No better time to formalise informal economy than now – TUC

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Government must use its coronavirus stimulus package for Small and Medium-Sized Enterprises (SMEs) as a catalyst to formalise the informal economy, the Trades Union Congress (TUC) has urged.

As part of requirements for accessing the GH₵1billion support, prospective applicants are required to have Tax Identification Number (TIN), be registered, must employ between one and 99 people, and must be a member of a business association; and the TUC believes this can form the basis to finally formalise the sector which, according to many studies, employs about 80 of the country’s workforce and contributes significantly to national output.

“Following the pandemic, everybody is talking about the need to support the most vulnerable; but how do you know who is vulnerable since we don’t have the database. All those doing business in Ghana, the majority are not registered: you don’t know how much they earn, you don’t know how much tax they pay; you don’t know how much they have lost, so how then do you replace the lost income?

“As government offers support, those receiving the support must make themselves available; we should be able to identify them – not just in the period of COVID-19 but also beyond, given that in the world we find ourselves today pandemics are likely to occur, or other forms of crises are likely to occur,” said Dr. Kwabena Nyarko Otoo, Director-Labour Research and Policy Institute, TUC.

He said this when he presented a report of a preliminary assessment of the economic and social impacts of COVID-19 at a forum on COVID-19 and its impact on workers in Accra. It was organised by Friedrich Ebert-Stiftung Ghana and the TUC.

Formalisation of the informal economy has been on the books for some year now, with very little success achieved so far. However, the TUC is confident that the GH₵1billion Coronavirus Alleviation Programme (CAP) Business Support Scheme, made available by government and in part as counterpart funding from banks, could springboard the dream into reality if approached rightly.

Although the pandemic has left no aspect of the world economy untouched, those in the informal sector have been hit the most. And in economies such as Ghana, where there is inadequate data on the sector, it is very difficult for social and economic intervention programmes to reach deserving businesses and individuals.

Workers, especially those in urban areas – like trotro and taxi drivers and owners, barbering and hairdressing salons, market women, food vendors, artisans, among others – have been severely impacted by the pandemic, according to the TUC.

“The pandemic is having a disproportionate impact on informal economy workers, who constitute over 80 percent of the total workforce. Because they find it difficult to comply with social distancing rules, they are particularly vulnerable to the pandemic in terms of their health and security of livelihoods,” the report said.

The TUC, which says crises or pandemics have also become a part of today’s world, is therefore of the view that all efforts must be made to use the CAP as an incentive to formalise the informal economy; so that in future such interventions can be tailored or targetted.

“Now, if we use this current crisis to identify the vulnerable and how to assist them, it helps us to prepare for the next crisis,” he added.

More importantly, Congress believes that the large section of the country’s workforce that operates in this segment have no access to a social security or retirement plan, and usually have to depend on family and friends to survive when old age catches up with them, or during hard times. This, coupled with the loss of economic activity due to the pandemic, the workers lobby body noted, has made life particularly unbearable for those in the sector.

Formalisation of the sector offers many benefits, too. This is because the transition will enable informal sector workers to access pension and other retirement benefits, while pooling together long-term private capital to fund development in critical areas such as infrastructure. It will also help widen the tax net, aside from giving policymakers some idea of who is vulnerable and who is not in times of crisis.

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