Namibia: Informal Traders are Invaluable for the Economy

By StreetNet International
April 11, 2013
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By Jackson Mwalundange

NAMIBIA is a dual-economy country with formal and informal sectors. The formal sector is characterised by large capital outlay, formal structure, and documentation of the business entities.

It is included in the economic statistics of the nation. The informal sector entities, on the other hand, are small, mostly one person, and without formal structures and documentation. They are hardly in the national statistics and, hence, their role is not recognised.

This shaped the government view of them – the scum of the land, hence frequent `battles` by local authorities against street vendors and other informal traders at Rundu, Oshikango, Ongwediva, Oshakati, Outapi, Windhoek and other places.

A superficial view would see severe poverty among the informal trader towns, but fail to see that that is where development is moving fastest. Without informal vending there would not be so many formal businesses at Katima Mulilo, Rundu, Eenhana, Ondangwa, Omuthiya, and Katutura, for instance. How does informal trading cause development? We take Rundu as an example.

At Rundu, people (mostly with little or no formal education) extract products from nature. These can be fruit, crops, vegetables, meat and wood. On the roadside or in open markets they turn them into cash. This would create demand for manufactured goods and banking and other services. Chain stores, banks, and other service providers sense this and come in to meet the demand. They provide jobs and, therefore, increase demand for goods and services of both formal and informal sectors. Were it not for the uninformed action of the local authority to get rid of the informal sector, both sectors would co-exist and grow side by side providing more jobs, leading to more demand and creating more formal entities and public services. New buildings, roads, bridges, and power and communication lines would sprout, and development and growth would be in full swing.

Lack of this understanding leads the formal sector to pressurise local governments to sideline or close down the informal sector entities as far as possible, throw thousands into unemployment and put a burden on the formal sector employees and make them poorer until the poverty equillibrium is reached when nobody would have capacity to escape it. Many goods and services become a luxury and the newly impoverished community focuses on the basic essentials only, thus forcing many formal-sector vendors to close down and throw more workers in the streets and, finally, reverse the development process.

Development in the towns and villages without much informal trade is minimal, usually restricted to public sector. Such is the case at Karasburg, Keetmanshoop, Berseba, Gibeon, Talismanus, Khorixas, Divundu, Kongola, and Ngoma, amongst many others.

Many, including the government, regard Katutura as Windhoek`s poorest suburb. They think Khomasdal or Windhoek West is better off. This view should be accurate if prosperity means living in a large walled house that takes away, not sins, but mortgage or rent of over 40 percent of one`s income. This view should also be accurate if prosperity means driving a car bought with a heavy bank loan. Such a person cannot save. Banks and retail outlets would smell this and stay far from him/her.

If it is true that banks and retailers would, normally, only go where there is enough purchasing power, then it should be true that Katutura has such a power. Shoprite installed four outlets there. Pick n Pay has one. Woermann Brock has more. All the banks have branches in Katutura, with FNB and NamPost having two outlets each.

In Katutura, informal traders deposit large amounts of cash in their banks, thus inducing banks to come closer to them. In Khomasdal, workers have large salaries that are deposited in town by their employers. They have little, if any, to deposit. The banks sense this and would install ATMs for withdrawal and not open branches. The Katutura scenario is repeated in other micro-producer-dominated towns from Katima Mulilo to Outapi.

If informal trading is such an important economic player, why should the government sideline it? Generally, the government looks at the statistics, which once made Karas the richest region and Kavango and Ohangwena the poorest. Karas`s diamonds and fish feature well in the statistics but are inaccessible to the local citizens while indigenous informal products such as eembe, eenyandi, hoodia, mopani worms, cowpeas, maguni, bambara nuts, and marula wine don`t feature. This is where the government and its consultants miss out.

Because of these informal products, a parent in Kehemu at Rundu can easily sponsor his or her children at a university while their counterpart at Karasburg can barely do the same. This may also explain why one finds comparably fewer students from Karas at our institutions of higher learning than from other regions.

Also, the tax collector never sees informal traders handing him a cheque. What he does not realise is that with increased income, the micro-traders pay more VAT at the formal outlets and increases the income side of the national budget and, hence, reduce the N$7.5 billion deficit as well as the N$32 billion national debt. If we could appreciate the role being played by the informal traders and give them a space, we will see increasing production, employment, and decreasing national deficit and debt.

  • Jackson Mwalundange studied Third World Economic Development at Trinity College and Business Administration at the University of Hartford. His involvement with IMLT and FFF throughout Namibia helped him to explore and appreciate the economic systems of Namibia`s diverse communities.

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