BY GETACHEW MINAS
With the adoption of the neo-liberal policy symbolized by structural adjustment, the informal sector in Ethiopia has witnessed difficulty in its growth. The effective participation of the sector in the national development has faced a variety of constraints.
These include high social costs, lack of access to resources, markets, land and basic infrastructure. The sector has been operating in a hostile political, social, economic and institutional environment in Ethiopia in the past.
All these challenges have adversely affected the socio-economic and working conditions of small operators, resulting in the overall decline in their standards of living. There seems to be no study of the obstacles the informal sector has faced.
As a major source of self-employment, the variables that determine the effectiveness of the sector should be studied. As a catalyst of development the informal sector deserves a thorough investigation with its socioeconomic implications in the design of neo-liberal policy reforms.
The Ethiopian government currently focuses on the human development aspect of operators in the informal sector. They are provided with shades and industrial parks in the major cities of the country.
These parks are open to any investor irrespective of their identities as long as they contribute to the generation of output, employment, tax, foreign exchange, and social amenities to workers and communities.
These socio-economic developments reflect achievements in human capabilities and confidence of operators or small investors as income earners who support families and communities. The adoption of a Neo-liberal policy brings about improvement in the welfare of operators in the informal sector.
Studies on the basic social needs of the people who are the core of informal sector development in the developing countries have established that the neo-liberal policy on social service expenditures, subsidy removal, interest/exchange rates, trade liberalization and trade sector deregulation had an adverse influence on the informal sector.
These measures not only aggravated the poverty state of operators but also invariably undermined human development in the sector. The studies show that there was a significant “association” between neo-liberal policy measures and the decline in the socioeconomic conditions of operators.
They conclude that for human development to occur in the informal operators, the country needs a government where the leadership and policy makers would see the “investment in the people” as the central element in the entire development process.
The studies further recommend the development of a bottom-up policy approach that will incorporate the informal sector into the mainstream economy.
The formalization of the informal sector begins with respect for the humble operators who contribute to the national economy by creating more output, income, employment and other economic opportunities.
Respect for these operators begins with observing the existing law and order that reduce harassments of citizens.
All legislations and regulations that hamper the growth of the sector have to be rejected if informal operators are to be transformed into formal ones in Ethiopia. Furthermore, for the national economy to achieve sustained development, investment must be channeled toward the provision of inputs, raw materials, infrastructure and social services to the informal sector.
The basic ingredient for stimulating economic growth, productivity of labor and incomes in the informal sector is recognition. For all the developing countries, including Ethiopia, to achieve any meaningful economic development would be advancement of human development of the sector.
Their policies and programs must engage and incorporate the genuine participation of the end beneficiaries, recognizing and respecting their needs and priorities. In the urban areas of Ethiopia, the informal sector operators, including coffee brewers on the streets, should be treated as female breadwinners for their families, who deserve due respect by all. If they are “taxpayers” they deserve more respect by law enforcement personnel as they finance their monthly salary.
The overall objective of economic development in Ethiopia is to improve the living standards of the people. In so doing, the socioeconomic progress of the people is promoted. The basic needs of the people are satisfied through the provision of food, shelter, health, education and other services.
Focus is given to the reduction of poverty, unemployment and other social evils. These problems are closely linked to human development issues that limit the ability of people to live a productive life. The provision of basic social needs of life calls for the development of capacity of people to freely access the basic means of production, such as land, shelter, credit, and support to start businesses.
In the last few decades, developing countries have experienced socioeconomic crises which have manifested in persistent internal and external macroeconomic imbalances. As Sanusi pointed out the internal economic disequilibrium became evident following the drop in world market price for exports which created a revenue shortfall for the governments. This immediately triggered off a major crisis in their economies.
The structural imbalance caused by external factors associated with the type of production, which is dominated by foreign capital, upon which the African economies, including that of Ethiopia, were organized from earlier times, thus making them producer and exporter of primary products. This process has affected the social relations of production which exposed the weakened economies.
Neoliberalism is associated with irresponsible exercise of executive decision making. It leads to managerial ineptitude, indiscipline, corruption and inappropriate policy formulation and implementation. Usually, the governments are unable to adequately manage the crises in management at all levels.
As Yesufu pointed out that governments fail to finance the social sectors and maintain infrastructure, with the result that the quality of life and welfare of the citizens deteriorating. Some of the African nations started to run huge budget deficits whilst at the same time embarking on imprudent foreign borrowing from private and official international sources such as the WB and the IMF and other sources of finance.
The borrowing spree laid the foundation for the debt crisis which has compound the problems afflicting the wider economy of Africa, including Ethiopia.
At sector level, many firms either suspended production or reduced capacity utilization drastically because of inability of the national government to continue to meet its foreign exchange requirements as it is import-dependent for production.
Inputs used in production such as machineries, technical skills, and finance are acquired from developed countries. In some African countries, capacity utilization of the economy dropped drastically after the introduction of the so-called assistance programs. In this situation, the fate of the informal sector operators was irrecoverably dismal.
To cope with the socioeconomic problems, several employees in the public and private sector were laid off. Informal sector operators were left helpless. Together with this situation, public service provision, including health and education suffered from severe neglect. Also, there was an acute shortage of consumer goods and imported items.
The living and working conditions of many workers deteriorated sharply as the crisis deepened. To redress these socioeconomic crises, various austerity and stabilization measures geared toward tackling the rapid economic decline were pursued by governments without any positive improvement. Donor inspired Structural Adjustment Program (SAP) designed for
The Ethiopian Herald 6 March 2021
