Jul 12

Spotlighting opportunities for business in the informal sector

By Josef Kefas Sheehama

The Namibia economy is mostly dominated by the informal sector, and the majority of the population is employed in this sector at approximately 60 percent of total employment. The sector is confirmed as a major source of employment.

It was interesting to conduct mini research in informal sectors in Windhoek, Rehoboth, Mariental, Otavi, Okahandja, Otjiwarongo, Tsumeb, Omuthiya, Ondangwa, Oshakati, Oshikango, Rundu and Walvisbay respectively. The consolidated research revealed that about 57% of the participants are selling fruit and vegetable, kapana including eedingu (dry meat), and old clothes amongst other things. In addition, 60% of the participants are ready to get business registered but funding is the problem, and 25% of the participants are trading without business names. About 45% of the participants stated that they are not aware of the Business and Intellectual Property Authority (BIPA). Close to 90 percent of informal traders do not keep their books in good standing and some do not even have bookkeepers. In the absence of proper bookkeeping procedures, it can be difficult for anyone to tell whether a business is making a profit or not. Though in Namibia we have tertiary institutions that offer training programs in entrepreneurship for the citizens. Open space utilized by participants, however, Tsumeb constructed open markets which are not yet occupied.

This mini-research work is undertaken in order to fill the knowledge gap in areas of people and place relationships, where improvements are needed to overcome challenges in the provision of facilities, design, and planning. It is therefore recommended that appropriate mechanisms should be put in place towards improving the quality of the open markets to further enhance user interaction cum the sustainability of the community in Namibia. The growing informal sector accentuates the need for strategic and appropriate policy responses. However, to address informality, one must first understand it as well as the factors driving it. It is possible for Namibia to attain V2030 if policymakers craft a clear understanding to facilitate the informal to graduate to the

formal sector. At the same time, there are many factors that influence a business’s decision to formalize. These range from internal factors, such as individual business purpose and characteristics, to external factors, including market conditions, costs of doing business, and business cultures and relationships. Government interventions that aim to formalize businesses should be guided by the cost-benefit analysis of formalization trade-offs, drawing from a clear understanding of where the prominent weaknesses lie that would curtail movement toward formalization and maximization of the benefits generated from an intervention.

Furthermore, the attainment of Vision 2030 depends on the ability to formulate policies as a driving vehicle to upgrade the open markets. The policymakers should work together and inspire action to meet Namibia’s commitment to leave no one behind throughout its implementation of the Sixth National Development Plan (NDP6). It is imperative to reflect on the previous NDP’s shortcomings by coming up with well-researched and well-reasoned mechanisms that prioritize and synchronize activities to yield the desired results and avoid the economy faltering. The Sixth National Development Plan (NDP6) could use the flexibility inherent to the informal sector to integrate into the formal sector of economics such as economic diversification, industrialization, sustainable economic growth, and investment, and social concerns such as inequality, poverty, and well-being. Linking informal targets and NDPs can provide a basis for inter-sectoral partnership during implementation. It is possible that the informal traders can be graduated into the formal economy if we work together with common goals to attain Vision 2030.

Additionally, the reality for Namibia, however, is that we lack the capacity and resources to provide extensive economic analysis across a fully open market or we are challenged to make decisions based on best information. Thus, there is a need for mind-shift. We should look at our failure as a necessary stepping stone to achieve our desired goals and not as a deterrent not to try again. On our journey the real solutions can therefore not come from the pessimists among us, but from those that are prepared to face the uncertainty of the future and willing to overcome the fear of failure. The Industrial Policy should be revisited or reformed to incorporate the informal economy. The current industrial policy narratives tended to either neglect the informal economy or even viewed the informal sector as potentially threatening to the formal economy, needing elimination and control rather than support and investment for inclusive structural economic transformation. This narrative still viewed the informal economy as outside formal arrangements, and often found on the edge of high vulnerability to poverty, low earnings, irregular incomes, and bad working conditions. Therefore, recognizing the precarious nature of the informal economy has also brought marked attention to the resilience of the informal economy and its creative energies to not only cope and adapt to change but also it is potential as an untapped engine of innovation and growth that is worthy of policy attention, investment, and support towards inclusive structural transformations and pathways to formality.

Moreover, the informal sector in Namibia is a significant sector that has helped to absorb unemployment in the labor market. Given the role of the informal sector, in the economy, the government should look at the informal sector with a view of enacting policies that will synergize the informal and formal sectors in order to unleash the vast potential of the economy since activities in both sectors of the economy are not mutually exclusive. A massive drive to register and have a database of all businesses in the informal sector can also be carried out to ascertain the number and needs of the operators in the informal sector. Informal economy is associated with two major aspects, one is the growth of the economy and the other is related to poverty and inequality. Most people prefer to get into the sector because it became an avenue for their survival. The most informal economy workers in this country are youth, the population majorly affected by our country’s unemployment rate.

To that end, the policies on the sector should focus on investing human capital in the informal sector for this will encourage innovation and thus promote industrialization and furthering economic growth. The Namibia Chamber of Commerce and Industry (NCCI), invites the business communities to participate in the Trade Mission to Zambia from 23-27 July 2023. The government can sponsor at least five informal traders to attend the Trade Mission.

Policies should therefore focus on formalizing the informal sector for this will address all the challenges faced by the sector.