#InformalTalks: Q&A after webinar on Organizing & Mobilizing Informal Workers yesterday!

Zimbabwe has the largest informal economy in Africa and the second largest informal economy in the world. Despite having been one of the largest industrialised economy in the eighties and nineties Zimbabwe degenerated to where it is due to difficulties it had in land redistribution. This meant that most of the skilled workers who did not manage to relocate to other countries found their way in the informal sector. Given that the workers have no other alternative choices to earn a living, it may prove difficult to organize the workers to realise their rights to some of the employee benefits as long as there is no other alternative source of income. Should the priority for Zimbabwe be to formalise these informal enterprises into formal entities with access to markets and technical know how and then look at organising the informal workers? (Gizila T.)

Zimbabwe is certainly not the only country where graduates end with jobs in the informal sector. All across Africa, there are examples of graduates who are taxi drivers or undertaking some petty activities: sometimes they even earn more in these activities than they would if they were employed at the level of their educational achievements! But probably or even certainly Zimbabwe is the country where this phenomenon is the most widespread. This being said and whatever the level of education of the workers in the informal sector, the question of extending coverage of social protection (especially health coverage and pension schemes) to these types of workers is currently under implementation in many African countries, committed to the SDGs. It is too early to say whether some countries have been successful in their attempts to reach universal coverage, though some progress can be noted here and there. One of the orientations of such policies is to rely on the “social and solidarity economy (SSE)” a concept covering traditional associations as well as cooperatives or microcredit institutions, and such types of institutions. Only these are likely to be efficient for collecting social contributions that give entitlements for health coverage or old age pensions because it would be too much optimistic to believe that informal operators bring regularly their contributions to official institutions, even if these contributions are statutory. Amounts collected by SSE can then ensure the payment to social security institutions or private insurance funds that will deliver the benefits. There are examples of good practices in this regard. If the payment of such social contributions is envisaged as a step toward formalisation, then other benefits of having a formal status can be afforded to ease the access to other advantages of being formal. But organising comes first. And by organising we can mean the belonging to a solidarity or community group.

Evidence suggest that willingness to organise in community groups is there. The challenge so far has been the ability to meet contributions by the targeted group. How can Policy be developed that helps to address the challenge in countries with limited fiscal space; bearing in mind that social protection coverage requires funding and continuity? (Manard S.)

I agree that there is evidence of the willingness to organise in community groups. These community groups may have various objectives. Some may be credit groups such as tontines in West and Central Africa or merry-go-round in Eastern Africa. In this case, the groups are used to collect contributions. In some countries, cooperatives may exist and be effective for purchases of inputs in bulk or for commercialising the crops for example. Collection of social contributions may be associated to the payment of inputs or taxes collected on crops (this means that the collection is not monthly but adapted to the periodicity of purchases). For community groups (traditional or more recent), the difficulty may be to convince the participants to engage in savings for contributing to social protection schemes (health coverage, pension, etc.). Even if there is a legal/statutory obligation for universal health coverage, as it recently happened in some countries, one cannot expect that people depending on the informal economy will suddenly queue up at Social Security Agencies to pay for their social contributions. Awareness raising, sensitisation and communication are necessary preliminary steps. Contrary to taxes, social contributions cannot be expected to be brought to the institutions by the beneficiaries but should rather be queried by the institutions from the populations, which means a lot of communication and interaction strategies. This is also why there is a need for strong interventions from associations in charge of the implementation of development projects to back, support or revitalise grassroots organisations existing at local level. In this sense the actors of the social and solidarity economy must be mobilised by public authorities to play the role of intermediaries between the State and the populations. The role of state agencies is therefore a role of coordination and accompaniment of the actors of the social and solidarity economy.

Another difficulty lies in the necessary distinction between contributory and non-contributory schemes. It cannot be expected that 80% of the population benefit of non-contributory schemes. This would not be sustainable even in the short term. Those who can should be affiliated to contributory schemes, and those who cannot should benefit of social safety nets. The challenge is to identify those who can contribute and to show them their interest in contributing. Why people in good health should pay for their health, and why young and adults should pay for their old age?

The aim would be to increase voice collectively so to engage in several areas (bargaining, etc.). However, one main issue regarding the informal economy is that informal workers do not have any incentives to contribute for social security. I think that informing the “benefits” of being formal is a topic that could be discuss in these organizations. Is there a successful case study where one was capable of influencing informal workers on joining voluntary social security contributions through organizations? (Juana I.)

All the challenge is in the awareness of the benefits of becoming formal. In some countries, the tax clearance is required for taking a step toward a formal benefit. A potential incentive for paying social contributions could be that, not only it opens to the benefit of health coverage or old age pension, but also provides the tax clearance. Not to speak of the very preliminary step, which is the establishment of a national identity card and even before, the establishment of a birth certificate. Large populations lack these documents that are the initial entry points to formality. Raising awareness of the benefits of becoming formal may take place through the media, but at local level, within the grassroots organisations, it is more effective and efficient.

