Hawkers, vendors, a Key part of the economy

| Friday October 15, 2010 00:00

Known variously as the subterranean, the hidden, underground, shadow, secondary, black, invisible or parallel sector, this sector  faces many challenges.

The growth of the informal sector in general and the vendors and hawkers in particular, is mainly the result of failure by the formal sector to provide employment opportunities for everybody. Kempe Ronald Hope, Sr, says that it has grown 'because of the failure of the developing countries to formally make the kind of economic progress that would have allowed for, among other benefits, low urban unemployment rates, a reduction in national poverty rates wages and salaries that kept pace with inflation...'

It is safe to speculate though, that even if the formal sector could provide jobs for everybody, some people would still prefer to be self-employed considering the fact that self-employment has the attraction of giving the individual considerable independence in terms of controlling his or her work schedule.

The periodic economic recessions that have resulted in retrenchments and declines in formal wage employment globally, natural population growth, droughts, poverty and a declining standard of living as well as shortage of land in the rural areas are among the causes of the rural-urban migration phenomenon.

Unable to find employment in the cities, the individual, usually with financial support from a parent, friend, relative or money-lender, sets up a small business to avoid going into open unemployment.

It is worth noting that, for a desperate person trying to forge an existence, setting up a vendor shop is one of the easiest options, since it doesn't require much expertise or capital. 

Hawkers and vendors trade in fruit, vegetables, sweets, cooked food, cigarettes, airtime, water, items of clothing and an assortment of other goods and services. They regard the town centres, bus terminals, taxi ranks, hospitals, schools, railway stations government offices and industrial sites as natural markets.

For starters, early development literature taught that petty traders in the informal sector were a temporary or transient anomaly which would disappear as industrialisation and the resultant rapid economic growth materialised.

The economists of the 1970s believed that the gains of economic development in the formal sector would sooner or later filter to the lower classes and bring about the end of all traditional economic activities represented by hawking and street vending.  Not only has reality proved that the small traders are here to stay. It has also become apparent that, due to negative economic growth globally, more and more people find themselves outside the orbit of formal sector employment.

There has historically been a love-hate relationship between the informal sector on the one hand and the big business and local authorities or central government on the other.

It is the big businesses that provide government with development revenue in the form of taxes. Nor is the informal sector included in governments' gross national product.

On the other hand, perhaps due to governments' wish that one day the small traders will disappear leaving behind modern, sparkling cities, the traders are not monitored nor made to pay tax.

Instead of formalising the trade and taxing it, most governments rather ignore or evict them especially when the business community complains about littering or obstruction.

Dr Badziyili Nfila of the University of Botswana opines that if a class struggle ensues between vendors and big commercial enterprises, government is bound to side with the commercial enterprises because they pay tax while the hawkers and vendors do not.

He adds that, since capitalism thrives on the exploitation of the weak and powerless, a situation of massive unemployment favours it greatly because the unemployed provide cheap labour for the rich and powerful.

Policy makers as well as scholars cannot agree on the relevance of the informal sector to the challenge of job creation and therefore economic development of a country. 'There are many different view points from which one can observe the informal sector.

It can be viewed in a positive way, as a provider of employment and incomes to millions of people who would otherwise lack the means for survival. It can be viewed more negatively as a whole segment of society that escaped regulation and protection.

It can be romanticised as a breeding ground of entrepreneurship which could flourish if only it were not encumbered with a network of unnecessary regulation and bureaucracy.

It can be condemned as a vast sign of backwardness, poverty, crime and unsanitary conditions. Or it can simply be ignored,' says Ansenne.

Goolan Vahed posits that the street traders are seen as a distasteful and repulsive anomaly and an impediment to achieving a 'beautiful' modern city.

Anti-vendor policies remain in place in Botswana. Continuous police harassment and evictions bear testimony to this. In addition, the street-traders are to dismantle their stalls and mount them again the following morning.

Taking the components home or storing them somewhere in town requires considerable effort and money, a situation which eats into the small profit margins.

Furthermore, informal sector practitioners are often cash strapped and lack finances for expansion. Financial institutions do not recognise them.

The street traders complain of unfair competition from chain stores and expect government to protect them from these large commercial enterprises which can easily put them out of business by under pricing.

It is worth noting that the majority of those in the informal sector are women. The double burden of being a mother and wife on one hand and an entrepreneur on the other, working 10 to 12 hours a day is a big challenge.

This has contributed to moral decay as the children spend long hours without their mother. Moggie Mbaakanyi, the secretary general of the Botswana Caucus for Women in Politics, says that the laws regulating the operations of the informal sector should recognise the critical role played by the woman as a care-giver and provide for cottage industries where women can legally run their businesses at home while they play their social responsibility of nursing their children.

She regrets that after 44 years, the status quo remains, where the crucial role played by women in the economic development of the country is not recognised.

She maintains that in the meantime, the government, as well as the rest of the international community, have at least on paper declared a holy war on poverty.

It would appear, however that the potential of the informal sector to contribute to job creation is not fully recognised. Some people have argued that political leaders, the large majority of which are males, are living in denial.

Development experts feel that the time has come for government to liberalise and legislate in favour of street-traders.

It is felt that the licensing regime should be overhauled and made user-friendly.

'To promote the subterranean economy, it is desirable for developing country governments to consider removing the obvious disincentives to entrepreneurship by creating a liberalised economic environment that minimises restrictions,' adds hope, for good measure.

This can only be achieved, goes the argument, if the street-traders themselves are involved when decisions that affect them are made.

By supporting the street traders, governments would be empowering women who happen to be over-represented in the sector.

This, observers say, government could achieve by offering easy loans to these traders. It is also argued that government should get supplies from these traders as a way of empowering them.

More importantly, the informal sector should be given the right to public space such that when a town is planned with parks, schools and hospitals, street traders should be catered for in terms of space.