December 12th 2017

Opinion / Commentaries

Informal industries as the mainspring for equity and equality

Yet, if we refocus our efforts to actualize equity which will, in turn, bring us to a point where we will be able to achieve equality, with the informal sector as the nucleus of our development plans, we will realize our economic goals, reduce poverty levels and yield a shared understanding of natio

By Phyllis Wakiagaceo@kam.co.keThursday, 23 Nov 2017 11:03 EAT

Phyllis Wakiaga KAM Chief Executive.

Equity and Equality are two distinctive terms often used interchangeably but have two very different meanings. Equality, which widely features in discussions of economic development, simply means providing everyone with access to national resources in fairness and justice, in order for them to live fully. However, this can only happen if all citizens are at the same level (for example, income or living standards) and therefore need the same things.

On the other hand, equity, means providing everyone with what they need, in order to equally access national resources, to live a quality life. Longstanding investment in the productivity and profitability of the informal industries in the country, especially in counties, can help us achieve both these things, creating economically empowered individuals and generating revenues to boost effective and quality public national resources.

Where inequality abounds, one finds that there are few entrepreneurs in the formal market. Primarily, the competitiveness of these businesses increasingly takes a beating as they are the only ones constantly being taxed. This also affects their ability to pay competitive wages, expand and scale their businesses - hence offering less employment opportunities and operate at high production costs.

However, if we find ways through which many young entrepreneurs in the informal sector can scale their productions, making their businesses more profitable, they will be incentivized to formalize these businesses and in the process, create employment as well as catalyse the flourishing of related businesses in different sectors. This will increase the number of people earning competitive wages and reduce the inequality gap.

More importantly, county governments can tap into their informal sectors as a resource to promote equity. Different counties are at different stages of development, depending on various factors, including the demographic mix and geographic disposition, their development needs are indeed quite divergent.

Even if two or more counties are in need of the same resource, their uses would be diverse as well as the levels of usage. In focusing on formalizing the most prevalent informal ventures within the county, through the development of nurturing, progressive taxation and fiscal policies – many disenfranchised young people will find a purpose, a sense of belonging and increase their civic participation for the sake of building our nation.

At the same time, County governments will stop relying on the national government for financial support. In fact, they will now come in at advantageous bargaining levels, offering valuable partnerships to the central governments and securing opportunities for further economic growth for their constituents.

County governments will turn these young flourishing businesses into ambassadors, to showcase productivity, reduced poverty levels and thriving environments to potential investors across the region. Trade fairs and exhibitions, such as the Kenya Manufacturing Summit and Expo running this week, which promote locally produced goods and profile unique Kenyan inventions can be replicated in various counties, and used as platforms for young businesses to profile their work.

In doing so, the formalized businesses now established, will be able to set up structures that will give them equal access to markets as their counterparts in other counties or in the region. This access is achieved through the frequent production of quality goods in the required volumes. This translates to increased productivity levels, a growth in demand for these goods in the domestic and regional markets and the sprouting of numerous value chains.

County governments can use their new found revenue to tighten the regulations and policies around intellectual property, further incentivizing the informal businesses to formalize. Knowing that there are efforts to curb counterfeits, as well as protect and reward their innovations, these informal businesses will be motivated to put their trust in the county governments’ institutions.

Currently there are approximately 5.8 Million unlicensed businesses in Kenya. Additionally, out of 14.9 Million employees who make up the Micro, Small and Medium Enterprises (MSME) sector, 8.9 Million are in working in informal businesses. Many feel that their work is not valued by the government and even worse, that the term informal is synonymous with illegal, given what many see as rigid and difficult regulations and policies.

Consequently, they are detached from the plans and visions of national economic development and we as a country lose out from the value of their full participation in nation building.

Yet, if we refocus our efforts to actualize equity which will, in turn, bring us to a point where we will be able to achieve equality, with the informal sector as the nucleus of our development plans, we will realize our economic goals, reduce poverty levels and yield a shared understanding of national cohesion.

The writer is the CEO of Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya.





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