Treat informal sector well: Dons

Stakeholders who attended the breakfast debate organized by Policy Forum under the theme ‘The Power of Tanzania’s Informal Economy: Unveiling the Concealed Opportunities’ have warned that the formalization should follow a step by step process rather than being handled as an event.

Prof Honest Ngowi of Mzumbe University said that forceful transformation will tear the informal sector apart, thereby denying the country otherwise expected economic benefits.

“The country can benefit from the sector even without formalization; what is important is the provision of incentives that would enable the sector to grow,” Prof Ngowi stated.

Noting that the country’s informal sector requires proper arrangements for the country to gain benefits through pre-requisite revenue collections, Ngowi argued that technology and the number of people employed in the sector were less important features in the sector.

“There are businesses operating under modern technologies, others employing many people; yet, they’re categorized as ‘informal businesses,’” he said, insisting that technology and number of employees were not important features when categorizing the informal sector.

Ngowi was supported in this by Prof Haji Semboja of the University of Dar es Salaam (UDSM), who opined that the government was supposed to improve the working environment for the informal sector.

According to Prof Semboja, the informal sector guarantees easy entry and exit, making operators practise entrepreneurial activities for survival –which is unhealthy for formal investment in industrial development and socio-economic prosperity of the country.

“For instance, businesspeople operating in the Kariakoo area cannot consistently be found in the area. Those found doing business in the area will not necessarily be the same people who will be found trading in the same spot in the next two to three weeks,” he said.

The professor further noted that the settings would sometimes be politically acceptable – although it was tantamount to sabotage of the country’s economy because such arrangements nurtured poverty.

In any case, Prof Semboja hailed the government for its efforts to formalize artisanal mining activities through the Small Industries Development Organization (SIDO) and the Ministry of Industry, Trade and Investment in spite of known challenges. Prof Semboja said some businesspeople would prefer to remain ‘small,’ although their growth was inevitable for the country’s economic growth and prosperity, stressing that Tanzania’s economy wasn’t as vibrant as people were being made to believe.

“People are complaining of life’s hardships due to increased poverty. But, poverty cannot be alleviated under the current methods which we may think are good for us,” he said.

In the event, he urged the government to take a leaf out of the book on the wisdom of the People’s Republic of China that had transformed their country’s economic wellbeing for the better in a relatively short duration.

“The Chinese have completely changed technology, means of financing and lifestyles. What Tanzania is supposed to do is to determine how it will move forward,” the way the Chinese have done, the professor said.

Contributing to the Breakfast Debate, the executive director of the Youth Partnership Countrywide (YPC), Mr Israel Ilunde, called for a major reduction in bureaucracy and inordinately high costs in order to enable firms to grow exponentially.

“High costs of registering companies and unmitigated bureaucracy force private sector enterprises to remain informal,” Ilunde said, urging the relevant authorities avoid practices which hamper companies from growing.

A lecturer at the Statistics Department of the University of Dar es Salaam (UDSM), Mr Gasper Baltazary, urged the government “to think formally when thinking on the informal sector.

“The government should aim at benefiting from both the formal and informal sectors of the economy on a win-win basis. To that end, it should urgently address obstacles in taxation and company registration,” he said.

For her part, a student pursuing a Bachelor of Arts degree in Psychology at the University of Dar es Salaam, Ms Sumaiyya Mahmoud, suggests that formalization processes should not punish business operators in the informal sector.

Ms. Sumaiyya Mahmoud – who is the deputy Education minister for Dar es Salaam University Students Organization (DARUSO) – counseled that “formalization strategies and procedures should be designed and implemented in such a way that they benefit the Economy and the country at large. Bureaucracy should be minimized, and incentives provided to promote growth and prosperity of the private sector” in particular, and the entire Economy at large, she stressed.

During his presentation at the Policy Forum debate, Mr William Madiwa of the Tanzania Trade and Economic Justice Forum (TTEJF) said the informal sector was a good source of employment for the youth.

Noting that the ‘2014 Integrated Labour Survey’ found that jobs in both the formal and informal sectors increased from 16.6 million in 2006 to 20 million in 2014, Mr Madiwa said “the increase was more notable in the informal sector, which had 4.3 million employees in 2014 – up from 1.6 million in 2006.”

