Vision 2030 cannot be realized without the Informal Sector

The informal sector holds the key to achieving vision 2030 and realizing the much coveted dream of a peaceful, prosperous and more equitable society. In contrast to a growing perception that the sector is a marginal activity at the peripheral of the formal sector, it accounts for 20 percent of GDP and employs 65 percent of the working population in Kenya and it has achieved this with little support. But by continuing to ignore or circumvent the informal sector in resource allocation and strategic development planning, we expose the country to what some analysts have predicted will be a new wave and scale of conflicts emanating from the sector’s inability to continue employing, and the increased competition for seemingly diminishing resources, infrastructure, services and marketplace opportunities.

To forestall this eventuality, there needs to be a large scale government intervention and a massive investment of private capital in development of social and physical infrastructure with the aim of increasing the quality and quantity of engagement with the sector and ensuring that the evolution of the sector happens around grassroots institutions.

Some key areas of focus should be:
i. The development a framework for promoting strong grassroots business organizations as the channels for delivering resource for both service and production oriented activities.
ii. The development of appropriate youth oriented vocational and skills development to unlock idle human and social capital resident in the sector
iii. Identification of the appropriate technology, tools and instruments that can be introduced to increase efficiency and productivity of the sector to enhance competitiveness in the marketplace
iv. The design of appropriate incubation models to address the multiple causes of business failure and consequently reduce the high early stage failure rate of small businesses

PERSPECTIVES OF THE SECTOR
The informal sector is an oxymoron - on one hand it is an unregulated and unorganized sector whose numbers, for example, are not known and whose activities are unaccounted for. On the other, it provides jobs and offers incomes for some of the most vulnerable groups in our country.

The people who make up the informal sector are innovators, skilled at surviving, and in some cases prospering in a highly disorganized environment. Unfortunately, informality is responsible for loss of their full rights as citizens by operating outside the regulated economy.

But the sector does not exist in a vacuum as there is clear interconnectedness, partnerships and continuity with the formal sector, maintaining a two way flow of labor, goods, finances, etc, between the two sectors.

PARADIGMS OF DEVELOPMENT
The development decades of the 60s and 70s first threw up this strategy of 'growth.' Aiming for an economic growth, it was assumed that the benefits of this growth would reach all the sectors of the economy. This did not actually take place. In fact, inter-personal and inter regional disparities began to emerge. The urban informal sector emerged then as an answer or solution to the failure of the 'trickle down' growth strategies.

Since the growth strategies brought about disparities, later, in the 80s, economic and developmental strategies stressed on growth with distribution, or equity. It was assumed that strategies which stressed on equitable distribution of growth would be more appropriate. For various reasons, this distribution again did not take place. In fact, only in the informal sector was there more equitable distribution of income. This was very evident in the way workers in the sector, though thinly spread and inefficient, could distribute work that could be done by one person to several people.

As a result of the failure of the 'growth with equity' strategy to actually generate opportunities for the poor, the focus of development shifted to 'employment generation’ and more recently, in the new millennium, they added wealth creation. Even though this did work to an extent, the formal sector, which these developmental strategies were aimed at, was not able to absorb the multitudes of skilled, semi-skilled and unskilled people coming out of our institutions of learning seeking for a piece of the action, The urban informal sector on the other hand, did, mainly for the reason that there are generally no restrictive barriers to entry and that the sector typically uses inefficient and labor intensive processes and technologies.

REGULATION
Regulation is critical in reducing the level of informality, but to achieve any success, it will be prudent to rationalize the role of the regulator in creating conducive conditions for doing business while ensuring that this does not involve subsidies that often distort markets which are typically conditioned by a completely different flavor of intercession.

The informal sector in Kenya is unique in many respects key of which is that as opposed to many most developing countries, entrepreneurs do have some interaction with authorities. Permits are issued by local authorities across the country, albeit, a daily permit. This however does not in any way suggest regulation. Regulation presupposes that a percentage of the proceeds of permits are ploughed back in the form of services, which is hardly the case in Kenya.

With the emergence of Counties, there will be need to establish mechanisms for collecting important data for policy formulation which should focus on supporting the already vibrant sector to thrive while at the same time defining a path to proper regulation