WIEGO (Women in Informal Employment: Globalizing and Organizing) is an international network that has conducted a programme on social protection for helpless populations across developing countries in three continents. You can find such good practices about informal workers joining voluntary contributory schemes through organizations (www.wiego.org). As a matter of fact, voluntary or statutory is not the issue as statutory has not the means of being applied in practice; so everything relies on incentivising and sensitising. A good practise can be found with AVSI, an Italian Foundation, which has made emerging saving and solidarity community groups at local level (with emulation between villages) among professional associations (pottery, furniture makers, hairdressers, etc.) and supported on a voluntary basis those members who decided to dedicate a part of their savings to health coverage. In this case AVSI bulked the amounts collected in order to adhere to existing mutual funds and obtain for the members of the saving groups the benefits from the mutual funds. When the contributors will be numerous enough, the objective will be to create their own mutual funds at the level of the profession. The question remains of what will happen at the end of the project when AVSI will leave. It is assumed (but to be checked) that the professional associations will be strong enough to be able to continue their cooperation with the mutual funds and keep the trust of their members.

On the priority issues of the different sectors or groups one should also study a way that those workers can contribute to social security. When one speaks with these groups usually they are also worried about coverage on health social security, however not that much about saving for pensions. Yet this issue is not usually on the table when bargaining. Wouldn’t one should try to find ways of providing credit (or other services) to informal workers only if one manages to convince them to start contributing to social contributions? (Juana I.)

If it is often difficult to convince and persuade individuals in good health to save (to contribute) for when they fall ill, it is even more difficult to convince and persuade young or adult people to save and contribute for pensions in their old age. With the target of SDG 3 of achieving universal health coverage, many countries are currently designing and implementing such policies. In some countries, this opportunity is seized in order to propose various packages including contributions for pensions or other social benefits. Communication is a preliminary essential step in this regard for raising awareness, but simultaneously the quality and access of allowances have to be increased and improved. See also my comments to the second question above.

What is the role of fairtrade organizations in the informal economy? (Robert W.)

Fair trade organisations intervene in the value chain in supporting the small producers (of coffee for instance) to get a greater share of the value added from purchasers who transform the product accept paying higher prices against a label of fair trade that will ensure them to reach customers who want to be sure that the products they buy and consume do not originate in the exploitation of the small producers or in child labour for instance. The most known of such actions concern coffee producers, but there are also interesting examples in the textile industry where a child-safe label can be established. See the example of E-FACE that implemented a programme known as Safe Threads in Ethiopia. Domestic producers of textiles who do not use exploitative child labour can go to the government and, after proving that their means of production are child-safe, they can receive the “Safe Threads” certification. This good practice is mentioned in the RNSF collection of good practices and lessons learned, on this IESF website.

Regarding the project in Bolivia, did the case of networking among micro-enterprises included becoming suppliers in a value chain? if so, did you find a problem with the informal units not managing to handle regular orders? (Juana I.)

The project implemented by FAUTAPO (“Producción con Formación”) supported micro-businesses through a methodology to generate ideas that can solve the problems of customers or people with any need. The methodology helped existing informal micro economic units (e.g. tailors, catering services, carpenters) to develop new products and services tailored to the clients’ needs. The project didn’t directly work using value chain analysis although in some cases beneficiaries were able to become suppliers managing to deliver on time (e.g. production of 282 school uniforms; production of women’s cloths for a fashion show held at a Hotel). So in this specific case the informal units did not have to handle regular orders from contractors.

In the cases where informal units are engaged in regular sub-contracted orders, the difficulties encountered in handling these orders provides space for intermediaries to collect the production from several units and the informal units are consequently loosing a part of the value that they could have obtained. Another issue to be dealt with is the respect of quality and norms. In the context of projects coming in support of such informal units, the support can consist in raising awareness and providing training for respecting quality requirements and timeliness and avoiding to fall into the clutches of parasitic intermediaries.

Is there a methodology to measure efficiency of an organisation of informal actors? What could be the criteria to measure it? (Esso S.)

As for any type of organisation, it should be possible to measure the efficiency of an organisation of informal actors. Though not a specialist in these matters, I would say that such criteria as the total number of members, the total number of new members per year, the number of years of existence, the democratic rules presiding to the election of people in charge, the success of their struggles (which effective gains for the members and more generally the workers concerned?). Here again you can consult and explore the WIEGO website to see illustrations of effective and successful actions of some organisations of informal workers (such as waste-pickers in Latin America, or home-based workers in Asia, or domestic workers in various regions): www.wiego.org