CUSHIONING JUA KALI

Aiding the informal sector cope with COVID-19

Informal traders are on the shorter end of the stick in fight against coronavirus

In Summary

•Traders in informal sectors largely depend on their daily sales to make ends meet

•It is imperative that the Government steps in and ensures that the informal sector is in a position to weather the COVID-19 storm

With governments across the world struggling to contain the COVID-19 pandemic, it is crucial for the plight of those in the informal sector to be considered, particularly in the African context.

This is all the more true considering that the informal sector employs the majority in Africa – case in point, the Institute of Economic Affairs indicates that the informal sector employs up to 85 per cent of the Kenyan workforce.

The informal sector, or informal economy, is characterised by sole traders and micro, small and medium enterprises (MSMEs) that conduct various economic activities that are ordinarily not regulated by-laws relating to taxation, labour, and the environment.

 

Practically speaking, the informal sector is characterised by individuals providing needed goods or services in designated market areas, within densely populated urban settlements. Further, traders in informal sectors largely depend on their daily sales to make ends meet, due to the low-profit margins that characterise the sector.

The above considered, social distancing measures, as well as shelter-in-place directives, are bound to adversely impact traders in the informal sector. For instance, shelter-in-place directives stand to reduce the usual foot traffic expected in designated market areas, thereby reducing the sales expected by the informal traders themselves.

Social distancing measures are expected to further heighten this problem. Similarly, the current national-wide daily curfew running from 7 p.m to 5 a.m, together with the restriction of movement in and out of designated COVID-19 hotspots, such as the Nairobi Metropolitan Area, would, on one hand, reduce the trading hours within which informal traders may generate their much-needed income, and on the other curtail the movement of informal traders who live in satellite towns but work in urban areas.

In both instances, the informal traders are on the shorter end of the stick, ultimately taking home less than would be expected on a normal day, at a time where every coin made is critical for the sustenance of a household.

From the above, the plight of the informal trader, under the current circumstances, is indeed much worse than that of the middle-class Kenyan. It is therefore imperative that the Government steps in and ensures that those in the informal sectors are in a position to weather the COVID-19 storm. This would include providing food to those living in vulnerable economic circumstances and implementing strategies that may ensure that informal traders may continue to generate incomes in these trying times, for instance taking advantage of closed schools to create open-air markets that maintain social distancing requirements.

Karen Kandie – MD IDB Capital