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Home / Opinion - The hidden potential of informality in Namibia

Opinion - The hidden potential of informality in Namibia

2022-11-25  Josef Kefas Sheehama

Opinion - The hidden potential of informality in Namibia

The informal groups are formed by the individuals to satisfy their social needs of affiliation, and they emerge on their own. 

A conundrum that policymakers face in addressing the large presence of the informal sector in Namibia is whether the objective of policy should be to reduce the size of informality in the economy and relocate as many workers as possible to the formal sector or should it be to promote the well-being of the informal sector and take steps to enhance its vitality and inherent dynamism. The ultimate aim is to assist owners of informal businesses to transit into the formal sector so as to reap the benefits associated with formalization while allowing society, in general, to also benefit from increased job creation, tax contributions and social responsibility contributions and so on that result from formalization of a business. To be accepted and followed as a leader, however, it is also necessary to have a clear vision that is upheld at all times, no matter what happens. This is a quality that is lacking in our hectic society. So, it is time for visionary leaders to stand up and be counted. They should work for the uniform development of the municipalities by rising above party lines and political affiliations. They owe it to the voters. Everything can change tomorrow and the trick is to move with it without losing sight of the vision. An effective leader focuses on the ultimate goal and is at all times prepared to put up with all the associated bumps and obstacles on the way to that ultimate goal. 

Conversations with some informal business people in Namibia suggest that although many informal businesses would like to formalize, they perceive the process as cumbersome. In other words, there are challenges to overcome when transiting from informal business to a formal one. Some owners also pointed out that formalizing will expose them to paying taxes so they would rather remain informal. Put differently, informal businesses are motivated to remain informal in order to avoid paying tax. The information from the informal conversations although insightful, remain speculative. They need to be rigorously tested in a scientific manner in order to fully comprehend what it really takes an informal business to successfully transit to the formal sector in Namibia. The problem is that without a systematic study, no one will ever know for sure what motives drive informal businesses to seek formalization that is, what opportunities most attracted the businesses to formalize, the challenges they have to deal with; the personal characteristics that owners rely on most in dealing with the challenges of transition; and what strategies can be put in place to reduce if not eliminate the challenges of transition from informal to formal business. 

Additionally, in order to ensure optimal efficiency of informal businesses, there is a need to understand the needs of informal traders and the contributions made by the informal sector in their lives. There is tremendous potential within the informal business sector for it to become a major role player in sustaining the livelihoods of many people, but the efficiency of these informal businesses needs to be improved by removing some of the constraints, which hinder their functioning. These constraints include crime, transport, municipal service and abuse. The municipal officials and informal traders with regards to policies and practices, as well as their impact on enabling the development of the informal economy. As such, municipalities are viewed as critical to the implementation of the goals of Namibia’s developmental local government. In relation to this view, from a theoretical perspective, the established strand relates to the town’s growth and development potential with the core theme of local economic development. It is critical to understand that informal trading has become an economic alternative for community members. 

Moreover, it is important to understand the residents of the affluent suburbs frustrations who do not want informal businesses trading in their area, saying they pose a health and safety risk. This is true because municipalities fail to create good places for our brothers and sisters to trade from. We cannot allow people to marginalize people or victimize them, especially the weak and helpless ones. We need to protect and uphold human rights at all times. Without them, there would be no long-lasting peace, no justice or hope for a better and more prosperous Namibia. The municipality failed to create formal employment and a conducive environment for SMEs to thrive. It is inhuman to take someone’s bread. We cannot allow our brothers and sisters to die of hunger whilst other people are eating in the hotels. The municipalities are expected to provide a better standard of living, increase community cohesion, wellness and happiness while progressing towards sustainable development. To be successful in meeting these requirements, cities need to transform their strategies to include innovation and enable the convergence of the digital and physical dimensions. 

Furthermore as reported by local newspapers, residents took issue with the salaries of the municipality’s staff members, the allowances as well as subsistence and travel allowance. They specifically mentioned the salaries of 50 city bus drivers who are each earning N$600 000 per annum. The Windhoek municipal council’s annual allowances of about N$850 000 paid to its mayor is the highest paid by a local authority in Namibia, with other local authorities, such as Walvis Bay and Swakopmund paying their political heads between N$35 000 and N$50 000 per month. The Namibian reported in 2019 that the Windhoek chief executive officer at the time was paid more than N$3,7 million annually, according to the local newspapers. The importance of the informal sector in ensuring job security and reducing poverty cannot be understated and municipalities should bear this in mind. 

It is important for policymakers to focus on implementing policies that help reduce informality gradually by tackling the drivers of informality, including social exclusion and the incentives for individuals and businesses to operate informally. Attacks on the sector motivated by the view that it operates illegally and evades taxes are not the answer. 

In conclusion, the informal sector in Namibia has remained stubbornly large and shows no sign of decreasing in importance despite several years of economic reforms. Please revisit your policies again. 

Therefore, for the policymaker, there is no one size fits all solution to the problem of pervasive informality in the Namibian economy, and there needs to be a fine balance between overregulation and underregulation of the informal sector 

2022-11-25  Josef Kefas Sheehama

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