The Driving Force of the Informal Sector for Economic Growth - Spotlight on the Jua Kali Industry

Figure 1: Jua Kali Artisan at Work (Source: Business Daily Africa)

---

The informal sector in Sub-Saharan Africa is a booming and prominent part of national economies. It provides goods and services to both urban and rural communities, and plays a complimentary role by filling gaps the government and private sector fail to fill (Rohregger, et al., 2021). Governments' inability to increase employment opportunities, an overwhelming lack of international competition in the private sector and low levels of education and training have all attributed to the informal sector’s dominance over the formal sector in Sub-Saharan Africa (Turkson, Amissah, & Gyeke-Dako, 2020). 

The informal sector makes up 85% of employment in Sub-Saharan Africa (ILO, 2018), and about 83% of employment in Kenya, proving to be the dominant sector in comparison to the formal sector.  In 2020, the total number of people employed in Kenya was 17.4 million, of which 14.5 million were employed in the informal sector (Kamer, 2022). The informal sector provides countless opportunities for marginalized groups who have been overlooked by the public and private sectors. Amongst these groups are women, who make up 89% of the informal sector in Sub-Saharan Africa (UN Women, 2016). Given its success in numbers and great potential, the informal sector can be leveraged as a significant source of growth and economic development in Kenya.  Figure 2 below indicates Kenya’s employment by sector, highlighting the prominence of the informal sector.

Figure 2: Kenya's Employment by Sector, 2015-2020 (Source: Statista, 2022)

Jua Kali; Success and Challenges under the Sun
Kenya’s informal economy, commonly referred to as “Jua Kali” meaning “hot sun,” is a lucrative and essential sector of the economy. Although Jua Kali was initially used to describe traders and artisans working in open spaces, the term has expanded over the years, capturing economic activity by micro, small and medium enterprises as well. Regardless of its widespread success in increasing national employment rates, the informal sector faces several challenges, including but not limited to;

1. Lack of access to finance and credit, such as bank loans
2. Increased vulnerability during unprecedented economic turns caused by external factors such as a global pandemic
3. High competition, especially from competitors who can easily source cheap labour and set their prices below market prices.

These challenges have previously been stated by the entrepreneurs Mkono works with, who reported that competition by international companies and lack of access to bank loans are challenges they have faced as entrepreneurs. 

The government of Kenya has long since recognized the power and influence of the informal economy on Kenya’s national growth. The Ministry of Industrialization, Trade, and Enterprise Development lists “Development of Small & Medium Enterprises and the Jua Kali Sector” as one of its six milestones. The milestone lists the following objectives;

• Protection and Institutionalisation of the SMEs and Jua Kali Markets
• Access to Credit
• Access to Markets and Opportunities
• Capacity Building to Deepen the Skill Pool.

Recognizing the strength of the informal economy is a crucial step towards Kenya's economic growth. Given how vast the sector is, it remains important for private institutions and organizations to step up as well and provide support to entrepreneurs to foster their growth and success. The informal sector has contributed substantially to economic development by supporting millions of livelihoods and steering economic growth. With collective efforts to support and grow the informal sector, Kenya could tap into the sector’s full potential, resulting in immense economic and social benefits for the country.

Works Cited

ILO. (2018, April 30). More than 60 per cent of the world’s employed population are in the informal economy. Retrieved from International Labour Organization: https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_627189/lang--en/index.html

Kamer, L. (2022, August 1). Total employment in Kenya from 2015 to 2020, by sector. Retrieved from Statista: https://www.statista.com/statistics/1134332/total-employment-in-kenya/

Rohregger, B., Bender, K., Kinyanjui, B., Schuring, E., Ikua, G., & Pouw, N. (2021). The Politics of Implementation: The Role of Traditional Authorities in Delivering Social Policies to Poor People in Kenya. Critical Social Policy, 404-425.

Turkson, F. E., Amissah, E., & Gyeke-Dako, A. (2020). The Role of Formal and Informal Finance in the Informal Sector in Ghana. Journal of Small Business & Entrepreneurship, 1-25.
​
UN Women. (2016, December 3). Retrieved from UN Women: https://interactive.unwomen.org/multimedia/infographic/changingworldofwork/en/index.html