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CHAPTER 2 ANALYSIS OF THE INFORMAL SECTOR AND ITS LINKAGES TO DEVELOPMENT: A THEORETICAL PERSPECTIVE
INTRODUCTION
This chapter focuses on an analysis of the theoretical points of departure regarding the informal sector, major development theories and the interface between the two. It provides a brief overview of the theoretical background against which the author will be discussing the informal sector in Malawi. The chapter begins with an analysis of the history of the concept of the informal sector in general and then positions Malawi within this history. It examines the informal sector definitions, size, benefits and disadvantages. In addition, the linkages between the informal sector, development and development theories are presented and a conclusion is stated.
THE INFORMAL SECTOR ANALYSED
History of the concept of the informal sector
According to Bromley (1978a:1035), “although the terms ‘formal’ and ‘informal’ were used in anthropological circles in the 1960s, with meaning closely analogous to their current usage in development studies and employment policy, they were not introduced into the development studies literature until the early 1970s”. Bromley traces the origin of the term “informal sector” back to a conference in 1971 on Urban Unemployment in Africa held at the Institute of Development Studies in Sussex. At that conference, Keith Hart presented his much-quoted paper on the informal sector, which was based on his work in the low-income neighbourhood of Nima in Accra. At the same workshop, John Weeks also presented a paper which reviewed the literature on urban employment and introduced the term “unenumerated sector”, a close intellectual cousin of the “informal sector”. Bromely (1978a:1035) goes on to say that although the papers of Hart and Weeks were severely criticised, the conference discussions served as a springboard for introducing the concept of the informal sector into wider discussions.
Within a year, the concept was incorporated in a substantially revised form into the International Labour Organisation’s (ILO) report on Kenya. Shortly after, this report was debated in the Kenyan Parliament. This debate brought the issue of the informal sector into the political arena. From that point onwards, the informal sector was incorporated into the conceptual underpinnings of much of the urban research in the ILO’s World Employment Programme and subsequently into the urban research programmes of other international organisations.
In documenting this history, Bromley (1978a) argued that the “informal sector” concept would have vanished without a trace had it been presented in a different forum. He gave examples of the work of Tina Wallace and Sheldon Weeks, which was released at the same time and included innovative ideas. This work is virtually unknown today because they did not have the springboard of a major conference and was published in a periodical that was not widely read. The author agrees with Bromley’s observation that this practice still occurs today. If one writes and presents an article within certain forums of the United Nations, the chances of its being popularised are much greater whereas the same article presented in other forums will not have any impact. One may also argue that, in the 21st century, the particular website on which the article appears will influence its wider dissemination. If the article appears on a well-known website, it will be popularised.
In agreement with Bromley’s history of the concept of the informal sector, Charmes (1990:12) indicated that Keith Hart was the first to use the term in 1971, although it was the ILO report of Kenya in 1972, which launched and popularised the concept.
As can be expected, there are different opinions on the history of the emergence of the concept of the informal sector. Thomas (1992:51) argues that while credit for introducing the term “the informal sector” into the discussion of developing countries by economists is generally given to Keith Hart in an article entitled “Informal income opportunities and urban employment in Ghana” (presented in Sussex in 1971, but only appearing in periodicals in 1973), the phenomenon was noted by earlier writers.
Thomas (1992:51) points out that Reynolds had, as early as 1969, developed a model containing two urban sectors. One of these sectors, the trade service sector, was described as “the multitude of people whom one sees thronging the city street, sidewalks and back alleys in the Less Developed Countries (LDCs): the petty traders, street vendors, coolies and porters, small artisans, messengers, barbers, shoe-shine boys and personal servants”.
Adding to the same argument, Rogerson (1985:2) indicates that the intellectual antecedents of contemporary informal sector studies may be traced back to the close of the 19th century when the British social scientist, Kingsley, began to study the lives of that “crowd of dwarfs and cripples” whom he viewed as such an inadequate measure of man’s historical evolution and achievement. Rogerson (1985:6) indicated that it was against the fabric of the changing intellectual landscape in development studies that the informal sector concept was born. Rogerson continued by stating that although it could be argued that there are prior claimants to the informal sector concept (eg Bauer and Yamey 1951; McGee 1971), it has become almost an accepted practice to apply the axiom “when talking of the informal sector, start with Hart in 1971”.
The above discussion suggests that people have been involved in the informal sector throughout many generations in different forms. The only difference seems to be the fact that they never used the term ‘informal sector’ until Hart introduced it in 1971.
It is also clear from the literature (Oyowe 1995:244; Charmes 1990:12; Mhone 1996:12; Sethuraman 1981:4; Fields 1990:55) that the development of the informal sector concept has been more highly associated with the migration of people from rural to urban areas than with population growth, which increases the labour force. Oyowe (1995:244) argues that the informal sector in the Third World is linked to the problem of rural exodus, the cause of which can be traced partially to rapid population growth. However, a more pervasive and persistent cause of rural exodus is the disruption wrought on the traditional social and economic fabric on many countries by Western influences: the introduction of Western education and the loss of traditional values, the establishment of a modern economy and urbanisation. In addition, Charmes (1990:12) reports that it was Mazundar in 1975 who introduced the informal sector as a model in which rural depopulation consisted of the following two elements: temporary migrants who came to seek employment in the informal sector because of ease of entry, and an urgent need for immediate income and permanent migrants who ultimately sought jobs in the modern sector but temporarily accepted an open unemployment situation. He indicated that, although this distinction between the two types of migrants could be contested, the fact remained that rural migrants who were underemployed in subsistence agriculture were attracted to the towns in the hope of obtaining a modern sector job. Failing to find one, they were necessarily relegated to the informal sector, which offered them earning opportunities at the level of simple subsistence.
