ILO discusses formalising informal economy

Representatives of governments, employers and workers from all over the world, including Zimbabwe, recently met at the International Labour Conference in Geneva for two weeks to come up with proposals for formalising the informal economy.

About half the world's workforce is absorbed in the informal economy. In many developing countries informal business provides a means of survival for as much as 80 percent of the population.

The Zimbabwe government was represented on the Committee on Transitioning from the Informal Economy by National Social Security Authority general manager James Matiza and Small and Medium Enterprises and Cooperative Development permanent secretary Evelyn Ndlovu.

Zimbabwe, represented by Mr Matiza, was appointed chair of the government members of the Africa Group in the Committee and spoke on their behalf during committee discussions.

The committee adopted a number of conclusions intended to form the basis for a draft recommendation on transitions from the informal to the formal economy that will be considered by the International Labour Conference at its next session, due to be held next year.

In his closing statement, on behalf of the Africa group, Mr Matiza said informality was a common feature of countries in Africa. The Africa group had benefited from the discussions and exchanges of information, he said.

Among the conclusions, was one that stated that the denial of rights at work, the absence of sufficient quality employment opportunities, inadequate social protection and the absence of recognised social dialogue were most pronounced in the informal economy. One of the objectives of formalising the informal economy was to promote decent work for all, it said.

The conclusions also highlighted the fact that the informal economy was often characterised by low wages and that some workers and economic units within the informal economy had considerable entrepreneurial potential.

"Their creativity, dynamism, productivity, skills and innovative capacities could fully develop if transition to the formal economy is facilitated," the conclusions stated.

Speaking on his return to Zimbabwe, Mr Matiza said the committee had discussed some of the reasons behind the informal economy and ways in which informal sector businesses could be brought into or encouraged to see the benefits of coming into the formal sector.

He said Zimbabwe had already taken steps towards formalising the informal economy or bringing informal businesses into the formal sector.

He said the initiative on this had been taken by the Ministry of Small to Medium Enterprises and Cooperative Development.

NSSA would play a financing role by making funds available to the Small Enterprises Development Corporation (Sedco) for lending to informal businesses, as a way of transitioning them to the formal economy.

The Ministers of Public Service, Labour and Social Welfare and of Small and Medium Enterprises and Cooperative Development were expected to meet soon to discuss cooperation in this exercise, he said.

He pointed out that workers in the informal sector were currently unable to belong to the national pension scheme. They also did not enjoy many other workers' rights espoused by the International Labour Organisation.

If the businesses they worked for could be formalised, they would be able to become members of the national pensions scheme and, in the event of their being injured at work, benefit from the Workers' Compensation Insurance Fund, he said.

"The International Labour Organisation is a tripartite body, made up of representatives of governments, employers and workers. That is why there were representatives of all three on the committee that was discussing transitioning from the informal to the formal sector.

"The lack of protection of workers within the informal sector was a matter of common concern. For us, as a social security authority, our primary concern is the fact that workers within the informal sector are not covered by the Workers' Compensation Insurance Fund and are not contributing to the national pension scheme.

"Retirement benefits under the national pension scheme depend on a person's contribution period and the insurable earnings on which he or she is paying contributions to the pension scheme at retirement.

"Those in the informal sector do not contribute to the scheme and therefore cannot benefit from it," he said.

"Thus we, as NSSA, have an interest in supporting the formalisation of the informal economy, which is why we are ready to provide funding for informal sector businesses as a way of bringing them into the formal sector," he said.