The Sunday News
- Continued from last week
THE informal sector contributes significantly to both urban and national employment creation. And yet top-down policies and passive urban governments stifle rather than promote the growth of the informal sector (Thomas, 1992; Amis and Grant, 2000).
At the core of the problems of street traders and vendors is the regulatory environment to address laws (labour legislation and municipal by-laws most of which are archaic and were made during the colonial era in Zimbabwe and are no longer a reflection of the status quo and prevailing economic reality); taxes; registration procedures; services (training, access to markets, financial services and insurance, access to infrastructure, and protection against crime) and institutionalisation of the sector (Lund and Skinner, 2003). Also lacking is the empowerment of traders to speak with one “voice” (Lack of Unionisation) and the absence of social protection. Addressing these challenges for a successful management of the informal sector requires that governments enhance the livelihoods of street traders and vendors by promoting their labour, human, social, and productive capitals. In this regard the role of governments, albeit limited, is to foster a conducive environment for economic growth through promoting investment opportunities of the city.
In other words the informal sector thrives well where the formal sector is functional. The “informalisation” of the formal sector in order to enhance profits by firms is a widely acknowledged phenomenon (Meagher, 1989, cited in Xaba, 2002).
Despite its positive contribution to employment creation, informalisation has also cheapened labour. Moser (1978) echoes the same sentiments and says informalisation is exploitative, “interested in the extraction of profit, not the provision of employment”. A prerequisite condition is that governments facilitate access to secure infrastructure “with reliably delivered set of services” as is the case with the Durban City Council which spent about R45 million building infrastructure for informal traders between 1997 and 2000 after realising that poor road infrastructure, dysfunctional public administration, poor housing market, inadequate water supply, poor sanitation, poor storage and security services scare away potential investors (World Bank, 2000:12).
The few investors that remain are reluctant to pay local taxes for poor and inadequate infrastructure and services, opting as was the case with Nairobi (Kenya) to deal with private agencies that can guarantee efficient services. This reduces the bankability of municipalities. Thus street traders and vendors suffer twice.
Firstly, from job scarcity in the formal sector and secondly from the regulatory framework that directly or indirectly deals with their business. The municipal by-laws for instance through zoning regulations in different parts of cities can inhibit instead of enhancing informal sector productivity Lund and Skinner (2003) demonstrate how two South African local authorities, the Johannesburg City Council and Durban City Council differently evoked the 1995 Business Act to inhibit and promote the growth of the informal sector respectively. The JCC declared the whole inner city a no-trading zone, drastically reducing the number of street traders and vendors. In contrast, the DCC demarcated street trading sites throughout the inner city thus protecting the livelihood strategies of the poor.
Therefore, governments must protect traders’ labour capital by charging affordable site fees in addition to improving their revenue collection mechanisms to curb corruption. Another factor which militates against the full utilisation of the poor’s labour capital is the registration formalities to being a street trader or vendor.
Registering is time consuming and financially costly because in many local authorities, it is institutionalised in different municipal departments.
For instance Lund and Skimmer (2003), argue that before a decentralised system of registration it took a visit to three departments in order to register as a street trader with the Durban City Council, namely, the Licensing Department (trading licence), the Informal Trade and Small Business Branch Department (site permit card) and the City Health Department (health certificate to sell foodstuffs). In Bolivia, Brazil, Chile and Uruguay, it takes about one to three months in order to register.
The solution lies in “strengthening [street traders and vendors]” productive capacity as well as changing the business environment in which they operate.
This entails centralising registration and framing by-laws and registration in such a way that they “shift from a criminal law paradigm to an administrative law paradigm” so as to encourage “informal entrepreneurship development”.
There is also a close correlation between human capital and urban economic development. Human capital equips households with the means to escape poverty traps. The opposite is true, lack of human capital entrenches households into poverty.
Street traders and vendors often lack adequate access to health, education (primary and vocational), and infrastructure services.
Governments can either facilitate the provision of human capital by building primary education, health institutions and improving sanitation and sewage disposal systems or ameliorate the situation with affordable fees for services.
Although informal sector vocational training does not guarantee adequate income it nonetheless addresses issues of capacity-building, skill upgrading and entrepreneurship development (McLaughlin (1990).
Training allows street traders to diversify into other productive economic activities. It is crucial, however, that street traders and vendors determine the content of training and that such training programmes are accompanied by evaluation exercises. In terms of health, municipalities should provide adequate and well-serviced health institutions because poor health affects the earning capacity of the poor.
Thus in addition to social capital, municipalities should also create an enabling environment that enhances other forms of capital such as productive capital.
Unwilling to engage in running battles with municipal officials some would-be traders prefer making use of their houses to generate additional income.
A study by Schlyter (2001) shows that house-zoning regulations in Chitungwiza prohibited income-generating activities and for instance in Bulawayo there are restrictions as to the number of chickens a high-density house can have.
Rakodi (2002) also argues that the only survival strategies at the disposal of the poor are the held portfolio and “capability to find and make use of livelihood opportunities”.
Therefore, municipalities should relax regulations that prohibit the use of housing for legal productive business. However, this is supposing that the poor own houses.
In reality the city housing market is skewed in such a way that the poor can only afford being tenants.
There is need therefore to address policies to do with land management in as far as they relate to access, registration and legalising land tenure.
In particular, slum upgrading by municipalities in India and Cairo (Egypt) has improved the living standards of the poor through promoting informal economic and social activities.
Related to adequate land management is the promotion of urban agricultural activities at local government level.
Urban agriculture provides the poor with additional income and secures food reserves thus acting as a price insurance against expensive sources of food.
Conclusion
Evident from the above discussion is that a successful management of the informal sector requires good urban management and relative political autonomy from central governments. In terms of urban management, governments should promote rather that curtail the organisational capabilities of street traders and vendors. The ability to organise and act as one force in times of hardship has been recognised as a valuable asset for individuals, households and communities (Moser and Holland, 1997). In other words municipal policies should address social marginality by empowering street traders and vendors. As Nelson and Wright (1995) argue; “the challenge is for the marginalised group to gain treatment as equal partners in a process of development from people in such institutions, so that they have long-term access to resources and decision-making”.
- Butler Tambo is a Bulawayo-based policy analyst who can be contacted on [email protected] or +263 776 607 524 or by liking the Facebook Page Public Policy Research Institute of Zimbabwe for more interactions with the author.
