In Sub-Saharan Africa, the urban informal sector accounts for the majority of businesses and employment, yet workers face minimal access to formal social protection. Sharon Onyango explores the link between urban informality and social protection, proposing innovative approaches for inclusive economies in African cities.
In Sub-Saharan Africa (SSA), the informal labour markets are pivotal components of the growing urban economies, accounting for approximately 60 per cent of GDP. The sector encompasses casual labourers and domestic workers among others. Traditionally, informality in these markets is characterised by low human resources and efficiency, limited access to elementary services, inadequate financial inclusion, minimal wages, and uneven earnings.
Presently, most SSA cities’ demographics are experiencing a rise in the working-age population that exceeds the available job opportunities in the formal sector. This leads to the ongoing growth of the informal sector workforce. As global predictions indicate a decline of these economies with increased development, the case is dissimilar for SSA, with a projected country-specific expansion of the informal sector by 2050 in line with the growing population.
The Informal Sector Dilemma: Rethinking Social Protection Mechanisms
Despite their invaluable contributions, workers in the informal sector often grapple with precarious conditions marked by job instability, restricted healthcare accessibility, and meagre compensation. The unpredictable nature of their work complicates the establishment of conventional social protection mechanisms, exposing a considerable population to vulnerability.
Over the past three decades, social protection policies have garnered growing interest from both donors and African nations. Many of the SSA countries have developed their own national policies and adopted various approaches to enhance social protection. Employers and employees need to invest in developing skills, protecting, against the liquidation of valuable assets during unforeseen challenges, and encouraging savings to enhance overall resilience.
Unveiling the Struggles: Social Protection Challenges in SSA’s Informal Sector
Informal workers, though dynamic and often overlooked, contribute significantly to the vibrancy of the urban economic landscapes. However, their lack of formal recognition poses challenges for the implementation of adequate social protection measures. Some of the key challenges include:
Absence of Formal Documentation and Unpredictable Income: Navigating the informal sector’s lack of formal contracts and irregular income can be quite the puzzle when it comes to setting up clear eligibility and ensuring consistent contribution to social protection. Take Tanzania, for instance, where micro-trade has been dominant, and many traders operate without formal documentation. This gap is being tackled by their trade associations, which aim to provide a range of diverse services.
Gender Disparity: In SSA, women and youth constitute the highest portion of informal labourers, thereby, presenting distinctive challenges that may demand targeted social protection measures. In Kenya, where a mere six per cent of formally employed women have access to maternity cover, leaving over ninety per cent in the informal sector uncovered, with no leave benefits. This stark reality exposes them to economic shocks and uncertainties.
Fragmented Policy Implementation: Inconsistent policy enactment across diverse regions and nations in SSA, often leads to inadequate access to social protection. In South Africa and Nigeria, both economies have experienced numerous challenges, accompanied by policy incentives that could support the sustainability and enhancement of the informal sector in the two nations.
Innovative Approaches: Shaping a Resilient Future for Informal Workers in SSA
To address the multifaceted nexus between informality and social protection, SSA cities are progressively exploring modern solutions. Digital technologies, for instance, offer opportunities to connect with informal workers, providing financial services, healthcare information, and educational resources. The utilisation of existing digital finance technologies not only facilitates connectivity but also cultivates a saving culture among this population. In Kenya, Tanzania, and Ethiopia, the mobile money platform ‘M-Pesa’ has been used to expand social assistance payments, reaching informal workers who may not have access to customary banking services.
In addition, the establishment of community-driven social insurance schemes proves instrumental in pooling resources and providing financial protection to informal sector workers. In Ghana, the National Health Insurance Scheme (NHIS) has introduced community-based health insurance schemes. Here, informal sector workers contribute to and receive health coverage tailored to their needs.
Lastly, teaming up with microfinance institutions is imperative in designing and implementing social protection programs tailored to the commercial realities of the informal sector. An example is Nigeria’s National Social Safety Net Program (NASSP), which collaborates with microfinance organisations to cover conditional money transfers to vulnerable groups within the informal sector, to promote financial inclusion.
In conclusion, fostering sustainability and inclusive development in SSA cities demands acknowledging and tackling the drawbacks experienced by informal sector workers. Implementing modern social protection measures requires a shift from traditional approaches while embracing inventive strategies to bridge the existing gap. Eventually, these tailored solutions will contribute to a more inclusive framework across the continent towards promoting an economically resilient urban future in Africa.