Let's support informal sector

An Economics professor at the University of Ghana Dr. D.K. Twerefou is advocating a comprehensive legal, institutional and financial support for the informal sector to ensure sustained economic growth.

“If the objective of devising strategies and policies that will help move informal firms and individuals into the formal sector is not yielding appreciable results, the valuable and appropriate alternative is to better accept the informal sector and create a dynamic, supportive and equal environment and opportunity for both the formal and informal sectors…” he said.

Presenting a paper on the size, structure, composition, and contribution of the informal sector to the socio-economic development of Ghana at a development seminar in Accra, Dr. Twerefou said employment generation, increased productivity, job security and good working conditions as well as provision of social security for the vulnerable in the informal sector should be the objectives around which support policies may be focused.

The seminar was organized by the Institute of Social, Statistical, and Economic Research (ISSER) and Merchant Bank.

According to the university don, even though the informal sector provides about eighty per cent (80%) of employment and makes numerous contributions to socio-economic development, evidence shows that the sector's contribution to national revenue generation is still the lowest.

“Most informal sectors are not registered and do not pay taxes to the government. This implies revenue loss for development activities. PNDCL 177 was enacted to widen the tax net to include informal sector operators. Despite these legal efforts, revenue collection from the informal sector is still low,” he argued.

Dr. Twerefou suggested that productivity enhancing policies aimed at organizing informal sectors operators, providing credit facilities, developing markets, providing technical and management training as well as provision of infrastructure and technology are very critical to the development of the informal sector.

“Welfare-based policies should focus on the less productive but more vulnerable informal units and workers in the informal sector since they are often left out of productive support. Such policies should aim at providing social infrastructural development, micro-loans delivery, low-level technical assistance, literacy and numerical skills and other basic requirements,” Dr. Twerefou proposed.

He believes that if the impediments of lack of well coordinated support, lack of cheap and long term credit, and lack of education and other economic resources are removed from the informal sector, its contribution to economic growth and poverty reduction in the country will be greatly enhanced.