The state of East Africa’s informal sector


More than 66 per cent of total employment is Sub-Saharan Africa is from the informal sector, the International Labour Organization (ILO) has revealed, the biggest provider of employment in Africa.

Informal economies are typically characterised by low productivity and non-exportable goods and services.

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On the other hand, the sector also provides crucial livelihoods to the most vulnerable of the urban poor.

It is projected that the informal sector is likely to absorb many of the continent’s young employment seekers who are mainly today’s millennial digital natives – educated, learned and very adaptive to global trends.

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The Inter Region Economic Network (IREN) recently has held its 18th Africa Resource Bank Forum in Nairobi in collaboration with the Friedrich Naumann Foundation for Freedom(FNF), under the theme: “The Future of Africa’s Informal Industry in the Era of Digitalization.”

“The emerging economic informality operators are vastly different from traditional informal economy actors. Economic informality is no longer synonymous to street vending. The street is now Facebook, Twitter etc,” said James Shikwati, IREN Director and Founder.

The aim of the forum was to identify ways in which Africa’s informal sector can leverage on emerging digital technologies to meet Africa’s and global market needs.

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“There is need to close the digital divide for our enterprises to be competitive in the global market,” said Stefanie Steinbach, Head East Africa Office of the Friedrich Naumann Foundation for Freedom(FNF).

“Digital technologies are opening up new opportunities for the informal sector to innovate and grow. It is important we foster inclusive multi-sectoral collaboration to tap into the opportunities of this sector, “said Tobias Alando, Head of Membership and Board Affairs, Kenya Association of Manufacturers (KAM).

Contrary to the old forecasts, informality has not diminished over time and is even increasing in many countries.

African governments have been struggling with how best to respond to the pervasive sectors by focusing on punitive and regulatory measures to enforce formalization or evicting vendors outside cities.

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However, other approaches focus on unleashing the untapped entrepreneurial potential of the informal sector; digitalisation is such an approach, experts have advised.

The Friedrich Naumann Foundation for Freedom is the foundation for liberal politics in the Federal Republic of Germany.

It aims to promote the goal of making the principle of freedom valid for the dignity of all people and in all areas of society.

The support of human rights, rule of law and democracy in more than 60 countries form the core of the work of the regional offices in Europe, Africa, Asia, and Central America. International and transatlantic dialogue programs are used to promote these three values.

In East Africa, the foundation supports the development of think tanks that network liberal thinkers, come up with shared concepts for development and progress by working with liberal partner organizations in the political realm as well as civil society.

The Foundation is also working on a project to promote secure property rights with the aim of improving food security in the country.

Inter-Region Economic Network, Ltd. (IREN) on the other hand is a leading independent African Think Tank that promotes ideas and strategies geared towards causing prosperity in Africa through free enterprise and sound public policy.

Initiated in 2002 as the “Africa Freedom Network” the Africa Resource Bank forum (ARB) is one of IREN’s key forums that target policymakers, business leaders, media, industry players and academia for annual brainstorming sessions on various issues that affect Africa.

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Martin Mwita is a business reporter based in Kenya. He covers equities, capital markets, trade and the East African Cooperation markets.

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