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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

Towards a post-Covid-19 economic and financial recovery of local and regional governments in Africa : Overview of recovery plans and economic support measures

The health wave of the Covid-19 pandemic seems less important than those experienced in Europe and Asia. However, Africa remains fragile in terms of health with coverage rates of health structures among the lowest in the world, and all the more so as successive waves of the pandemic are to be feared. In all countries, central, regional and local governments have anticipated by taking the barrier measures that have slowed the spread of the disease. If the contamination figures remain at low levels, the repercussions of the measures taken to prevent the pandemic from developing could call into question the progress made over the past decade in terms of improving the living conditions of the populations.

The economic situation is therefore likely to deteriorate structurally to the point where the African Development Bank (AfDB) forecasts that “nearly 50 million Africans will fall into extreme poverty and that a third of Africans, or 425 million people., live below the poverty line[1]“. The face of this poverty will largely be represented by the increasing numbers of slum dwellers in our cities and informal sector workers [2].

At the territorial level, the impact is likely to be greater according to UCLG Africa [3], particularly in terms of financial resources and investment expenditure of local authorities. The results of simulations carried out from two scenarios[4], based on data from the Observatory of Local Finances, suggest a real collapse in the financial resources of local authorities, of the order of 30% to 60% depending on the regions of Africa and the sizes of cities. As for investment expenditure, their level will drop by around 25% to 40% depending on the regions of Africa and the sizes of cities ; the level of investment spending would be close to 0 for small towns and intermediate towns[5].

On another level, many analysts agree that beyond the issue s of public health, management of the pandemic now questions the development model that most states have adopted in the context of globalization. Beyond issues related to the development of short circuits rather than long circuits, the territorialization of public policies must be at the heart of the changes to come. Among these, the local authorities must, while managing the emergency and the daily problems, put in place the conditions for anticipating the changes that will take place in the long term.

To organize the process of exiting the crisis, it is important to have in sight not only the response to the emergency, but also the implementation of strategies to revive economic activity. The local authorities should fight Covid-19 in three – and often overlapping – phases:

Read more in the latest issue of LEDNA’s bimonthly Newsletter, available here

New report, COVID-19 in African Cities: Impacts, Responses and Policies, launched by ECA & partners

Addis Ababa, Ethiopia, June 16, 2020 (ECA) – With the ongoing coronavirus pandemic crippling economies the world over and set to trigger into motion Africa’s first recession in 25 years, the Economic Commission for Africa and its partners teamed-up to produce a new report which proposes several interventions to promptly and effectively address COVID-19 challenges on the continent at the urban level.

The report titled; COVID-19 in African Cities: Impacts, Responses and Policies, analyses the current situation within the African continent and efforts channeled at mitigating the global pandemic within the context of cities in the region.

Produced by the ECA, UN Habitat, UN Capital Development Fund (UNCDF), United Cities and Local Governments of Africa (UCLG Africa), African Development Bank (AfDB), and Shelter Afrique, the report, which was virtually launched Tuesday, proposes responses for short, medium and long-term interventions to be led by national and local governments with the support of international and regional development Institutions.

To adequately address the challenges of COVID-19, five key recommendations have been identified in the report.

  • Applying local communication and community engagement strategies
  • Supporting SMEs and the informal economy
  • Deepening decentralized responses to COVID-19 through strengthened local government capacities
  • Targeting informal settlements through tailored measures
  • Establishing mechanisms to promote rapid access to housing and prevent forced evictions
  • Integrating urban planning and management as key priorities for recovery and rebuilding strategies towards long-term resilience

In their remarks during the virtual launch, officials from the partner organisations agreed COVID-19 has revealed the high vulnerability of African cities to the effects of shocks, and their limited capacity to mitigate and recover from the associated impacts. All this as Africa’s cities continue to grow rapidly under conditions of severe infrastructure and service deficits, absence of adequate productive jobs, weak planning and management capacities and institutions, among others.

