Panel 7

Beyond marginality. Ambiguities and potentialities of informality in Africa

Panel organisers: Anna Baral, The Nordic Africa Institute/University of Uppsala, Sweden and Cristiano Lanzano, The Nordic Africa Institute, Sweden

E-mail: cristiano.lanzano@nai.uu.se

Despite its ambiguities and the critiques formulated against it, the concept of informality keeps being ethnographically and theoretically productive. Hart, who popularized the concept in a seminal article (1972), has himself acknowledged its complexity and clarified that the informal sector is not a reserve for the poor. Yet, informality has predominantly been used to evoke low productivity, unreliability and insecurity characterizing large sectors of the African economies. In the public debate and the development sector, informal workers have been either victimized and made targets of policy interventions, or romanticized as neoliberal heroes (De Soto, 1989).

To be sure, the sectors that have been analysed through the lens of informality – such as urban petty trade, domestic work, small-scale mining, but also smuggling, trafficking and other less legitimate occupations –  all share elements of unpredictability and precariousness. However, a significant body of work in African studies has shown that informality is a multifaceted field, where structural relations with the formal sphere are constantly rebuilt. Informal economies undergo transformations and processes of accumulation of capital and power. Informal workers unite, mobilise or simply find ways to navigate the uncertainties of their predicament (Lindell, 2010): not only do they survive, but some also prosper, constructing mechanism of social security that shun the control of the state, or are variably related to it. Thus, analyses of the informal need to go beyond essentialist views confining it to marginality.

The panel welcomes ethnographic contributions on informal economies in Africa and their ambiguous connections with states and formal markets, on processes of social differentiation within the informal sector, and on the ways in which informal workers seek to create the conditions for prosperity in precarious situations. We also encourage discussion on alternative frameworks to approach informality in Africa and on its links with broader global processes.  

Approved abstracts panel 7

1. Rubber does hit the road: The reality and significance of the informal economy in Africa

Author: Christopher Changwe Nshimbi, University of Pretoria, South Africa.
E-mail: csnzed@gmail.com

This paper underscores the reality and significance of the disputed and often-tainted informal economy in Africa. The paper focuses on two key components of the informal economy—employment and production—and simultaneously highlights three key issues in informality that are significant to regional integration by the spatial way in which they relate to borders. The paper draws on a thorough review of the literature and documentary evidence on informality, borders and regional integration to show that though difficult to assess, the informal economy is a permanent African reality that dates back to the Iron Age. It is also a source of employment for many, sustains livelihoods and contributes to local, national and regional economies and, to regional economic integration from the bottom up. On their part, African nation-state borders regulate movement, presenting sever restrictions on especially undocumented labour migration and informal trade. With supportive policies, however, cross-border movers are potentially useful partners of the state and African integration. These actors could help deepen integration by participating in measures designed to reduce non-tariff barriers to trade. Because grassroots actors suffer abuse, are ill-treated at borders and in host countries, and lack access to social protection, African borders should be transformed into functional bridges that link communities straddling proximate states, to establish amorphous borderlands that would enhance economic, social and cultural integration.

2. Small-Scale Trade, Citizen-Making, and the Politics of Informality in Northern Ghana

Author: Ulrik Jennische, University of Stockholm, Sweden.
E-mail: ulrik.jennische@socant.su.se

In the last decades, the government of Ghana have in line with a global development discourse sought to formalize the economy of small-scale trade, while simultaneously define it as informal. Through welfare services, such as health insurance and pension schemes specifically designed for actors in the “informal sector”, and through the National Urban Policy that describe how urban planning should provide for the activities of the “informal economy” by strengthen its capacity, the state seeks to bring previously excluded actors under its realm of control and construct new markets. This process of citizen-making and market creation articulates a contradictory politics of informality that diminishes the analytical value of informal economy. Meanwhile, this process entails a moral engagement with the everyday life of traders. It not only defines the good citizen but transforms and merges different conflicting moral economies. For instance, the Ghana Investment Promotion Centre Act (GIPC 2013) reserves market and street trading to Ghanaians only. The policy is rarely enforced because it simultaneously competes with international agreements. But it enables traders to politically mobilize against foreign traders as immoral Others. This paper is based on ethnographic fieldwork among small-scale traders in Northern Ghana with a specific interest to the intersection of state, market and citizenship. It investigates how the state, amid its national project, frames its politics around the categories of informal and formal. It argues that this process complicates the use of informal economy, and explores the possibilities of moral economy (Fassin 2009) to illuminate the underlying moralities of this process.

