By Michael Madill
Poor neighborhoods might just be the best hope of poor African countries. The rich ones certainly aren’t up to the job. You can find wealthy people and big governments in every country on the continent, but they have done little to make their neediest people better off in the fifty years since many of them got their independence. There are arguments about how much of this problem is their fault or even their responsibility, but we can look back at half a century of attempts to mitigate poverty and suffering and see only modest, irregular gains.
Today two-fifths of a country’s income vanishes into corrupt practices and politicians’ pockets in places like Uganda. Official development assistance makes up more than half the government’s budget in Niger, the Central African Republic and Liberia just to name a few. Countries with relatively more exposure to the world economy like Nigeria and South Africa are struggling to close budget gaps like their poorer neighbors. And in places like the Democratic Republic of Congo and Guinea-Bissau it’s hard to distinguish government employees and soldiers from petty thugs and criminal warlords because they are often the same people.
Yet, hidden away behind the stories of misery and decline is a secret. Africa is thriving. Something like half its people are making money in ways that don’t get into official statistics about economic growth, and there is a flip side of the human development indicators about child mortality, AIDS, malaria and malnutrition. Those same sick or disadvantaged people are surviving with little help from governments or NGO’s. Many, in fact, are eking out a living in spite of government attempts to impoverish them, lock them up or chase them out of view of the rich folks and tourists.
If you add up the reported value of the goods and services produced in African countries last year, you get about one trillion dollars. Fifty-one countries and a trillion dollars. The United States economy is worth about fourteen trillion dollars all by itself. In Africa, though, the figures count only things which economists can measure – the formal economy – plus an estimate of things they think they missed. It’s that second number, the estimate of hard-to-measure activity called the informal economy, that hides Africa’s hope.
See, economists really have no idea how big the informal economy is, so the estimates which get into official reports of a country’s gross domestic product or GDP are the result of negotiation between governments, international banks, and United Nations agencies. So are the official figures, but there is less room for politics to distort them because everyone has to work with the same data. One thing most observers can agree on is that informal economic activity is probably equivalent to forty per cent of GDP. In Africa’s case this means we could be missing about four hundred billion dollars in economic activity. That’s like forgetting to count California, Texas, New York, Florida and Illinois when adding up the value of the US economy.
Now, there aren’t millions of people in Mali or Chad or Ethiopia hiding their Mercedes behind their thatch huts when the taxman comes to call, though that sort of evasion distorts GDP figures, too. The people churning out informal income are the guys by the side of the road making stoves and grills out of old truck parts in Dakar, the women selling maize or mangos from a stall near a bus stage on the road to Kumasi or the tailors’ co-op working in Kibera slum in Nairobi. These people will almost never get rich or even earn enough to move to a nicer section of town, but they make enough to feed and house their families, send their children to school and to keep other informal enterprises like vegetable markets and beer stalls going.
It’s not like the government doesn’t know they’re there. A man welding a cooking pot from the metal wheel of a disused pickup truck next to a busy intersection in the middle of the day is hard to miss. People like this are overlooked because they are either deliberately ignored or have managed to slip through the fingers of official counters. You might not be counted on purpose if you live in the constituency of a politician unfriendly to the government. Maybe you pay a ‘tax’ to a powerful local businessman for protection, which includes shielding your business from nosy inspectors. Or maybe it’s simply too far or considered to dirty or dangerous for census takers and tax inspectors to reach you. In all cases, the end result is the same. You get on with your life but the money you make doesn’t show up in official reports. When enough people doing enough business cluster together, they can keep up a fairly substantial level of economically valuable activity without anyone really noticing.
The trouble with working off the books like this is that when it comes time to distribute official resources for development, like digging a well or building a school or paving a road the government can overlook you and send things that might have helped you to someone else. It’s easy to get trapped in a sort of official limbo. You don’t get help you need because you’re not really there, but you perform a vital function in society and so must be tolerated and encouraged insofar as possible. The answer in most countries is for governments to ignore the informal economy altogether. Of course they admit it exists, but they plead a long list of difficulties when it comes time to count, tax, regulate or otherwise officially acknowledge it. It’s simply cheaper and easier to let it go and try to tap some of the benefits indirectly.
The reason this is the best hope for Africa is that informal economies everywhere survive and thrive against the odds. Paucity of capital, lack of education and in many cases the absence of basic services and utilities do not deter people from taking risks, even prevent them making a profit on small ventures at the bottom of the economic pyramid. Every country in Africa depends on its informal economy to supply the needs and fill the gaps of the official one.
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