creation and closing of areas where informal trading may occur and the granting of permits, regulates the conduct of street vendors, health and safety measures.
- Wadzai is the executive director of Viset. — [email protected]. These weekly New Perspectives articles, published in the Zimbabwe Independent, are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Pvt) Ltd, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). — [email protected] or mobile: +263 772 382 852.