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← The hidden opportunities of the informal economy

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Showing Revision 11 created 11/20/2017 by Brian Greene.

  1. The informal markets of Africa
    are stereotypically seen
  2. as chaotic and lackadaisical.
  3. The downside of hearing
    the word "informal"
  4. is this automatic grand
    association we have,
  5. which is very negative,
  6. and it's had significant consequences
    and economic losses,
  7. easily adding -- or subtracting --
    40 to 60 percent of the profit margin
  8. for the informal markets alone.
  9. As part of a task of mapping
    the informal trade ecosystem,
  10. we've done an extensive literature review
  11. of all the reports and research
    on cross-border trade in East Africa,
  12. going back 20 years.
  13. This was to prepare us for fieldwork
    to understand what was the problem,
  14. what was holding back informal trade
    in the informal sector.
  15. What we discovered
    over the last 20 years was,

  16. nobody had distinguished
    between illicit --
  17. which is like smuggling or contraband
    in the informal sector --
  18. from the legal but unrecorded,
  19. such as tomatoes, oranges, fruit.
  20. This criminalization --
  21. what in Swahili refers to as "biashara,"
    which is the trade or the commerce,
  22. versus "magendo," which is
    the smuggling or contraband --
  23. this criminalization
    of the informal sector,
  24. in English, by not distinguishing
    between these aspects,
  25. easily can cost each African economy
    between 60 to 80 percent addition
  26. on the annual GDP growth rate,
  27. because we are not recognizing the engine
  28. of what keeps the economies running.
  29. The informal sector is growing jobs
    at four times the rate

  30. of the traditional formal economy,
  31. or "modern" economy, as many call it.
  32. It offers employment and income
    generation opportunities
  33. to the most "unskilled"
    in conventional disciplines.
  34. But can you make a french fry
    machine out of an old car?
  35. So, this, ladies and gentlemen,

  36. is what so desperately needs
    to be recognized.
  37. As long as the current assumptions
    hold that this is criminal,
  38. this is shadow,
  39. this is illegal,
  40. there will be no attempt at integrating
    the informal economic ecosystem
  41. with the formal or even the global one.
  42. I'm going to tell you a story of Teresia,

  43. a trader who overturned
    all our assumptions,
  44. made us question all the stereotypes
    that we'd gone in on,
  45. based on 20 years of literature review.
  46. Teresia sells clothes under a tree
    in a town called Malaba,
  47. on the border of Uganda and Kenya.
  48. You think it's very simple, don't you?
  49. We'll go hang up new clothes
    from the branches,
  50. put out the tarp, settle down,
    wait for customers,
  51. and there we have it.
  52. She was everything we were expecting
    according to the literature,
  53. to the research,
  54. right down to she was a single
    mom driven to trade,
  55. supporting her kids.
  56. So what overturned our assumptions?

  57. What surprised us?
  58. First, Teresia paid the county
    government market fees
  59. every single working day
  60. for the privilege of setting
    up shop under her tree.
  61. She's been doing it for seven years,
  62. and she's been getting receipts.
  63. She keeps records.
  64. We're seeing not a marginal,
  65. underprivileged,
  66. vulnerable African woman trader
    by the side of the road -- no.
  67. We were seeing somebody
    who's keeping sales records for years;
  68. somebody who had an entire ecosystem
    of retail that comes in from Uganda
  69. to pick up inventory;
  70. someone who's got handcarts
    bringing the goods in,
  71. or the mobile money agent
    who comes to collect cash
  72. at the end of the evening.
  73. Can you guess how much
    Teresia spends, on average,
  74. each month on inventory --
  75. stocks of new clothes
    that she gets from Nairobi?
  76. One thousand five hundred US dollars.
  77. That's around 20,000 US dollars
    invested in trade goods and services
  78. every year.
  79. This is Teresia,
  80. the invisible one,
  81. the hidden middle.
  82. And she's only the first rung
    of the small entrepreneurs,

  83. the micro-businesses that can be found
    in these market towns.
  84. At least in the larger Malaba border,
    she's at the first rung.
  85. The people further up the value chain
  86. are easily running
    three lines of business,
  87. investing 2,500 to 3,000
    US dollars every month.
  88. So the problem turned out
    that it wasn't the criminalization;
  89. you can't really criminalize someone
    you're charging receipts from.
  90. It's the lack of recognition
    of their skilled occupations.
  91. The bank systems and structures
    have no means to recognize them
  92. as micro-businesses,
  93. much less the fact that, you know,
  94. her tree doesn't have
    a forwarding address.
  95. So she's trapped in the middle.

  96. She's falling through the cracks
    of our assumptions.
  97. You know all those microloans
    to help African women traders?
  98. They're going to loan her
    50 dollars or 100 dollars.
  99. What's she going to do with it?
  100. She spends 10 times
    that amount every month
  101. just on inventory --
  102. we're not talking about
    the additional services
  103. or the support ecosystem.
  104. These are the ones who fit
    neither the policy stereotype
  105. of the low-skilled and the marginalized,
  106. nor the white-collar,
    salaried office worker
  107. or civil servant with a pension
  108. that the middle classes
    are allegedly composed of.
  109. Instead, what we have here
    are the proto-SMEs

  110. these are the fertile seeds
    of businesses and enterprises
  111. that keep the engines running.
  112. They put food on your table.
  113. Even here in this hotel,
    the invisible ones --
  114. the butchers, the bakers
    the candlestick makers --
  115. they make the machines
    that make your french fries
  116. and they make your beds.
  117. These are the invisible businesswomen
    trading across borders,
  118. all on the side of the road,
  119. and so they're invisible
    to data gatherers.
  120. And they're mashed together
    with the vast informal sector
  121. that doesn't bother to distinguish
    between smugglers and tax evaders
  122. and those running illegal whatnot,
  123. and the ladies who trade,
  124. and who put food on the table
    and send their kids to university.
  125. So that's really what I'm asking here.

  126. That's all that we need to start by doing.
  127. Can we start by recognizing
    the skills, the occupations?
  128. We could transform the informal economy
    by beginning with this recognition
  129. and then designing the customized
    doorways for them to enter
  130. or integrate with the formal,
  131. with the global,
  132. with the entire system.
  133. Thank you, ladies and gentlemen.

  134. (Applause)