Recognising Africa’s true entrepreneurs, for good or ill

Should Africa's informal traders be celebrated for their entrepreneurial spirit, or banished in favour of modern shopping malls?

Should Africa's informal traders be celebrated for their entrepreneurial spirit, or banished in favour of modern shopping malls? “Kids selling tiny bags of peanuts, women carrying buckets of soda bottles on their heads, kiosks selling tools, hawkers selling mobile phone recharge cards, roadside stalls offering fried Indomie (a brand of spiced instant noodles that is a common, cheap meal here) … Panel trucks delivered photocopiers, computers, TVs, gaming consoles, and troves of mobile phones freezer-packed in Styrofoam cartons. The guts of global production splayed out in a series of chaotic stalls.” This is how journalist Robert Neuwirth, in his new book, titled Stealth of Nations: The Global Rise of the Informal Economy, describes Ladipo market in Lagos, Nigeria. Many would view such a market as a mere sign of underdevelopment, instead of an important retail environment. However primitive this way of trading may seem compared to shiny modern shopping malls, it forms part of a global informal economy worth an estimated US$10 trillion. If all the world’s informal operators were to group together in a country, it would be the world’s second largest economy after the US. Neuwirth prefers not to use the term “informal economy”. He says it is often associated with the criminal underground, rather than a system of improvisation and self-reliance, the do-it-yourself economy. Many of the merchants also don’t classify themselves as part of an informal economy. They view their activities as an open, independent and admirable exercise in self-reliance. During his first research trip to Lagos, Neuwirth explained to street vendors that he was writing a book about the informal economy. They had no idea what he was talking about. A local, with whom Neuwirth was working, then explained the term to the traders as follows: “He’s writing a book about businesses that exist solely on individual effort, with no help from the government.” This made more sense. It is hard to generalise about the informal economy as it stretches across a variety of sectors, with traders’ income levels differing widely. A girl that sells water next to the road might make barely enough to feed herself; while those that trade in large quantities of goods from China could earn more handsome profits. Criticism: taxes and piracy Unregistered informal traders are often condemned for not paying taxes as well as for the fact that some are involved in piracy and smuggling. For example, one of the Nigerian traders interviewed by Neuwirth ships his goods from China to the port of Cotonou in Benin (with minimal customs controls and few restrictions on pirate merchandise), from where it is smuggled into Nigeria. Informal traders are also involved in selling rip-offs of branded clothing and pirated DVDs. Neuwirth, however, argues that many of these merchants would not be profitable if they had to pay taxes and comply with various rules and regulations. He says for informal traders there is “nothing intrinsically more desirable about registration or licensing, if getting a registration or a licence doesn’t add anything to a business’s bottom line". For Neuwirth the issue of piracy is also not black and white. “In much of the world, a majority of people see buying pirated bags, books, or computer programs as a necessity and not a crime. It’s simply a low cost alternative to the high cost of legal and name-brand products. Studies of consumer behaviour in China have shown that people consider the pirated item as just one more choice in the marketplace, and, if they had enough money, they reported that they would buy the real thing rather than the pirated version." Various blue-chip multinational firms also rely on the informal economy for a large chunk of their profits in Africa. Neuwirth writes how mobile operators are selling their prepaid cards through street vendors, and how some well-known consumer goods companies also rely on the informal economy as a distribution system. Cleaning up the streets In recent years, some African governments have started to clamp down on informal traders. The governor of Lagos State, Babatunde Fashola, has for example, cracked down on street hawkers and spontaneous markets in order to improve traffic flow. Neuwirth says that evidence of similar demolition and relocation in other parts of the continent, doesn’t inspire confidence. For example, in 2010, the government of Luanda, Angola, relocated Roque Santeiro, the city’s largest informal market, to catastrophic results. “Most local residents couldn’t afford to make the twenty five-mile round trip to work at the new market, so unemployment skyrocketed and crime escalated dramatically. Customers also avoided making the lengthy trip to Panguila, the new location, and traders report a steep decline in business.” He continues that “in almost every city and country, these plans to banish markets from the central streets of the cities bring up the larger issue of what constitutes economic development. In Lagos, where 80% of the working people make their money in [the informal economy], it’s hard to see how Fashola’s plan constitutes anything other than an act of civic suicide. Destroying the positive homegrown entrepreneurial fabric of the city in the name of driving out the criminals and decongesting the roads is a far too broad policy. It hurts legitimate [informal] businesses far more than it hits the criminals.” In an earlier interview with How we made it in Africa, Yinka Ogunsulire, managing director of Nigeria’s ARM Properties at the time, said that informal trading is likely to remain an important aspect of commerce in most parts of the country for some time to come. “Informal trading thrives well in countries like Nigeria simply because alternatives do not really exist and even where they do, they do not offer the ‘convenience’ that informal street trading offers; such as, bringing commodities directly to people, whether they are in traffic or simply going for a walk. Also, ‘haggling’ or the process of intense negotiations is a cultural norm with most Nigerians, and it will take some time for most people to come to terms with a fixed price regime in formal settings.” “Our forecast is that the retail sector will steadily become more organised, largely driven by the move by some of the State governments to ban street trading, revitalise city centres and modernise trading standards. This is however unlikely to lead to the complete disappearance of the informal and ‘highly mobile’ markets,” she added.

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In Stealth of Nations, Neuwirth does an excellent job of recognising and celebrating the entrepreneurial spirit and business-savvy of Africa’s informal entrepreneurs.Without MBAs and often with very little capital to their disposal, thousands have managed to establish successful enterprises. Whether street hawkers and chaotic markets should be part of Africa’s future is debatable. However, it is a system that is not going to disappear soon, and until the time that Africa is littered with Western-style shopping malls and drive-through restaurants, informal traders will continue to play a critical role in society.