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Being “Informal” Is Also Working!

Being “Informal” Is Also Working!

  • Iris Chivite Guimarães • Chief Executive of the Small and Medium Business Segment at Vodacom Business

The informal sector is so ingrained in our society that it is a blatant part of our daily lives. From the credit stand to the fruit stand, from the small bread shop on the corner to the cobbler who gives us a helping hand when our sandal decides to break in the wrong place and so many other (and endless) examples, we are constantly breathing informal!

In a mixture of ‘they dirty and tarnish the appearance of cities’ and ‘but there’s no job, they’re just making ends meet’, the voices raised to talk about the ‘informal’ are loud, some angry, others resigned. But are we really debating the issue of the informal sector, looking at what it really is?

Let’s see: according to the National Statistics Institute (data from 20z19), around 80 per cent of the Mozambican economy is informal, with an estimated contribution of 40 per cent to the Gross Domestic Product. And if we want to go further, we can look at a study entitled ‘The Impact of the Informal Economy on the Development Process in Sub-Saharan Africa’, carried out in 2010, which reveals that the informal economy in African countries accounts for an average of 60 per cent of the GDP and contributes greatly to circumventing problems such as unemployment and poverty. In other words, the expansion of the informal sector is not just a ‘problem’ in Mozambique. And it’s not a problem at all, but a form of subsistence that plays a major role in the country’s economy.

I realise that it is very difficult for formal companies to work with ‘informal’ ones because of the tax bureaucracies they are subject to

I recently had the opportunity to travel to some provinces on business, and I came back with the certainty that the informal market must be supported to become formal. In other words, we need to cherish this sector, starting by looking at its impact on the economy and society in general. After all, from the informal ‘root’ to the formalised small business, both are the biggest employer in the country and boost our economy. Thanks to my travels around the country, I have had the opportunity to witness this evolution/growth from the informal to the formal, in the form of entrepreneurs who today proudly represent duly formalised micro and small businesses, operating and contributing to the local economy.

And the most fascinating thing of all is witnessing this gradual transition from business ‘outside the law’, which mostly takes place on the streets, to what I would consider an intermediate stage, in the form of containers transformed into mini-grocery shops, bars, hardware shops, small boutiques or bread depots, to the totally formal stage, which takes shape in small shops or offices. It’s undoubtedly a victory that translates into more jobs, taxes and a boost to the economy.

But I have no illusions that this process is simple or that change will happen overnight. I realise that formal companies find it very difficult to work with ‘informal’ companies due to the tax bureaucracies to which they are subject. This fact, in my opinion, should be rethought with a view to supporting these ‘informals’, so that they can expand and have the opportunity to formalise and provide services to stabilised companies, thus guaranteeing the continuity of their business.

And while we always tend to look at what the government isn’t doing to help the most vulnerable, in this case I believe that all the big companies that can somehow support the informal sector should also be called to account, either through technology or know-how under the different local content development programmes, so that they can fulfil their role of contributing to the stimulation and growth of the economy. And if it is true – and it is indeed true – that the informal market accounts for a significant portion of the movement of capital in our country, it is clear, at least to me, that as entrepreneurs or legislators, muttering in discontent at this ‘informal monster’ is not the solution!

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