Government policies on the informal sector should be focused on how to help small businesses create value rather than formalising them, because it is only through this that they can become competitive, David Ofosu-Duarte, Senior Partner-AB & David, a law firm, has said.
Although the informal sector accounts for about 88 percent of the country’s workforce and constitutes about 80 percent of economic activity, Mr. Ofosu-Dorte noted that the sector has over the years not received the right attention it requires.
“The informal sector’s growth actually should not be based only on formalising them, but also creating value. In other words, if you actually help the informal sector to package roasted plantain well, it could be served as lunch at international conferences. That way, you add value. The informal sector person may remain small and informal, but he can compete on a realistic level.”
Mr. Ofosu-Dorte spoke at the launch of a book titled ‘Growing the Ghanaian Informal and Small Businesses’, authored by Nana Dr. Owusu-Afari – Chairman and Managing Director of Afariwaa Farms and Livestock Products Limited, and former President of the Association of Ghana Industries (AGI).
He explained that almost every Ghanaian eats roasted plantain and peanuts, but because the people that are involved in this trade are not given the needed support to create value they are unable to supply roasted plantain for conferences and big events.
“On every street, including the streets of East Legon where the rich live, you will find roasted plantain everywhere. This means the rich eat roasted plantain, so how come when we organise big conferences roasted plantain is not served? It is because these people do not issue invoices and receipts and they don’t respond to competitive tenders,” he said, adding that it is a sad reflection of a society that divorces itself from the realities of its culture.
Commenting on how policies on business reforms have consistently ignored the informal sector, Mr. Ofosu-Dorte noted that simple reforms of business laws in Ghana seem to focus on the formal sector, with very little attention on the informal sector.
Similarly, he said taxation laws seem to focus so much more on the formal sector than the informal sector, which he said requires thought-leadership to bring a change in how the informal sector is analysed.
Despite the large number of businesses in the informal sector, its contribution to the economy in the area of taxes has not been encouraging, as the bulk of the country’s tax revenue comes from the formal sector.
A survey commissioned by the Friedrich Ebert Stiftung in 2016, dubbed ‘Understanding the Urban Informal Economy in Ghana’, showed that over 80 percent of people in the country’s largely informal economy agree they must pay taxes once they earn an income.
In that study, it was revealed that the majority of informal sector employers – 56.3 percent – do not contribute to the SSNIT’s Informal Pension Fund: all of which, the report noted, if well harnessed could contribute to development of the country.
Growing Ghanaian Informal and Small Businesses
The 165-page book provides a valuable insight about the informal sector’s role in national development.
The book has eight chapters which include the characteristics of informal businesses in Ghana, an in-depth analysis of the sector, its contribution to the economy, government policies, and challenges faced by the sector.
It also offers recommendations on how the sector can be supported to add value to the national economy, especially in the area of job creation.
“The current trend observed in the studies is that informal businesses are increasing at a faster rate than formal businesses and the earlier we adopt policies that can help them grow positively to help the economy the better it will be for our growth and development as a nation.
“With the explosion in youth population growth resulting in annual increases of graduates coming out of our vocational, technical and tertiary institutions, the informal businesses become the main guaranteed source of employment generation for the majority of the youth. We therefore need to put in place a framework of legal and institutional policies that will guide the sector’s operations,” the book’s author, Nana Owusu-Afari, advocated.