By Tio Nakasole
We often measure growth where it is easy to count it while paying lip service to the broader economy that carries the burden of our demographic divided.
The Namibian real GDP growth in 10 years is expected to average at 6.6 per cent, well above the 1.0 per cent average recorded between 2016 and 2025.
While much of the economic activity operates along formal, measured lines, large parts of the economy are unseen and uncaptured, such as the capital values of livestock in the informal economy. Which is valuable.
However, it might be construed to suggest that that part of the economy drives itself only, which is certainly not.
This form of economy is supported by the domestic informal part of the economy, by informal entrepreneurs whose source income comes from providing goods and services to those people who may not be able to afford a formal business.
These are people who prepare and sell food at the open market, order with me, repair shoes and tyres, provide hairdresser and seamstress services, and are mechanics panel beaters and electricians.
The informal economy keeps on growing, but that is mostly due to the formal sector’s stagnation given the low internal rates of savings, weak domestic investment, poor terms of trade and declining productivity.
Based on the diagnostic report on informality in Namibia, the informal economy is providing 418 674 people with employment, which is 57 per cent of the total employment in the country.
That tells you that the informal economy is thus the means of making a living for most Namibians right now.
The dichotomy appears to be more lopsided than one can imagine. When measured using the purchasing power parity, the informal economy contributes about 24.7 per cent of GDP, yet 57.7 per cent of employment is carried by it.
A quarter of the total economic activity supports more than half of the workers. Additionally, informal units are each only about a quarter of the labour productivity of formal firms, and only 7 per cent of informal workers belong to a union.
In comparison, the formal side of the economy continued to anchor most of our exports but created few jobs.
Mining, which led on exports and national income, only accounted for 2.6 per cent of the total employment based on the 2023 Labour Force Survey report.
Unemployment now stood at 36.9 per cent, up from 33.4 per cent in 2018, and youth unemployment at 44.4 per cent. Over half of working-age Namibians are either unemployed or part and parcel of the potential labour force, which is the number of discouraged jobseekers. Informality becomes the last resort, where surplus labour goes.
Nor does the informal economy sit entirely outside the system. Informal traders pay VAT on their stock and utilities to local authorities and municipalities, but the same local authorities and municipalities curtails what can be re-invested in infrastructure and services that may allow them to grow and graduate into a formalised category.
Three things that can be done for Namibia.
Formalise with informal operators instead to disentrepreneurise them. The rigid push-around could worsen the position of people it is meant to help. Support should raise productivity and open access to resources so that workers can move across without losing their livelihoods.
Give trade space and a voice. Permitted trading bays and open markets can help, but traders’ expression is often times they are not consulted on where to go. Participatory planning and a considerate look at the legacy of apartheid spatial policy should be considered.
Extend credit and protection. Graduated loans can move vendors into larger credit tiers. Namibia’s informal workers have little social protection, and their access to a fianance remains limited.
A 6.6 per cent growth outlook is anticipated in the formal economy; the question is, will it be felt or not, in the informal one. The mammoth task at hand is not to choose between the two halves. It is to grow the formal half fast enough to absorb the other, while those who rely on the informal half are not left behind.
Tio Nakasole, Analyst at Monasa Advisory and Associates, writes on the governance, public administration and investment landscape -tio@monasa.org
