The Chief Executive Officer of Local Enterprise Authority (LEA), Dr Tebogo Matome, has called on government to provide more robust interventions that will strengthen the informal sector.
According to Matome, if interventions to strengthen the informal sector are put in place it would eventually lead to voluntary formalisation of businesses by entrepreneurs, which would be positive to the economy.
Matome was presenting a paper on Informal sector development at the Botswana Tertiary Education Conference in Gaborone on Wednesday. According to Matome, though they do not fall below the government radar screen and were unregulated, the informal sector had a part to play in most economies including in Botswana.
Matome came close to rebuking government for being sometimes stringent on helpless informal traders though they had a stake to play in the local economy. “What Gaborone City Council did to hawkers sometimes last year by destroying their trading equipment and chasing them was not right, who did they pose a threat to?” exclaimed Matome.
He was of the view that although informal, the sector cushioned economies in some areas. Being primarily the product of limited absorptive capacity of labour by the formal economy, Matome said an informal sector was refuge to those who could not make it into the formal sector.
Although he could not reveal how much the informal sector is currently contributing to the local economy because it is difficult to be quantified as it is unregulated, Dr Matome said that the informal sector was contributing well to the local economy as shown by the number of candidates seeking LEA services who have passed through the sector or are still participating in it.
Matome said usually the informal sector thrived when a country has high living inequalities, have weak institutions particularly education institutions which continuously churn out graduates who are not empowered to partake in the formal market. Limited access to infrastructure, unregulated markets and lack of enforcement, cost of regulations and avoidance of regulation and their knowledge thereof such as tax were all, according to Matome, some of the main causes of the informal sector.
He, however, said all was not lost as the informal sector has proved to be providing employment for a sizeable size of the population, especially the unemployed. Botswana’s unemployment rate currently stands at 17.8%. “The informal sector allows most people to escape the trap of abject poverty,” said Matome.
He stated that he was an advocate for the deployment of pull interventions that will strengthen the sector instead of destroying it, an area which he said Botswana is doing well in. On average he said the local regulation environment is effective and accommodative to informal traders.
He, however, said government can still further interventions by including entrepreneurship modules in school curriculums at all levels, expose young people to opportunities at an early stage, introduce robust institutions which will provide keen support and incentives for entrepreneurs and SMMES and conduct frequent informal sector surveys among others.