Op-Ed: Informal industries are the springboard for equity, equality

By Phylis Wakiaga

Equity and equality are often used interchangeably but have very different meanings.

Equality simply means providing everyone with access to national resources in fairness and justice, in order for them to live fully.

However, this can only happen if all citizens are at the same level and, therefore, need the same things. On the other hand, equity, means providing everyone with what they need to equally access national resources and live a quality life.

Longstanding investment in the productivity and profitability of the informal industries in the country, can help us achieve both equity and equality, creating economically empowered individuals and generating revenues to boost effective and quality public national resources.

Where inequality abounds, one finds that there are few entrepreneurs in the formal market. Primarily, the competitiveness of these businesses increasingly takes a beating as they are the only ones constantly being taxed.

This also affects their ability to pay competitive wages, expand and scale businesses—hence offering less employment opportunities and operate at high production costs.

However, if we find for young entrepreneurs in the informal sector to scale productions, making their businesses more profitable, they will be incentivised to formalise the businesses and in the process, create employment and catalyse the flourishing of related businesses in different sectors.

This will increase number of people earning competitive wages and reduce inequality gap. More importantly, county governments can tap into their informal sectors as a resource to promote equity. Different counties are at different stages of development. Depending on various factors, including the demographic mix and geographic disposition, their development needs are indeed quite divergent.

Even if two or more are in need of the same resource, the uses would be diverse as well as the levels of usage. In focusing on formalising the most prevalent informal ventures within the county, through the development of nurturing, progressive taxation and fiscal policies—many disenfranchised youth will find a purpose, a sense of belonging and increase participation for the sake of building the nation.

At the same time, Counties will stop relying on the national government for financial support. In fact, they will now come in at advantageous bargaining levels, offering valuable partnerships to the National governments and securing opportunities for further local economic growth.

Counties will turn the young flourishing entrepreneurs into ambassadors to showcase productivity, reduced poverty levels and thriving environments to investors.

Trade fairs and exhibitions, which promote locally produced goods and profile unique Kenyan inventions can be replicated in various counties and used as platforms for young traders to profile their work.   In doing so, established businesses will set up structures that give them equal access to markets as counterparts in other counties.

This access is achieved through the frequent production of quality goods in the required volumes. This translates to increased productivity, growth in demand for the goods in the market and sprouting of numerous value chains.   

Counties can use their new found revenue to tighten regulations and policies around intellectual property, further incentivising the informal businesses to formalise.

Knowing that there are efforts to curb counterfeits as well as protect and reward their innovations, the informal traders will be motivated to trust county institutions.  

Currently there are about 5.8 million unlicensed businesses.

Additionally, of the 14.9 million employees who make up the Micro, Small and Medium Enterprises (MSME) sector, 8.9 million are in informal businesses.

Many feel their work is not valued by the government and even worse, they take the term informal as synonymous with illegal. Consequently, they are detached from the plans and visions of national economic development, costing the country a lot in their lack of participation in nation building.

Yet, if we refocus our efforts to actualise equity which will, in turn, bring us to a point where we will be able to achieve equality, with the informal sector as the nucleus of our development plans, we will realise our economic goals, reduce poverty levels and yield a shared understanding of national cohesion.

The writer is Kenya Association of Manufacturers CEO