The hidden opportunities of the informal economy
-
0:01 - 0:05The informal markets of Africa
are stereotypically seen -
0:05 - 0:07as chaotic and lackadaisical.
-
0:07 - 0:10The downside of hearing
the word "informal" -
0:10 - 0:13is this automatic grand
association we have, -
0:13 - 0:14which is very negative,
-
0:14 - 0:19and it's had significant consequences
and economic losses, -
0:19 - 0:24easily adding -- or subtracting --
40 to 60 percent of the profit margin -
0:24 - 0:27for the informal markets alone.
-
0:27 - 0:31As part of a task of mapping
the informal trade ecosystem, -
0:31 - 0:34we've done an extensive literature review
-
0:34 - 0:39of all the reports and research
on cross-border trade in East Africa, -
0:39 - 0:41going back 20 years.
-
0:41 - 0:45This was to prepare us for fieldwork
to understand what was the problem, -
0:45 - 0:49what was holding back informal trade
in the informal sector. -
0:50 - 0:53What we discovered
over the last 20 years was, -
0:54 - 0:57nobody had distinguished
between illicit -- -
0:57 - 1:02which is like smuggling or contraband
in the informal sector -- -
1:02 - 1:04from the legal but unrecorded,
-
1:04 - 1:07such as tomatoes, oranges, fruit.
-
1:08 - 1:10This criminalization --
-
1:10 - 1:15what in Swahili refers to as "biashara,"
which is the trade or the commerce, -
1:15 - 1:19versus "magendo," which is
the smuggling or contraband -- -
1:19 - 1:22this criminalization
of the informal sector, -
1:22 - 1:26in English, by not distinguishing
between these aspects, -
1:26 - 1:32easily can cost each African economy
between 60 to 80 percent addition -
1:32 - 1:35on the annual GDP growth rate,
-
1:35 - 1:38because we are not recognizing the engine
-
1:38 - 1:41of what keeps the economies running.
-
1:41 - 1:44The informal sector is growing jobs
at four times the rate -
1:44 - 1:46of the traditional formal economy,
-
1:46 - 1:49or "modern" economy, as many call it.
-
1:49 - 1:52It offers employment and income
generation opportunities -
1:52 - 1:56to the most "unskilled"
in conventional disciplines. -
1:56 - 2:00But can you make a french fry
machine out of an old car? -
2:00 - 2:04So, this, ladies and gentlemen,
-
2:04 - 2:07is what so desperately needs
to be recognized. -
2:07 - 2:11As long as the current assumptions
hold that this is criminal, -
2:11 - 2:13this is shadow,
-
2:13 - 2:14this is illegal,
-
2:14 - 2:19there will be no attempt at integrating
the informal economic ecosystem -
2:19 - 2:22with the formal or even the global one.
-
2:23 - 2:26I'm going to tell you a story of Teresia,
-
2:26 - 2:30a trader who overturned
all our assumptions, -
2:30 - 2:33made us question all the stereotypes
that we'd gone in on, -
2:33 - 2:36based on 20 years of literature review.
-
2:38 - 2:43Teresia sells clothes under a tree
in a town called Malaba, -
2:43 - 2:45on the border of Uganda and Kenya.
-
2:46 - 2:48You think it's very simple, don't you?
-
2:49 - 2:51We'll go hang up new clothes
from the branches, -
2:51 - 2:54put out the tarp, settle down,
wait for customers, -
2:54 - 2:56and there we have it.
-
2:56 - 2:59She was everything we were expecting
according to the literature, -
2:59 - 3:00to the research,
-
3:01 - 3:04right down to she was a single
mom driven to trade, -
3:04 - 3:06supporting her kids.
-
3:07 - 3:10So what overturned our assumptions?
-
3:10 - 3:11What surprised us?
-
3:11 - 3:15First, Teresia paid the county
government market fees -
3:15 - 3:17every single working day
-
3:17 - 3:20for the privilege of setting
up shop under her tree. -
3:20 - 3:22She's been doing it for seven years,
-
3:22 - 3:24and she's been getting receipts.
-
3:25 - 3:26She keeps records.
-
3:26 - 3:29We're seeing not a marginal,
-
3:29 - 3:31underprivileged,
-
3:31 - 3:36vulnerable African woman trader
by the side of the road -- no. -
3:36 - 3:41We were seeing somebody
who's keeping sales records for years; -
3:41 - 3:47somebody who had an entire ecosystem
of retail that comes in from Uganda -
3:47 - 3:49to pick up inventory;
-
3:49 - 3:53someone who's got handcarts
bringing the goods in, -
3:53 - 3:56or the mobile money agent
who comes to collect cash -
3:56 - 3:58at the end of the evening.
-
3:58 - 4:02Can you guess how much
Teresia spends, on average, -
4:02 - 4:05each month on inventory --
-
4:05 - 4:07stocks of new clothes
that she gets from Nairobi? -
4:08 - 4:10One thousand five hundred US dollars.
