Informal sector devt: Challenge for inclusive growth strategy in Rwanda

inclusive growth is one of the strategies of government of Rwanda to reduce poverty and inequality. Vision 2020 Umurenge is a pro-poor social protection programme under the country’s growth blueprint, Economic Development and Poverty Reduction Strategy.
Women form a big part of the informal sector, according to different studies. / File.
Women form a big part of the informal sector, according to different studies. / File.

inclusive growth is one of the strategies of government of Rwanda to reduce poverty and inequality. Vision 2020 Umurenge is a pro-poor social protection programme under the country’s growth blueprint, Economic Development and Poverty Reduction Strategy. The strategy that is currently in the second phase aims at poverty reduction through inclusive growth in Rwanda. One of the factors contributing to high poverty levels in the country is lack of formal employment that has resulted into growth of a big informal sector.

Informal sector defined

 

Informal sector is part of the economy which is not accounted for through payment of taxes and also is not monitored through any form of government and authority. Activities of informal economy are not included in GDP. The concept of the informal sector was introduced in 1972 by the International Labour Organisation (ILO) in its Kenya Mission Report.

 
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business support: Philippe Isler

ILO defines informality as “a way of doing things characterised by ease of entry, reliance on indigenous resources, family ownership, small scale operations, labour intensive / adaptive technology, skills acquired outside of the formal sector, unregulated and competitive markets”.

 

The informal sector workforce can be categorised into three broad groups: owner-employers of micro enterprises; own-account workers, and dependent workers, paid or unpaid, including wage workers in micro-enterprises, unpaid family workers, apprentices, contract labour, home workers and paid domestic workers, as proposed by the ILO/International Confederation of Free Trade Unions (ICFTU) international symposium of 1999.

Informal sector in Africa

Informal sector is one of the biggest employer’s in Africa, providing employment to vulnerable sections of the population, including women, and youth. Almost nine in 10 rural and urban workers on the continent have informal jobs, and most of these are women and youth. Informal sector is thus source of generating reasonable income for people employed in informal sector in Africa.

African countries have experienced a very rapid growth in informal sector employment in recent years due to lack of formal jobs in labour market.

Research indicates that 122 million people entered the labour market annually over the last decade, but African countries created only 37 million jobs out of which only 28 per cent were wage-paying formal jobs (Mckinsey, 2012).

According to ILO estimates, informal sector contributes to 41 per cent of Gross Domestic product in sub-Saharan Africa, 30 per cent in South Africa, about 60 per cent in Nigeria, Tanzania and Zimbabwe.

In West Africa the informal sector accounts for approximately 50 per cent of national output, over 80 per cent of employment, and 90 per cent of new jobs.

The informal economy accounts for 66 per cent of non-agricultural employment in sub-Saharan Africa. In Mali and Madagascar the figure is over 80 per cent and in Uganda it is 94 per cent.

Informal sector employment accounts for 77.9 per cent of the total employment outside agriculture sector in Kenya, 73.4 per cent in Rwanda, 59.2 per cent in Uganda and 8.5 per cent in Tanzania.

In Rwanda

According to a report by United Nations Economic Commission for Africa, informal sector employment in Rwanda accounts for 73.4 per cent of total employment outside agriculture sector. The report indicates that three out of four people in Rwanda are employed in the informal sector, and percentage reaches to over 80 per cent in case of women.

A survey commissioned by TradeMark East Africa, Pro-femmes Twese Hamwe and International Alert on cross-border trade, shows that 82 per cent of the cross-border traders come from informal sector.

In recent years, there has been increase in growth of young labour force and informal sector has become fundamental source of income and means of livelihood.

People employed in the local informal sector include street vendors, hawkers, street vendors, taxi bicycles, domestic workers, hairdressers and barbers, and restaurants, and workers in tea plantations and mines, unregistered service providers, among others. The sector remains a significant contributor to the country GDP.

The writer is a senior lecturer at Jomo Kenyatta University of Agriculture and Technology

Kigali Campus

js.jayashukla@gmail.com

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