Why it’s crucial to rescue informal sector economy


Why it’s crucial to rescue informal sector economy

 Central Bank of Kenya
The Central Bank of Kenya. FILE PHOTO | NMG 

The raging coronavirus pandemic has put millions here in Kenya and around the world out of jobs due to the unexpected and unprecedented effects on economies.

The Central Bank of Kenya has already revised the 2020 economic growth forecast from an initial estimate of 6.2 percent to 3.4 percent, the lowest since 2008, when the country suffered greatly from the twin effects of the global financial crisis and the deadly post-election violence.

The World Bank estimates an even lower 1.5 percent growth rate for 2020, with a potential downside scenario of a contraction to 1 per cent if Covid-19 related disruptions in economic activity last longer.

The future locally and globally remains highly uncertain, and the outcome will hinge on how the pandemic plays out. It will also depend on the policy and recovery interventions that will be applied locally and globally.

Responsibly, the government initiated measures to curb the spread of the coronavirus and spare lives. Unfortunately, these measures have been accompanied by an economic depression whose impact we have just started to feel.


Our Small and Medium Enterprises have taken a beating as the economic effects of the lockdown begin to solidify.

While large businesses have the fallback options and continuity measures that might help them absorb shocks, small businesses are likelier to take longer to recover, if not collapse altogether.

But businesses are not alone in feeling the heat.

Our informal workers were the first to be affected. Majority of Kenyans fall in this category that makes up 83.6 percent of the total workforce, according to the Kenya National Bureau of Statistics (KNBS).

Nearly 15 million Kenyans – according to the KNBS – fall in this category, compared to the 2.9 million who work in the formal sector. These are domestic workers, cleaners, beauticians, mechanics and street vendors, among many more, who prop up households all over the country.

In turn, the consequences have trickled down further to our ‘kadogo’ economy, which is dominant particularly in vulnerable societies like the informal settlements.

A 2019 retail Measurement Report by Nielsen found that more than 70 percent of fast-moving consumer goods (FMCG) transactions occur at below Sh55. The vulnerabilities of our local communities have been brutally exposed by the pandemic. With the livelihoods of its citizens decimated, the kiosks that rely on moving stock to stay alive have consequently been hurt.

We cannot let the ‘kadogo’ economy die. There are mouths to feed and families to sustain. In the same light, we need to identify ways we can “keep the doors open” for the kadogo economy.

One of the ways to do this is by adopting an ecosystem approach to small businesses. By adopting an ecosystem perspective to addressing the issue, we will be able to sustain vulnerable livelihoods. If we are to emerge out of this unscathed, we will have to find ways to support all citizens. The ecosystem perspective is an ideal step towards ensuring that the cash flows across the economic divide. However, much more needs to be done. We need solutions, fast.

The writer is managing director of KCB Foundation.

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