The Botswana Institute for Development Policy Analysis (BIDPA) has called for the formulation of an informal sector policy in order to address challenges that hinder progress of small firms in the country.
The policy think-tank’s latest report on characteristics of firms in Botswana’s Informal Economy has suggested for the creation of a sector-specific policy. BIDPA argued the current ones do not exclude the development of the informal economy, but also do not adequately address the growth and development of the sector.
“The current policies in place are important in growing businesses, however fall short in assisting the informal sector because of requirements such as licensing which forms need to get the necessary assistance,” the reports reads in part. Botswana has a large informal economy which continues to grow at a rapid rate. However, the sector faces a number of challenges that hinder its growth and development.
According to the BIDPA report, if firms are sufficiently developed, it would assist in overcoming some of the socio-economic challenges the country faces such as unemployment and poverty rates. Results further depict that firms that did not need a loan when starting up are more likely to be informal than a business that used household savings or sold assets to start up. Furthermore, it was discovered that informal firms are less likely to have small businesses and institutions as their main customer as compared to individual buyers.
“An informal firm should aspire to formalise and reap benefits of being formal. However, the development of firms that are informal is also very vital and cannot be overemphasised, as there are a lot of benefits associated,” the report stated.
The report also indicated that most firms in rural areas are more likely to be informal because by formalising this imposes a tax burden on them yet there is no motivation or conducive environment to grow their business.
More initiatives could also be geared towards the encouragement of partnerships as this will help individuals pool resources and ideas for sustained growth in these firms, it suggested.