...But What About The Informal Sector?

The other day I was reading the Ministry of Finance and Economic Development's Guidelines For The COVID-19 Pandemic Relief Fund which outlined how the funds of the relief fund which was set up a few weeks ago were to be disbursed.

The relief fund, whose contributions include a 2 billion pula by the government as well as contributions from individual citizens, civil society organizations, development partners and businesses aimed to—according to the guidelines document—"minimize the adverse short-term impact of the COVID-19 recession on firms and households and to ensure that the economy is well placed for recovery when conditions improve". The document then goes on to state that "appropriate action should, therefore, be taken to help them [firms and households] to contain or reduce costs and defer financial commitments until cash-flow improves".

Reading through the introduction of the document, I had a lot of hope, especially when I got to the part where it was stated that "...interventions are targeted on sectors, firms, and households that have suffered the greatest adverse impact[from the COVID-19 crisis]". The document also stated that the government's economic response plan aimed to address strategic objectives which included support to workers, stabilization of businesses, ensuring the availability of strategic reserves and promotion of opportunities for economic diversification. However, as I proceeded to read through the rest of the document, the hope that I had at the beginning started to wane.

To start with, when I looked at the scope of the government's proposed fiscal interventions, it immediately became apparent that the informal sector was not part of its plans. The interventions for businesses were wage subsidies and loan guarantees, both of which required businesses who are to benefit to have a tax identification number (TIN)—basically only businesses who are in the formal sector.

The lack of consideration for businesses in the informal sector appalled me because, at the beginning of the document, it was explicitly stated that the relief fund was to help sectors that have suffered the greatest adverse impact from the COVID-19 crisis and informal traders are very high up that list. From street hawkers to tuckshop owners to small stock farmers, the COVID-19 crisis has had an inauspicious impact on the operations of the informal sector so when they were excluded from sectors which have been adversely impacted by the COVID-19 crisis, it made me wonder what strategy the government used to measure the impact of the pandemic.

For a country with an 18% unemployment rate including a 37% youth unemployment rate, the informal sector is solace for many people who have been failed by the government's job creation schemes over the years. The sector offers them an opportunity to earn sustenance for themselves and their families and if they are not to be considered during the COVID-19 crisis, what will become of them and their businesses?

On the guidelines document, I realized that small scale traders were conveniently placed under "household-level" mitigations, meaning that the government was willing to offer assistance to them only as individuals and not as businesses. Simply put, it appears the government's stance is that if you are trading in the informal sector, you are not considered a business at all hence a helping hand will not be extended to you to help cushion the impact of the COVID-19 crisis on your operations.

Our informal traders have long suffered from the brunt of town and village councils by way of stringent and often inane regulations and bureaucratic red tape and it looks like even during a crisis when everyone is getting help from the government, they will still be left behind. Poor people have always been the target of promises by politicians during campaigns so it is surprising (or is it?) that when push comes to shove and they need help from the same politicians who are now in government, they are locked out.

The government might argue that the reason it excluded informal traders in its intervention schemes for businesses is that they are unregistered hence it would be impossible to know where to start and as true to some extent as that is, the fact is that most of these informal traders are not looking necessarily for handouts but rather for a way to keep trading, something which has become impossible for them as a result of the lockdown.

As aforementioned, informal traders have shown that they are able to make a living for themselves despite failure by the government to help them so them not being considered for handouts will not be the first time that they have been left out. If it is not willing to help them with a fiscal intervention, the least the government can do for these traders is give them the liberty to do what has been putting food on their tables be it hawking, farming, running tuckshops, etc.

Measures like deploying security forces to trading areas, educating the traders about ways to keep safe and providing personal protective equipment (PPE) can be put in place to ensure that these traders adhere to the necessary regulation needed to curb the spread of the Coronavirus. Anything but putting them out of business and on top of that excluding them from benefitting from the government's fiscal interventions. That is just inhumane and will prove to be detrimental to the country post-COVID-19 as the social welfare bill becomes larger and larger and the ills that come with unemployment like crime and substance abuse become even more apparent.