3. Responding to the challenges and opportunities of mobile money and digitization of financial transactions: Why African countries should follow India and pursue a ‘Less Cash’ or ‘Cash-Lite’ Economy as a pathway out of poverty through Financial Inclusion

Author: Franklyn Lisk, Centre for the Study of Globalisation and Regionalisation, University of Warwick, UK.
E-mail: f.lisk@warwick.ac.uk

Personal conviction and political considerations motivated the current Indian Prime Minister, Narendra Modi, soon after taking office to launch an ambitious policy of ‘demonetisation’, which has contributed to increasing digitization of financial transactions across the country and enhanced a move towards a ‘less cash’ economy. Despite early mishaps and initial frustrations, the Indian demonetisation programme has turned out to be a ‘game changer’ – most significantly in terms of the impact on ‘financial inclusion’ which presumably has directly impacted on the lives and livelihoods of hundreds of millions of Indians who hitherto were “unbanked” in the sense of having no links with formal and informal financial institutions. Furthermore, greater financial inclusion of India’s 1.3 billion people is believed to be a crucial factor in the progressive reduction of absolute poverty in the country.

Based on India’s experience, there are good reasons to believe that Africa should take advantage of the digital revolution now sweeping through the continent to promote digitization of financial transactions as a pathway out of poverty. The widespread use of mobile money and increasing digitization of financial transactions in many African countries is paving the way for ‘de-cashing’ of the economy [i.e. the gradual phasing out of the use of currency in regular financial and commercial transactions and its replacement by convertible bank transactions] and enhancing  financial inclusion. This is significant when it is realised that presently an estimated 330 million Africans (i.e. about 80 per cent of the continent’s working-age population) use no formal or informal financial services. Financial dealings are predominantly currency-oriented, rather than bank transactions, and whatever savings take place usually involve stashing bank notes at home (i.e. ‘under the mattress’ syndrome). This situation leaves millions of individuals and households in the continent without the ability to accumulate enough capital to escape poverty. Similarly, the millions of Africans who etch out a living in the so-called informal sector – which represents nearly half of GDP in most part of the continent - are excluded by the nature of their livelihoods and businesses from joining and benefitting from formal financial services.

The paper will argue that moving towards a less cash society through digitization of financial transactions would encourage, ordinary citizens, companies and public sector policy-makers to devise mechanisms to bring more Africans into the financial sector; drastically improve the lives of the millions who are now ‘under- and unbanked’; and bring many livelihoods into the realm of the formal and modern economy. This will be a major game changer for Africa and a foremost economic opportunity for African countries to tackle poverty and inequality through of financial inclusion.

Based on available evidence, there is good reason to believe that Africa can succeed in the transition towards a less cash or cash-lite society. Already, a large swath of the continent is abound with mobile money and digital payment systems like M-Pesa  (which originated in Kenya a decade ago in 2007), EcoCash, E-Wallet  and other types of mobile money account.  The GSMA Foundation reported that in 2015 about 30 per cent of the total US$ 37.4 million ‘off the counter’ (OTC) mobile money transactions in the world took place in sub-Saharan Africa (SSA). These are precisely the types of innovative platforms that can play a pivotal role in the shift away from cash towards non-cash financial transactions in African economies. Lessons from the initial shortcomings of Indian experience suggest that success will require a more gradual and less stringent approach to ‘demonetisation’, so as not to allow cash scarcity to cripple economic activity in the large informal sector which provides livelihoods for tens of millions of people in the continent.

If Africa should succeed in this transition towards a less cash society, the benefits could be substantial and even profound. Digitization of financial transactions - mainly in terms of replacing cash by mobile and digital money - would save money for African countries, including reducing the costs to central banks of handling cash-based financial and economic transactions and of printing and processing currency notes. MasterCard estimates that most countries spend as much a 1 per cent of their GDP each year to print and distribute bank notes. Additionally, digitization of financial transactions would help to stem the flow of illicit finance and ‘black money,’ thereby contributing to reducing corruption which is catalysed by undocumented and often untraceable cash transactions. Finally, when accompanied by appropriate tax reforms, digitization could raise much additional revenues for national and local governments. The money thus saved and additional revenue raised could go towards improving the lives of the poor and contribute towards meeting the Sustainable Development Goals (SDGs) through investments in key human development areas such as health and education.

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