The dynamics of the informal sector in African cities: Support methods & best practices for sustainable and inclusive local economic development (LED)

Long criticized, the informal sector is now recognized on a global and regional scale; its economic and social impact is such that it is considered an alternative to socio-economic crises and shocks; it is also seen as a shock absorber against shocks imposed by the labor market and the inexorable rise in unemployment, and referred to as support or promotional aid, especially since it is considered by the International Labor Office as “the goose that lays the golden eggs that creates jobs and wealth”[1]

According to the International Labor Organization (ILO), the informal sector is “a collection of units producing goods and services with the main purpose of creating jobs and income for those concerned. These units, having a low level of organization, operate on a small scale and in a specific way, with little or no division between labor and capital as factors of production. Labor relations, where they exist, are mainly based on casual employment, kinship relations or personal and social relations rather than on contractual agreements with formal guarantees.” [2]

Africa is the continent, which to date has the most people living in the informal sector. It represents the vast majority with 85.5% of informal jobs, including 71.9% outside agriculture^[3]. Thus, the informal sector occupies a dominant place in African economies. According to the International Monetary Fund (IMF), the informal sector shrinks according to the increase in income level. It accounts for around 40% of GDP, on average, for low-income countries and 35% of GDP for middle-income countries[4]. In addition, it is “an essential component of most sub-Saharan economies” with a contribution to GDP ranging between 25% and 65%, an estimated weight of between 30% and 90% of non-agricultural employment.[5].

Read more in the last issue of LEDNA Newsletter , here.