He also revealed that the annual Gross Domestic Product (GDP) grew at 6.5 per cent during that period – with labour productivity alone growing at 4.1 per cent. Insisting that “the informal sector of the economy plays an important role in consolidating efforts to achieve the UN-supported Sustainable Development Goals (SDGs) by 2030” as originally set, Mr Madiwa postulated that “SDG Number One would not be achieved without increasing and protecting earnings of the working poor in the informal sector. This is largely because the majority of urban workers in Africa are informally employed, with low average earnings – thus complicating realization of the goal. SDG Number One is about eradicating poverty in all its forms.

“Since women are more likely than men to be informally employed in Africa – and since gender segmentation and earning gaps persist within the informal workforce – the 5th SDG Goal on Gender Equality (ending all forms of discrimination against women and girls) can hardly be attained without increasing women’s earnings while, at the same time, reducing the hindrances which women face in the businesses they operate,” he said.

Indeed, gender equality is not only a basic human right. It is also crucial to accelerating sustainable development. It has been proven time and again, that empowering women and girls has a multiplier effect – and helps drive up economic growth and development across the board.

Noting that SDG No. 8 is about ‘Decent Work and Economic Growth,’ Mr Madiwa said that goal will never be reached as long as the majority of workers in sub-Saharan Africa are informally-employed. Since informal workers face decent work deficits than formal workers, the goal targeting to achieve decent work for all would not be recorded without effectively addressing the assorted challenges that workers face in pursuing their livelihoods.

As for Goal Number 11 which calls for inclusion and realization of ‘Sustainable Cities and Communities,’ this would hardly be met without officially recognizing the economic and environmental activities that are routinely contributed by informal workers in their respective metropolises, the Tanzania Trade and Economic Justice Forum official stated.

This, he laid it on thick, “will in turn integrate livelihood activities into city plans and policies, as well as extend access to the general public all issues of land, public services and procurement in order to benefit informal workers among other citizens.”

In the event, Mr Madiwa identified the challenges that adversely affect prosperity of the informal sector in Tanzania as including insufficient capital to finance business startups and their optimum operations; scarcity of suitable raw materials; lack of enough or quality government backing; inadequate knowledgeable skills and technically-empowered manpower…

“Other challenges are ready availability, accessibility and reliability of the right data – especially in the developing countries where Information and Communication Technologies are still relatively poor, with technical and vocational training programs being limited,” he said.

By way of conclusion, Mr Madiwa suggested taking measured interventions at different entry points to be undertaken simultaneously with efficacious systems and strategies designed to improve performance of the informal economy across the country.

Furthermore, tailoring a new and better, all-inclusive pact between government authorities, small businesses and other stakeholders for an efficacious consultative and monitoring platform in the areas of inclusive participation in decision-making and implementation at different levels – especially during changes in policy and legislative frameworks.

In that regard, Mr Madiwa recommended formulation of policies regarding informality in general, and to specify basic objectives, such as efficient and equity transcending formality and informality.

He proposes that the informality should be aggregated into policy-relevant categories, rather than taking it as an undifferentiated lump – and then weigh policies by their impacts and their magnitudes.

Renewing the call for the government to reduce levels of taxation on the informal sector, he suggested “using a simple presumptive tax as a means of incentivizing small informal businesses to become formal – although that might not be enough in improving the livelihoods of the working poor, particularly women!

“This should be done by increasing access to productive resources and services, as well as legal and social protection for women – and enhancing voices and representations,” Mr. Madiwa said.

Also, conditions should be created that enable Medium-Size Entrepreneurs (MSEs) to upgrade their businesses and generate more employment. The conditions should necessarily be compatible with the promotion of the national policies for Small and Medium Entrepreneurs (SMEs) in different sectors of the Economy.

“Priming the market place for growth and jobs creation through managing demand is the task of the government. Governments achieve this by ensuring a conducive macro-economic environment that addresses demand-side constraints” is securely put in place, he said.

BODY TEXT: 1,592 words.

[EDITED by Karl LYIMO].