Monday, August 20, 2012

Green Economy and Sustainable Development: Which Way for the Informal Economy?

By IPC, August 17, 2012

This think piece argues that the informal economy should be included in discussions on green economy. The informal economy represents three-fourths of non-agricultural employment in sub-Saharan Africa, making it an important component in the social, economic and political arenas in Africa.

The authors draw on a case study on the informal sector in Kenya, known as the Kamukunji Jua Kali cluster, to make their case. The cluster is an initiative by subaltern groups that supports rural agriculture, creates jobs, recycles industrial waste and has an association that runs its own affairs. It is an example of how the informal economy in Kenya is linking social and environmental concerns.

The likelihood that this sector will persist requires rethinking the informal economy in terms of community economies that secure livelihoods, cultural identity and employment while moving toward green economies more generally.

The United Nations Environment Programme (UNEP) defines green economy as a system of economic activities related to the production, distribution and consumption of goods and services that result in improved human well-being over the long term, while not exposing future generations to significant environmental risks and ecological scarcities (UNEP 2011). Following from this premise, this think piece argues for the incorporation of the informal economy in the green economy agenda for sustainable development. Drawing on research from Kenya, it stresses the important social dimensions that are part of the informal economy and highlights some of the ways the informal economy is adapting to current market and climatic changes.

The informal economy in Africa

The informal economy, comprising micro- and small-scale trade, services, agriculture, manufacturing, transport and construction, is a sprawling phenomenon in African cities and rural areas, and is an important component of African economies. Informal businesses are often dominated by people, especially youth, with low levels of income and limited formal education, and by recent rural-urban migrants. Situated in municipal markets, streets, empty plots and bus parks, the informal economy is often not planned for in many cities.

The informal economy represents three-quarters of non-agricultural employment in sub-Saharan Africa and accounts for 78 per cent of employment in the region (ILO 2002); for example, in Nairobi, Kenya, about 2.2 million people were engaged in the informal economy (Government of Kenya 2010). In countries such as Kenya and Uganda, employment in the informal sector exceeds its counterpart in the formal sector (Xaba et al. 2002). In fact, due to economic and labour reforms in the 1990′s, the informal sector created 93 per cent of the new jobs in Africa (Chen 2001). This makes the informal economy an important component in the social, economic and political arenas of Africa. It is therefore crucial that green economy discussions acknowledge the informal economy from which many people derive their livelihoods and daily sustenance.

The informal economy plays a significant role in the restructuring of capitalism in the era of globalization,1 with important social dimensions. For example, Gibson-Graham (2006) conceptualizes the informal economy as diverse economies that communities are using to cope with the effects of globalization. There is increasing evidence that the informal economy, like the formal sector, has been responding to socioeconomic shocks and political changes. Bangura (1994) documents how the informal economy served as a coping strategy for middle-class groups in Africa, while Meagher and Mohammed Bello (1993, cited in Bangura 1994) illustrate how the informal sector was forced to diversify during the structural adjustment era. The likelihood that the sector will persist therefore requires a rethinking of the informal economy in terms of community economies that secure livelihoods, cultural identity and employment while moving toward green economies more generally.

Consider, for example, informal businesses, particularly in manufacturing, that are important for green economy. The question is: should we wait for the informal economy to formalize before we include it in green economy strategies? If we agree to upgrade and formalize it, how long should we wait? And how can such a process be accomplished? We argue that the informal economy ought to be treated as an economy in its own right without waiting for its upgrading or formalization.

Informal and green economies

Informal economies should be part and parcel of the green economy and sustainable development, as should the social relations and cultural tenets that contribute to their growth. First, the informal economy has its own way of organizing capital and distributing surplus, which makes it a form of “community economy” (in the words of Gibson-Graham 2006) or solidarity economy. It therefore includes a sociocultural dynamic involving the production and transfer of cultural products such as foodstuffs and creative industries; this is often disregarded when solely economic and entrepreneurial models are used for analysis (Kinyanjui 2010).

Second, the informal economy is neither shielded from the effects of climate change nor is it indifferent to them; rather, it is seeking alternatives to deal with them. The ability of actors within the informal sector to recycle plastics and waste metal is one example of how the informal economy can respond to environmental concerns. Waste recyclers also often do so due to poverty, but the importance of the need to recycle, as part of an environmental strategy, is significant.

Third, there is a need to avoid strategies for green economy and sustainable development that fail to consider the livelihood strategies used by people in the informal economy. These include “shortcuts” such as banning charcoal burning; prohibiting the felling of trees; reducing the number of vans (matatu) on roads; or relocating informal businesses from river basins. A systematic strategy for incorporating the informal economy into conceptualizing the social dimensions of green economy for sustainable development is essential, and also entails taking into consideration issues related to the participation of women, livelihood security and respecting actors’ cultural and religions beliefs.

Case study: Informality and green economy in Kenya

How the informal economy is responding to demands initiated by climatic changes can be illustrated by the Kamukunji Jua Kali cluster in Kenya. The cluster engages in widescale recycling of industrial metal products and plastic waste. Its use of non-renewable energy resources such as diesel or petrol is minimal. For example, in heating and melting metal products, the main source of energy comes from waste products from other industries, such as sawdust and used tyres. The fact that these can also be polluting stresses the need to equip workers with clean technology using available materials. The cluster also engages in the design of energy-saving furnaces, stoves and other equipment used for heating and cooking in rural homes, slums and informal settlements. It supports small-scale dairy processing by producing milk coolers and chaff cutters for dairy farmers, and small-scale poultry farming by making chicken brooders and feeding troughs.

The informal economy illustrates important social dimensions. Most of the informal workers in the Kamukunji Jua Kali cluster are men carrying out manual labour with very little mechanization or automation. However, women are also making inroads into the cluster, primarily focusing on the final stages of production, such as painting finished metal boxes and cooking stoves, or engaging in sales. The cluster is managed by the Kamukunji Jua Kali Association with all workers registered as members. The association serves as the link between the cluster and the government, and advocates for the rights of the informal workers. It also handles matters of security and conflicts between members, and mobilizes them into taking part in saving and credit associations.

In summary, the Kamukunji Jua Kali cluster is an initiative by subaltern groups that supports rural agriculture, creates jobs, recycles industrial waste and has an association that runs its affairs. Due to these positive socioeconomic effects, the cluster is an example of how the informal economy in Kenya is linking social and environmental concerns, and thus, should be included more centrally in the green economy agenda.

Toward a green informal economy for sustainable development?

Earlier models of economic development have tended to ignore the informal economy, with informal workers being excluded from the capitalist economy because of the complicated legal framework favouring large capitalists and the lack of property rights (De Soto 1989). However, notwithstanding the lack of statistics, informal employment in many African countries surpasses formal jobs, especially for women (Chen 2001). It absorbs low-income earners and those who have been excluded from the formal economy, especially during the structural adjustment labour reforms (Bangura 1994). It also acts as a site of resilience and possibility (Kinyanjui 2010) in the face of climate change, as discussed above. As such – and if green economy is supposed to define the future world economic system – the implicit link between the social components of the informal economy should and must be made more explicit when incorporating it in any green economy strategy.


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