Informality, poverty and inequality persist as a manifestation of the underlying structural constraints of Africa’s urbanization. Under these conditions, and without deliberate policy responses and adequate investments, cities may well become liabilities for inclusive and resilient future growth and transformation, the report notes.

It also notes that considering the economic and fiscal impacts of COVID-19 on national economies and the need to ensure that people have access to adequate food, housing, safe water and sanitation and reliable information, it was fast becoming clear that there is a need to increase and specify the role of local governments.

“These authorities are important in advancing community engagement, supporting risk communication and awareness building and facilitating adaptation measures,” reads the report.

COVID-19 has shown that it is important to rehabilitate the function of stabilization and redistribution of financial transfers from national to local and regional governments.

Strengthening local economies is one of the most effective responses to reducing the sensitivity of national economies to pandemics like COVID-19 and to the cycles of the global economy, notes the report.

“The degree of economic and financial impact of COVID-19 in Africa has been severe at all scales from national to local,” said Ms. Edlam Abera Yemeru, Chief of the Urbanization and Development Section at the ECA in remarks during the launch.

“The economic effects of COVID-19 have been particularly severe due to underlying vulnerabilities in African economies. The pandemic has exposed pre-existing underlying vulnerabilities in the economy of African cities that have made the urban impact of the crisis severe.”

She said in Addis Ababa, Ethiopia, for example, the impact of COVID-19 on hotels has been severe with 88 percent of hotels with membership in the AA hotel association being partially or fully closed due to low occupancy. Monthly losses are estimated at US$35 million and 15,000 workers have so far been laid off.

Ms. Yemeru said the local economic and financial effects of COVID-19 have a direct impact on economic development broadly and industrialization specifically.

“Going forward, local economic recovery and rebuilding should be at the core of economic recovery and rebuilding strategies of the continent and countries, and related stimulus packages,” she said.

“Continental and national COVID-19 discussions and efforts do recognize the vulnerability of cities and local governments, and acute impact, but insufficiently consider the role of productive, job rich and competitive cities in economic recovery, rebuilding and resilience in the medium and long term.”

Priorities should be on creating economically resilient cities, concluded Ms. Yemeru.

Issued by:

Communications Section
Economic Commission for Africa
PO Box 3001
Addis Ababa
Ethiopia
Tel: +251 11 551 5826
E-mail: eca-info@un.org

Impact of COVID-19 on the financial resources and capital expenditures of Local and Regional Governments in Africa

Africa has about 16,000 local and regional governments (LRGs). These local and regional governments were created following the adoption and implementation of decentralization laws which respond to the specific characteristics of countries: to their ancient or contemporary history, to the acting of national actors and to the internal spatial and socio-economic disparities, among others. These communities are of different types: rural or urban municipality at the basic level, “département” or equivalent at the intermediate level, community located immediately below the central state level (federal state, region, county, province, etc.). All of these types of LRGs’ have in common that they enjoy legal personality as a public body distinct from that of the central state, and financial autonomy. They are generally administered by elected assemblies, are led by an elected or appointed executive, and have their own administration.

These LRGs are grouped into national associations which are the representative body for the voices of local and / or regional elected representatives. There are currently 48 of them across the continent. The role of these associations is to contribute to strengthening decentralization, to represent and defend the interests of member communities with public authorities and national and international partners, and to promote good governance. Local and regional authorities can also be grouped according to type and size (rural or urban; rural towns, intermediate/secondary cities, large cities, etc.) according to the geographical area of belonging, or according to the dominant function (port cities, cities tourism, etc.). In some countries, associations exist per level of community (municipalities and regions for example), per types of community (urban and rural for example) or even per geographic spheres (regional associations of local or regional governments).

Read more here in the May LEDNA Newsletter. 