In support of the above argument, Charmes (1990:10) indicates that the 1972 Kenya report highlighted the fact that rural depopulation and the resultant urban growth did not give rise to high open unemployment but rather to the development of small-scale activities which provided rural migrants and urban dwellers who were unable to gain employment in the modern sector with a means of living and surviving.
While most of these models refer to the African situation, the origins of the informal sector in Latin America e,g, Brazil are similar. The informal sector in Latin America has been associated with surplus labour, mostly migrants from rural to urban areas who were unable to find jobs in the formal sector, or those willingly employed in a traditional informal sector, which had not been transformed by the modernisation process (Tokman 1990:95). Confronted with the need for survival, this labour group had to find activities to perform which would provide them with income, because the absence of insurance or government welfare programmes made open unemployment a choice that the majority of the population could not afford. As stated in the background to the problem section in chapter 1, the situation in Malawi was much the same.
However, migration is not the only factor that has stimulated the growth of the informal sector over the years. Onchwari (1992:31) indicates that it is interesting to note that the recent political instability, and the war in Sudan and Ethiopia have both caused significant illegal immigration problems for the Kenyan Government. Most of those refugees who manage to cross the borders have swarmed to urban areas where they join those in the informal sector in a search for survival strategies. This current dynamic confirms what was said previously.
The migration and immigration of the population has therefore had a greater impact on the development of the informal sector within the urban setting than population growth. The same is true of Malawi and this phenomenon will be explored further in chapter 5. One would, however, need to examine the pull and push factors causing the migration of people to each of the cities because these may differ from one country to the next. Once understood, a precise analysis will provide an essential foundation for the development of policy by governments.
Definitions of the informal sector
Having briefly examined the history of the concept of the informal sector, it is clear that there is little agreement on the actual starting point of this sector. It is necessary to mention at this stage that there is no commonly agreed-upon definition of the informal sector. According to Haan (1989:6), frequently quoted study of small enterprises by the Georgia Institute of Technology, more than 50 different definitions were identified in 75 countries. There are at least as many ways of defining the informal sector as there are countries in which the phenomenon has been studied – every country has unique features and circumstances that make a universally accepted definition impossible (Anderson 1998:2).
CHAPTER 1 INTRODUCTION TO THE STUDY
1.1 INTRODUCTION
1.2 BACKGROUND TO THE PROBLEM
1.3 PROBLEM STATEMENT
1.4 STUDY OBJECTIVES
1.5 BRIEF DESCRIPTION OF THE RESEARCH METHODS
1.6 ORIENTATION TO THE STUDY
CHAPTER 2 ANALYSIS OF THE INFORMAL SECTOR AND ITS LINKAGES TO DEVELOPMENT : A THEORETICAL PERSPECTIVE
2.1 INTRODUCTION
2.2 THE INFORMAL SECTOR ANALYSED
2.3 DEVELOPMENT ANALYSED
2.4 LINKAGES OF THE INFORMAL SECTOR TO DEVELOPMENT AND DEVELOPMENT THEORIES
2.5 CONCLUSION
CHAPTER 3 BUSINESS ENVIRONMENT ANALYSIS OF MALAWI
3.1 INTRODUCTION
3.2 CRONJE ET AL’S BUSINESS ENVIRONMENT MODEL
3.3 BUSINESS ENVIRONMENT ANALYSIS OF MALAWI USING CRONJE ET AL’S MODEL
3.4 CONCLUSION
CHAPTER 4 RESEARCH METHODOLOGY
4.1 INTRODUCTION
4.2 SECONDARY RESEARCH
4.3 PRIMARY RESEARCH
4.4 PRIMARY RESEARCH PROCEDURE
4.5 CONCLUSION
CHAPTER 5 RESEARCH FINDINGS
5.1 INTRODUCTION
5.2 FINDINGS ON THE GOVERNMENT OFFICIALS
5.3 FINDINGS ON THE REPRESENTATIVES OF LARGE INDUSTRY
5.4 FINDINGS ON THE SHOP OWNERS
5.5 FINDINGS ON THE INFORMAL SECTOR PARTICIPANTS
5.6 CONCLUSION
CHAPTER 6 CONCLUSION AND RECOMMENDATIONS
6.1 INTRODUCTION
6.2 SUMMARY OF THE MAIN FINDINGS
6.3 MAJOR CONCLUSIONS
6.4 RECOMMENDATIONS
6.5 AREAS FOR FURTHER RESEARCH
6.6 CONCLUSION
BIBLIOGRAPHY
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