Digital platforms and the rise of informal work in Africa

Event report

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The session was organised by the United Nations Economic Commission for Africa (UNECA) and moderated by Ms Ify Ogo (Trade Policy Expert, UNECA).

Mr Jamie Macleod (Trade Policy Export, UNECA) mentioned that the overall population on the African continent is 1.3 billion people, out of which

• Half of a working age are currently not in the workforce,
• 218 million are not participating in the workforce due to a variety of reasons (i.e. students, retirees, informal household workers),
• 43 million are unemployed,
• 122 million are salaried workers,
• And 309 million work in the informal sectors.

He pointed out that while populations all over the world and especially in India and China are aging, the opposite is happening in Africa. They currently have the youngest population, which indicates that the locality of global work distribution might change. He further noted that Africa has the highest level of informality in the world ranging from 34 percent in South Africa to 90 percent in Benin. He explained that many people looking for work turn to the informal economy as a ‘buffer of last resort.’

Macleod mentioned that, traditionally, the road to development led to structural transformation, which  occurred through the transition of employment from traditional agriculture to industry-related jobs. This transformation usually reduces vulnerable employment and informality, which tend to be moderately higher in agriculture. However, it is easier to get farmers to work in factories than it is to put farmers into the service sector today and therefore structural transformation has not occurred in Africa yet and Africa is prematurely de-industrialising. This means that there is less employment growth in industry, but agriculture is slowly replaced with services.

Ms Beatrice Claudia Chaytor (Senior Expert, Trade in Services, African Union) spoke about the One Africa market strategy to lower trade barriers on the continent and progressively to liberalise all services. She highlighted that the inclusion of service agreements in the first round of negotiations of the One Africa strategy was a strong signal showing that services have an important role to play in the African economies.

Chaytor noted that there is also a link between the efforts to liberalise services and better education, the commodities strategy of the African Union, and the creation of a free trade zone. She explained that Africa’s annual growth rate in the trade and services sector is 40 percent and that many of the affected areas already support e-commerce. She mentioned that the information and telecommunication technology sector is growing very fast and contributing to development of other related sectors such as the financial sector. The financial sector is in turn empowering populations by offering access to credit and other means to encourage growth. The transport sector is also evolving and increasingly providing important connections for services and goods that are needed to create economies of scale.

Chaytor said that there is a need for accompanying measures despite of the benefits of liberalisation. She explained that regulatory frameworks are important because they will provide more information about the different sectors, which, in turn, can be used to inform policy-makers to make adjustments. Additionally, the regulations will allow interaction across sectors. She also pointed out that most of the challenges for trade already existed in analogue trade and that all efforts to enable trade are also relevant for digital trade.

Mr David Porteous (Co-founder and Chair of Digital Frontiers Institute, Founder and Chair of BFA) pointed out that much of the informal activity in Africa is made illicit by tax rules. Moreover, he explained that the informal sector is usually very unproductive and that improvements must be made to increase productivity. According to Porteous, digitalisation reduces the barriers between the informal and the formal sector. These sectors should therefore not be looked at separately but rather as a spectrum.

He said that a large majority of people using Internet services in Africa are using it for consumption purposes rather than production. He noted that between 30 and 80 million people have the potential to join the digital trade sector and that the challenge is thus to find ways to make them producers. He further mentioned that the concept of ‘dependent contractors’, people employed by platforms such as UBER, is not that relevant in the African context since the challenge in Africa is still to bring a larger number of people online.

Porteous also spoke about the fact that digital tools are increasingly used for the purpose of product improvement. Many micro businesses are too small to use commerce and trade platforms and use social media platforms instead.  As pointed out by Porteous, these entrepreneurs are seeing growth as a result of incorporating these tools, but they also report an increase of stress levels since they have never been trained to make use of these tools nor have they been prepared for the expectations that their digital presence creates.

Porteous highlighted that there is not only one type of online work and that solutions need to take this fact into account. He supported the idea of creating regulatory sandboxes to determine effects of policies on a very small scale and recognised that the issues of employment in the digital environment are interlinked with those of other sectors. Therefore, he urged policy-makers to find cross-sectoral solutions that will also build digital trust.

By Cedric Amon