Implementation Status of Local Economic Development (LED) in Benin

Video Interview with Ms. Georgette Djenontin Bada , Officer in charge of Local economic development and resource mobilization within the National Association of Municipalities of Benin (ANCB). Find transcription below .

In Benin, what is the implementation status of Local economic development? 

In In Benin, it is true that several activities have been carried out in terms of Local economic development. Several strategies have been developed, in particular the ECOLOC approach, formerly steered by the PDM (Partnership for municipal development), the players of which are today at the level of the continental umbrella organization, UCLG Africa. It is a program which had  designed a local economic development strategy in certain municipalities in Benin. I admit that after the Partnership for Municipal Development (PDM) there have been other partners who have also initiated some actions in the sector but I must recognize that the little that I fundamentally know in Benin concerns the ECOLOC studies. As regards  the issue of LED, there is a problem that remains: we do not have a national policy for local economic development. There are attempts at strategies.

In 2012, UCLG Africa was willing to support Benin, which has started to draw up such a strategy, and UCLG Africa has implemented PADEL, the Support Program for local economic development, which has gained ground between 2012 and 2014. What did we have to do? There was talk of developing a national strategy for local economic development. Over time we have identified a certain demand for legislation that needed to be revisited. It was a question of seeing local economic development taken into account in that legislation . We were able to do this thanks to the technical and financial support of UCLG Africa.

We have continued the process up to a given level: for the moment things are a bit in a standby mode. The ECOLOC studies had been implemented in the department of Borgou. We started in a commune of the Donga area called Djougou. The process has been implemented up to a certain level. Unfortunately after these studies carried out at great cost with the help of the PDM over time and recently with the help of UCLG Africa, the municipalities have not been able to implement the projects initiated. However, the purpose of the ECOLOC studies is to identify a certain number of projects to be implemented at the level of local authorities to promote youth employment, income sharing, etc.

How long ago has the implementation of LED been really started in Benin ? 

I can tell you that there is a first period from 2000 until around 2008 when the first ECOLOC studies were carried out in Benin and there is another period from 2012 in 2014. These are the 2 main stages of ECOLOC studies in Benin.

How can you define Local Economic Development (LED) in a simplified way ? 

Before answering your question, I would like to say that local economic development is a very broad and multi-thematic concept that brings together all sectors. When someone talks about transport, economic development is part of the equation  because farmers who are in their field and who cultivate, harvest, and who do not have enjoy infrastructure to transport products from the field to the market  are facing a problem. So people say that everyone must be able to feel concerned by Local Economic Development:  people in the agricultural sector, in fisheries, in transport, and other sectors. For me, local economic development is a whole-government approach that brings together all the sectoral ministries. Even when one talks about health, local economic development is there.

In summary what is it all about ? 

It is about actions. One must think, see for example within a territory for example what the economic potential is ? What value should be added to this potential to generate income ? And when one talks about income, one means jobs and when one talks about jobs, it is also about paying taxes. It is a whole chain. Local economic development is not like an object that you have to touch to say this is local economic development, but it is a whole process.

First issue of the Newsletter of the Local Economic Development Network of Africa (LEDNA)

 

The year 2020 is the year of the launch of the first issue of the new version of the newsletter of the Network for Local Economic Development in Africa – LEDNA. It will be published every two months with the main objective of sharing with all the African protagonists of Local Economic Development (LED) the innovations, experiments, programs and projects in progress in African countries.

This newsletter is therefore yours ; it will also collect and disseminate your experiments and experiences in terms of Local Economic Development, in addition to the rich information already disseminated by our  www.ledna.org website which we strongly invite you to visit.

Aimed at the greatest number of people, the LEDNA website has several objectives: to provide a world-class knowledge hub whose access is free and with impartial and analyzed information; to promote the sharing of knowledge and experiences using the latest communication and networking techniques; to allow users to have access to their LED counterparts and establish communities of practice; and to capitalize and disseminate lessons learned from LED experiences in Africa.

Keep reading here.