Third Eye

Informal sector in Kenya needs equity to grow

Wednesday, October 28th, 2020 00:00 |
Jua Kali artisans. Photo/File

Equity and Equality are two distinctive terms often used interchangeably but have two different meanings.

Equality, which widely features in discussions of economic development, simply means providing everyone with access to national resources in fairness and justice, for them to live fully.

However, this can only happen if all citizens are at the same level (for example, income or living standards) and therefore need the same things. 

On the other hand, equity, means providing everyone with what they need, to equally access national resources, to live a quality life.

Longstanding investment in the productivity and profitability of the informal industries in the country, especially in counties, can help us achieve both these things, creating economically empowered individuals and generating revenues to boost effective and quality public national resources.

Where inequality abounds, one finds that there are few entrepreneurs in the formal market.

Primarily, the competitiveness of these businesses increasingly takes a beating as they are the only ones constantly being taxed. 

This also affects their ability to pay competitive wages, expand and scale their businesses– hence offering less employment opportunities and operate at high production costs.

However, if we find ways through, which many young entrepreneurs in the informal sector can scale their productions, making their businesses more profitable, they will be incentivised to formalise these businesses and in the process, create employment.

More importantly, county governments can tap into their informal sectors as a resource to promote equity.  

In focusing on formalising the most prevalent informal ventures within the county, many disenfranchised young people will find a purpose and increase their civic participation for the sake of building our nation.

At the same time, County governments will stop relying on the national government for financial support.

In fact, they will  have a bargaining chip, offering valuable partnerships to the central governments and will turn these flourishing businesses into ambassadors, to showcase productivity.

In doing so, the businesses, will be able to set up structures that will give them equal access to markets as their counterparts in other counties or in the region.

County governments can use their new found revenue to tighten the regulations and policies around intellectual property. 

Knowing that there are efforts to curb counterfeits, as well as protect and reward their innovations, these informal businesses will be motivated to put their trust in the county governments’ institutions.

There are approximately 5.8 million unlicensed businesses in Kenya. Additionally, out of 14.9 million employees who make up the Micro, Small and Medium Enterprises (MSME) sector, 8.9 million are in working in informal businesses.

Many feel that their work is not valued by the government and even worse, that the term informal is synonymous with illegal, given what many see as rigid and difficult regulations and policies.

Consequently, they are detached from the plans and visions of national economic development and we as a country lose out from the value of their full participation in nation building.

Yet, if we refocus our efforts to actualise equity which will, in turn, bring us to a point where we will be able to achieve equality, with the informal sector as the nucleus of our development plans, we will realise our economic goals, reduce poverty levels and yield a shared understanding of national cohesion.

—The writer is the CEO of Kenya Association of Manufacturers and the UN Global Compact Network Kenya Board Chair. She can be reached at [email protected]

More on Third Eye