-
4:11 - 4:16That's around 20,000 US dollars
invested in trade goods and services -
4:16 - 4:18every year.
-
4:18 - 4:19This is Teresia,
-
4:19 - 4:20the invisible one,
-
4:20 - 4:22the hidden middle.
-
4:22 - 4:27And she's only the first rung
of the small entrepreneurs, -
4:27 - 4:31the micro-businesses that can be found
in these market towns. -
4:31 - 4:36At least in the larger Malaba border,
she's at the first rung. -
4:37 - 4:39The people further up the value chain
-
4:39 - 4:42are easily running
three lines of business, -
4:42 - 4:47investing 2,500 to 3,000
US dollars every month. -
4:48 - 4:52So the problem turned out
that it wasn't the criminalization; -
4:52 - 4:56you can't really criminalize someone
you're charging receipts from. -
4:57 - 5:02It's the lack of recognition
of their skilled occupations. -
5:03 - 5:07The bank systems and structures
have no means to recognize them -
5:07 - 5:09as micro-businesses,
-
5:09 - 5:11much less the fact that, you know,
-
5:11 - 5:13her tree doesn't have
a forwarding address. -
5:14 - 5:16So she's trapped in the middle.
-
5:16 - 5:19She's falling through the cracks
of our assumptions. -
5:19 - 5:22You know all those microloans
to help African women traders? -
5:23 - 5:25They're going to loan her
50 dollars or 100 dollars. -
5:26 - 5:27What's she going to do with it?
-
5:27 - 5:29She spends 10 times
that amount every month -
5:29 - 5:31just on inventory --
-
5:31 - 5:33we're not talking about
the additional services -
5:33 - 5:35or the support ecosystem.
-
5:36 - 5:39These are the ones who fit
neither the policy stereotype -
5:39 - 5:42of the low-skilled and the marginalized,
-
5:42 - 5:45nor the white-collar,
salaried office worker -
5:45 - 5:47or civil servant with a pension
-
5:47 - 5:50that the middle classes
are allegedly composed of. -
5:50 - 5:55Instead, what we have here
are the proto-SMEs -
5:55 - 5:58these are the fertile seeds
of businesses and enterprises -
5:58 - 6:00that keep the engines running.
-
6:00 - 6:02They put food on your table.
-
6:02 - 6:05Even here in this hotel,
the invisible ones -- -
6:05 - 6:09the butchers, the bakers
the candlestick makers -- -
6:09 - 6:11they make the machines
that make your french fries -
6:11 - 6:12and they make your beds.
-
6:12 - 6:16These are the invisible businesswomen
trading across borders, -
6:17 - 6:19all on the side of the road,
-
6:19 - 6:22and so they're invisible
to data gatherers. -
6:23 - 6:26And they're mashed together
with the vast informal sector -
6:26 - 6:31that doesn't bother to distinguish
between smugglers and tax evaders -
6:31 - 6:34and those running illegal whatnot,
-
6:34 - 6:36and the ladies who trade,
-
6:36 - 6:40and who put food on the table
and send their kids to university. -
6:40 - 6:44So that's really what I'm asking here.
-
6:44 - 6:46That's all that we need to start by doing.
-
6:47 - 6:51Can we start by recognizing
the skills, the occupations? -
6:52 - 6:56We could transform the informal economy
by beginning with this recognition -
6:56 - 7:01and then designing the customized
doorways for them to enter -
7:01 - 7:03or integrate with the formal,
-
7:03 - 7:04with the global,
-
7:04 - 7:06with the entire system.
-
7:06 - 7:08Thank you, ladies and gentlemen.
-
7:08 - 7:11(Applause)
- Title:
- The hidden opportunities of the informal economy
- Speaker:
- Niti Bhan
- Description:
-
Niti Bhan studies business strategy for Africa's informal markets: the small shops and stands, skilled craftspeople and laborers who are the invisible engine that keeps the continent's economy running. It's tempting to think of these workers as tax-dodgers, even criminals -- but she makes the case that this booming segment of the economy is legitimate and worth investing in. If we do, she says, we might create thousands more jobs. "These are the fertile seeds of businesses and enterprises," Bhan says. "Can we start by recognizing these skills and occupations?"
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 07:26
Brian Greene edited English subtitles for The hidden opportunity of informal markets | ||
Brian Greene edited English subtitles for The hidden opportunity of informal markets | ||
Brian Greene approved English subtitles for The hidden opportunity of informal markets | ||
Brian Greene edited English subtitles for The hidden opportunity of informal markets | ||
Brian Greene edited English subtitles for The hidden opportunity of informal markets | ||
Brian Greene edited English subtitles for The hidden opportunity of informal markets | ||
Camille Martínez accepted English subtitles for The hidden opportunity of informal markets | ||
Camille Martínez edited English subtitles for The hidden opportunity of informal markets |