A study of the self-employed in the urban informal sector in Harare.

Abstract

State failure in Zimbabwe has had a profound impact on the labour market. As job opportunities in the formal sector have shrunk due to the contraction of the economy, the informal sector has been showing rapid growth. The restructuring of the labour market has resulted in an informal sector that is much bigger than the formal sector, a drastic reversal of the situation that existed just after the country’s independence in 1980. This growth in the informal sector has had the effect of keeping the reported unemployment figure in Zimbabwe at below 10 per cent. While this figure has been met with disbelief and derision both within and outside Zimbabwe, it is based on the application of the international definition of employment (ILO, 2008). This study analyses the impact of state failure on a segment of the informal sector - the urban informal sector self-employed and analyses how urban selfemployment has grown and developed in a context of state failure. This study also explores how this segment of the informal economy has responded to and been impacted by the economic and political crisis in Zimbabwe. The study found that state failure has had a large impact on the urban informal sector selfemployed in a number of ways. This impact has largely been in the form of (a) opportunities in filling the gap left by the collapse of the formal sector after the imposition of price and foreign exchange controls; (b) increased competition from new, more educated, entrants who were opting out of (or could not get jobs in) the formal sector; (c) increases in the number of people employed by informal enterprises (the majority of whom were non-family members); (d) the crisis/failing state’s increasing inability to enforce zoning and tax regulations. The findings suggest that there have been a lot of new entrants into the informal sector. These new entrants seem to be younger and more educated. These new entrants seem to have made strategic decisions on location, types of products they sell and the way they run their enterprises. The urban informal sector self-employed workers are not a homogeneous group. They exhibit differences in a number of areas for example, their age, the activities they are engaged in, their level of education, and the location they operate from. Zimbabwe’s price and exchange control policies exacted a heavy toll on the private sector with many formal enterprises collapsing as a result of these controls. These controls and the collapse of many formal sector enterprises presented numerous opportunities for economic rents and arbitrage. Although most of the respondents in the sample were generally happy with informal sector work, there were some who had clearly disproportionately benefited from state failure. While the study does indicate that the urban informal sector self-employed entrepreneurs do absorb a number of unemployed people, with the informal sector thus playing a distributional safety-net role not only for the enterprise owners but also for their employees, the number of people employed per enterprise seems to be too low to substantiate the view of the informal sector being a significant employer in the economy (even a failing one). The study concludes that the context of crisis/failed state has clearly created some opportunities for a segment of the population. These findings are largely inconsistent with a view that conceptualises the informal sector as an undifferentiated employer of last resort marked by low wages and difficult working conditions. While the informal sector is playing an ameliorative role as an income-generating safety net for most self-employed workers in Harare, the comparatively well-educated respondents selling high end products in the suburbs seem to have actually benefited from the conditions of state failure. The low salaries coupled with job insecurity in the formal sector have meant that the informal sector is increasingly viewed as a more preferable employment option, particularly for entrepreneurs. The returns from this type of activity have even encouraged a number of formal sector workers to increasingly participate in the informal sector to make ends meet. In a country where a formal sector worker’s salary can barely cover the rent, let alone food and other expenses, the informal sector entrepreneurs in this study perceived themselves to be comparatively wealthy.