Something amazing I have observed every morning of women and men going to work is that they all carry the same determination and urgency in their walk. This does not matter if you are a lawyer (I do not know if my lokasie hosts a lawyer though) or a plumber, vendor, or secretary – they all carry the same amount of determination to get to their station of income-generating activities.
During that hour of the morning, it is hard to distinguish who is from the informal economy the formal economy. All you see are individuals that are ready to go do what needs to be done to earn a living. Just a month or two back, the ministry of labour made known its intentions to formalise the informal sector or at least assist in the transition. I am sure many want me to give the reason for such a move. There are a couple of them: for tax purposes and, more importantly, for the informal players to benefit from various initiatives that only accrue to those in the formal economy. Other dilutional reasons also exist such as seeing no vendors on the street.
So, then how do we do it? These groups of people all have the same determination and are willing to go grind earlier for their dollar. How do we convince the informal players to change their way of doing things so it can reflect the formal economy protocols?
This is now what I want to highlight here. What does formalising entail and where do we start to formalise? In my shallow definition of formalisation, I will say it is the adoption of the minimum standards of operation in the economy. This starts with registering an enterprise; that you exist. In some circumstances it even involves getting permission for your operation, and registering your employees for social security. Lastly, in the eyes of NamRa, registering for tax payments. This is now in the Namibian context.
Now more questions arise: what does our formalisation entail? Is there another alternative way to formalise the activities of the grey/shadow economy? Just remember the money that gets to be spent at Shoprite and Pick N Pay in town is made at Havana 4way in the heat or rainy days. In other words, the informal/grey economy feeds the formal economy big time, especially the retailer sector. This is because the informal players receive no incentive or support from the government through policy intervention of any sort- it has to make its own money. The Woerman Brock, Checkers, and Shoprite, Brewery don’t go back there to support, but one will say their contracts workers, cleaners, and other low-paid souls spend their salaries there.
Given the role of the informal economy, do you still want to formalise and put it through the pain of compliance and its related costs or perhaps we should redefine formalisation? Because, as I passed by my guy with a tuckshop to buy my gums, then got three warm fat cookies (junkies) at the nearby madam, I always wondered, how can I formalise their operation? To make it worse, my guy is well structured, and is not an obstruction even, while the madam comes early morning to set up near the tuckshop to provide us with breakfast. Another guy, a young fella (probably the Angolan boys I hear of) always passes by the stop with freshly boiled maize.
Closer to my stop is Tuahangana Open Market with various cubicles for barbers, tailors, and a small shoe manufacturer, the rest are just fruits and meat sellers. I visit them frequently because my tailor is there, she is amazing though. All these groups of people are functioning very well given the economic and social circumstances. So then how do I formalise their operation and explain formalisation to them? I am paid to create solutions and practical ways to manoeuvre around complicated scenarios in the economy but formalising the informal economy keeps puzzling me.
The main perplexing thing to me is that I sat in rooms where people are discussing formalisation and I have just realised that that is far-fetched and too far from reality. Moreover, the ignorance of how the informal sector players will react or how they will be affected and their ability to transition. Furthermore, the importance of the informal sector to the formal economy. The discussion also happens in the absence of the participants or any study, the last study done on the informal economy was in 2017.
There is another group of informal players: kapana vendors who are found in every Katutura location with the famous ones being Single Quarter, Wanaheda, and Okuryngava. Go and observe the traffic and the exchange of the dollar at these places, at the same time the co-dependent activities such as fat cookies, salsa making, and cool drinks. They have created a system that works for them.
The Ministry of Trade is busy with the Informal Sector Policy and the Minister of Labour and Employment Creation tasked the Labour Advisory Council to advise on how to transform the informal economy into a formal one. Tate Nujoma’s address to the informal sector stakeholder workshop early this year indicated that informality would best be tackled by steady reforms such as investment in education and policies that address its underlying causes.
I, however, after my long observation and consistent interaction with the informal players, disagree with reforms, rules, and regulations as a way to facilitate the transition. As I explained, all those players comfortably found a system that works for them in a rigid economy that barely rewards the indigenous and historically disadvantaged. They have chosen spots where to set up not because they are stubborn or do not respect your city/town laws but because their target market is there or the structural circumstances forced them.
As I said I disagree with the approach of formalisation, especially the policy reform approach. Reforms and policies as we have seen will dictate vendors to be rounded up and placed into open market in the outskirts of town or start-ups will be forced to be in some isolated, not well-marketed incubation centres that nobody knows.
That is not formalisation. That is poverty creation and blindly disconnecting those individuals from their customers.
My suggestion is: the transformation should start with practical work on the ground such as physical and soft infrastructure that can enable informal players to do their work in a better way. Empowerment schemes and access to things such as stock or equipment for informal players. To offer capacity building to various informal players, and tailor-made services for them to acquire the basics for their hustle. Enabling them to render services or to sell whatever they sell. And when I talk about training, I don’t mean a seminar at Country Club while traders are at Havana 4way, no. I mean engaging those that are participating in the informal economy with good intentions and directing and equipping them with the basics required for them to transition.
We have to be cognizant that the majority of the informal participants except for a number of them join because there is no option. As a result, they have no time or resources to run to Bipa to register their barbershop or their two-man plumbing start-ups. So I urge the technocrats and policymakers to be careful not to be excited to create policies without investment in various enablers. It will be a total disaster, and a burden to the Namibia police to keep chasing people around to enforce some not-well-researched policies. Moreover, addressing the cost of operating formally and the compliance cost involved, which are some of the factors keeping some enterprises within the grey economy.
The thoughts to facilitate formalisation is okay, but it is essential to understand the Namibian economy well, the poverty level, the opportunity available, and the skill set of your people first. Furthermore, collective efforts will be required, incentives will be needed to stimulate informal players to transition to the formal. As for now, there is a minimum that will make one go formal if being in the shadow is more profitable and has less regulation, which can suffocate one’s operation. Unless one sees a tender and rushes to Bipa or they just register companies in case a tender comes. Email: firstname.lastname@example.org