The Role of the Informal Sector in African Economy

The informal sector of the economy often refers to the unregulated and mostly unregistered sector of the economy, put simply it refers to the numerous petty or small scale businesses operated by artisans, peasants and other micro entrepreneurs, within the economy.

Experts have argued that in most African economies, the informal sector is often the driving force of the economy and that as a matter of fact it is opined that the reason why most Western originated economic recovery prescriptions channeled through the World Bank, IMF and so on to Africa have often failed is because of the inability of such prescriptions to take the informal sector in most of these African economies into consideration.

The prominence of the informal sector in most African economies cannot really be underemphasized as almost all persons who cannot find placements within the formal sector of the economy finds solace in the informal sector of the economy. In as much as the informal sector, drives most African economies, it is a very much neglected sector as it seldom accounts for a pride of place in government planning for the overall economy. This may be due to a myriad of factors such as the unregistered and unregulated nature of most businesses in the informal sector, poor work ethics of most micro entrepreneurs, which often leads to mismanagement of such businesses, tax evasion and illiteracy on the part of most operators in the informal sector.

Giving the role of the informal sector, in the economies of most African nations, governments in African countries should begin to take more than a simple 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 potentials of the African economy since activities in both sectors of the economy are not mutually exclusive. A massive drive to register and have a data base 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.

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By Babs Iwalewa

Babs is an Msc (Geography) student at the Nigerian Defense Academy, Kaduna, Nigeria. His interests are in the areas of Population, Development, Culture, Politics and Urban planning. He is a member of the Association Of Nigerian Authors )ANA), Kaduna Chapter. Email: babiwalewa@talkafrique.com