COVID-19 and the Informal Sector in Africa

COVID-19 has taken the world by surprise.

The disease spread like wildfire from the city of Wuhan in the Hubei Province of China to Western Europe, America, East Asia and then Africa.

Although Sub-Saharan Africa was “late to the party”, over the past two weeks, the number of confirmed cases has grown rapidly from 1,017 on March 20 to 9,292 today; with the highest concentration in South Africa, Cameroon and Burkina Faso. If this trend continues and the measures put in place prove to be ineffective, Africa would be in serious trouble.

While COVID-19 is predominantly a public health crisis, it has severe social, political and economic implications. In fact, it is already threatening the livelihoods of millions of people in Africa, with a disproportionate impact on poor households and informal businesses. It is also redefining the way people interact and engage in the modern world.

The virus is highly contagious and deadlier than the well-known seasonal flu. Currently, there is no vaccine or a reliable cure for the disease. As a result, governments are focusing their efforts on preventive measures that suppress the virus rather than curative ones.

The World Health Organization (WHO) and national governments have put forward several measures aimed at "flattening the curve” and minimising the spread of the virus; from simple hygiene practices like washing your hands to behavioural ones like social distancing and more draconian measures like lockdowns of entire cities.

While many have found it easy to comply with some of these new measures, nationwide calls to stay-home and maintain social distancing have amplified the stark inequality that exists in most countries across the world. This is even more evident in developing regions in East Asia and Sub-Saharan Africa where the population is booming and poverty is rife.

The informal economy in Africa

A significant proportion of Africa's population depend on the informal economy for their survival. These are your roadside food sellers, vulcanisers, hairdressers, garbage collectors and other low-skilled workers. The informal sector also accounts for a large part of employment, production and income generation in African cities. The International Labour Organization estimates that more than 80% of total employment in Sub-Saharan Africa is in the informal sector.

The sector is pervaded by low productivity and low wages. Yet, it is the engine of most African economies and a crucial source of livelihood for many. Apart from reducing unemployment rates in the continent, the informal economy also greatly contributes to poverty reduction.

The nature of income in the informal sector is mainly subsistence. This means that workers are unable to save and during periods of uncertainty their earnings become extremely volatile, increasing their vulnerability to economic hardship.

Between a rock and a hard place

Historically, the poor have been hardest-hit by pandemics. Without access to social security, employment benefits or insurance, informal workers are the most affected groups during economic crisis.

The nationwide lockdowns and quarantine measures implemented by many countries on the continent have had a significant impact on economic activity, from local production to consumption. For instance, in the city of Lagos, which is best known for its dense population, chaotic traffic, frenetic commercial activities, bustling streets and nightlife, life is unusually quiet for its 21 million residents.

On the supply front, people who are sick cannot go to work. People who are quarantined are also unable to work. This has led to the shutdown of businesses - shops, malls and restaurants - and disrupted supply chains, preventing workers from earning wages. On the demand front, people are spending less as they are stuck at home and millions of informal sector workers have lost customers, with pronounced ramifications on their income.

Imagine a market seller who depends on her sale of fresh vegetables and fruits for her daily bread. Any day she stays home, there is less money for her to feed her family, pay rent and save some extra cash for other expenses. She has just one choice, to stay home and starve with her family, especially in the absence of social safety nets. The promise of governments to provide relief packages can only go so far, as a marginal proportion of the population will benefit from the palliative.

Stockpiling food is one of the behavioural responses to the lockdowns. Supermarkets and stores are crowded with customers who fill their trolleys with enough food items and household essentials to last them for weeks. However, poor households prefer to buy food in bits and cannot afford to stockpile because of their limited disposable income, low savings and restricted access to online commerce. Ironically, even for the few who are able to buy food items in bulk, there is the challenge of storage in the face of the persistent power outage in most African countries.

Social distancing, a luxury few can afford

Many informal workers live in dire conditions that make social distancing and self-isolation almost impossible. How exactly do you maintain social distancing in a 'face-me-I-face you' housing arrangement?

In this kind of environment, residents literally share everything from kitchens to toilets to even clothing hangers. Aside from the lack of space, the dearth of basic amenities such as clean water and functional health facilities in such areas amplify the struggles of residents. Also, in many African cities where electricity is an infrequent visitor, the heat will drive people outside their homes and render social distancing efforts useless.

Health Ministries across the continent have also advised that hand-washing with soap and water as frequently as possible for a minimum of 20 seconds is essential in curbing the spread of the virus. But, many households may not have access to these facilities. In communities where water supply is limited, if residents had to decide whether to use a bucket of water to cook a meal for their family or wash their hands, cooking will be a priority.

"Persuading slum-dwellers to stay in one-room shacks with many relatives will be tougher than getting people in New York or London to stay on the sofa watching Netflix."

The Economist

Informal sector workers do not have the privilege to work from home. Most of their jobs require face-to-face interactions with their customers and cash-based transactions. And, even when they can work from home, they lack the space and facilities such as power supply and internet access to make this possible.

An important problem is that most African cities are characterised by poor urban planning. This is further compounded by the existence of overcrowded slums which easily become hotspots during pandemics. During the 2014 Ebola crisis, a study found that Ebola patients living in run-down areas infected 3.5 times as many people as those living in rich areas. And, poor people were prone to disseminate the disease to rich neighborhoods. So, we should all be concerned about the conditions of those who live in slum settlements who are unable to abide by preventive measures.

Flattening the curve

This pandemic reveals a huge flaw in our society, especially in the labour market, that needs to be rectified.

Containing the spread of COVID-19 is paramount in mitigating the health and economic impact of the disease. To ensure that people stay home, the government has to intervene and take on the role of a 'welfare state'. The adoption of social protection policies such as cash transfers and unemployment benefits to low-income earners and small businesses is a crucial first step. This will help augment incomes, support poor households and strengthen resilience. It will also enable informal workers to adhere to social distancing practices with reduced anxiety on where their next meal would come from.

Globally, the most common policy response is the introduction of “stimulus packages” for the most vulnerable. For instance, the US has enforced a $2 trillion package, Germany has put in $800 billion and Canada has announced over $70 billion. Africa needs an economic stimulus of around $100 billion to buffer the economy and its burgeoning population from the impact of COVID-19.

Another feasible option is opening markets on specific days to allow traders to go about their business, but with strict restrictions to prevent overcrowding. India has adopted this approach and it has proven to be effective. Mauritius has also allocated market days to its citizens depending on the first letter of their surname.

There is a correlation between informal employment and poverty. This emanates from the lack of labour legislation and social protection cushioning workers and also from the fact that informal workers earn significantly less than workers in the formal sector. Long-term, African governments should consider ways of improving working conditions and ensure the legal and social protection of informal sector workers.

We are all being affected by the COVID-19 outbreak. But, the millions of families who were already living in precarious conditions before this will be in a more difficult position. Now more than ever, governments have a responsibility to enact policies that protect those most in need.

Thank you for reading & stay safe

Stephannie