Informal sector exploits workers

Namibia faces key developmental challenges such as a growing informal economy, lack of decent and secure jobs and insufficient social protection for workers.

However, employment created in the informal sector is reported to be largely exploitative and insecure.

The other challenge is insufficient up-to-date information about the character of the informal sector in Namibia. This scenario makes it difficult for planners and lawmakers to engage in proper planning and decision-making and to implement policies of service delivery.

This is according to a new report launched by the labour ministry.

The Namibia Informal Economy Case Study 2016/17 was conducted in the //Karas, Erongo, Kavango East, Khomas, Ohangwena, Omaheke, Oshana and Zambezi regions.

The results indicated that in terms of economic production as measured by the contribution to GDP, the share of the informal sector is much less than that of the formal sector.

However, with regard to jobs, informal employment is a vital source of income to the employed population. Between 2012 and 2014 the informal sector represented 40% of employment in Namibia.

The report found that employment in the informal sector was without contracts for most employees and that employees also work excessive hours, most of them between nine and 13 hours a day. Sick-leave benefits are enjoyed by fewer than 40% of these employees and fewer than 30% received annual leave.

“A high number of informal enterprises were not registered with the Social Security Commission and a lack of information on why they must register was the main reason cited for non-registration.”

About 84.3% of employees in the sector indicated that they were not registered with the Social Security Commission.

According to the report, up to 90% of self-employed workers were from urban areas. Nevertheless, regional variations were evident.

“Most of them were young adults, predominantly female, who have completed junior secondary education.”

Close to 85% had access to cellphones, according to the report.

About 70% had not received any training in running a business, while 8.5% had received training in crafts, repairing and operating machinery.

This suggests that a lack of training in how to run a business might affect the sustainability of their businesses, says the report.

The majority of businesses in the informal sector (92.1%) are solely owned and about 7% are partnerships.

According to the report a sizeable number of enterprises (62%) had only one employee. The majority were permanent employees with a fixed monthly salary averaging N$1 554. Close to half were paid between N$1 000 and N$2 000 and a third were paid less than N$1 000 a month.

Most of these enterprises were relatively new, only having been established in the last five years prior to the report.

“Noticeable was that about 12% of the operators had been operating for less than six months,” says the report.

Results show that over half of the businesses were in wholesale and retail trade, and 85% of the businesses were in the non-agricultural sector.

“As it was expected, close to 60% of the businesses were operating at home. Only 19% had business premises with a fixed location that was independent from home.”

Further findings indicated that access to credit and micro-financing was limited in the informal sector.

“In fact, financial difficulties were mostly the challenge faced with running businesses in the informal sector.”

According to the report, start-up capital for businesses in the informal sector was sourced either from own savings or relatives, friends and neighbours.

Several recommendations were made in the report, which include investing in training and skills development, increasing awareness of micro-financing, training informal entrepreneurs and simplifying labour laws.

ELLANIE SMIT