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Indeed, the concept of the informal sector is certainly not a novel one, this type of employment was part and parcel of pre-capitalist cities throughout the world (O’Connor 1983) thus it could be inferred that its emergence in African economies arises out of the continent’s position in the developing cycle. In fact, it has been noted as a very common feature of most less developed countries for its provision of livelihoods for the poor (Potts, 2007). There is a school of thought which presents a theoretical model of economic development initiated by Lewis in 1954. It stipulates that where there is an unlimited supply of labour in the informal sector, should the formal sector develop then its demand for labour increases also and absorbs any excess labour. Consequently, this should shrink the informal sector (Verick, 2006). The Lewis model dominated the development discourse during the 1950s and 1960s as Europe and Japan rebuilt their economies (Chen et al. 2002). This trend has not played out in Africa as conversely the informal sector has continued to expand. Statistics reported in Chen (2001) suggest that 93 percent of new jobs created in Africa during the 1990s were in the informal sector.(ibid)
The theory of the informal sector was brought into international use by the International Labour Organization (World Bank Report, XXXX) which defined informality as a “way of doing things characterized by (a) ease of entry; (b) reliance on indigenous resources; (c) family ownership; (d) small scale operations; (e) labour intensive and adaptive technology; (e) skills acquired outside of the formal sector; (g) unregulated and competitive markets”. (ILO Kenya Mission Report, 1972). Since then different variations of the definition have surfaced however the running thread remains unregistered, unrecorded employment and production which generally does not feature in government statistics.
In Africa, the informal sector was well established by the 1960s following the brief but strong growth in urban employment resulting out of governments’ investment in productive and service sectors (Potts, 2007). This sparked a wave of rural-urban migration and the demand for labour in the then burgeoning industrial sector did not keep up with the influx of migrants seeking work. Thus grew the gap, between formal sector opportunities and the number of job seekers, further exacerbated by the oil crises of the 1970s and the subsequent epoch of structural adjustment programmes. The consequential rapid de-industrialisation and declining formal employment, in response to SAPs, by some economies, led to a surge in the informal sector as former sector employees were faced with the reality of having to seek a means to an income through informality. Largely, this still represents the current situation in many African urban economies. Besides the lack of opportunities in the formal sector resulting in an excess of labour supply, the predominance of IS is also owed to the entry of formal sector workers who supplement their basic wages through income generation in the informal sector.
The size of the informal labour market varies depending on the source however it is estimated to be as high as 50% in some countries (Simone,2003). Numbers reported are as high as 72% of non-agriculture employment in sub-Saharan Africa, 78 percent if South Africa is excluded (ILO 2002c).

In summary, the growth in the informal sector can be traced to a few roots including rural-urban migration emanating from the supposed urban income gap and the allusion to superior services (Rakodi, 1997); the gender bias which sees women less equipped with the requisite skills to gain access to the formal sector and in some cases perhaps a cultural tendency to align women to the provision of certain informal services such as household helps for members of the formal sector. It has also been noted that there is a correlation between globalisation and a rise in IS, given the commercial need to be competitive, often businesses within the formal sector contract the informal sector to produce goods as cheaply as possible. Thus the demand in the informal sector is partly sustained through its interaction with the formal sector by providing essential services cheaply and by retaining flexibility to respond swiftly to shifting demands (Anderson, 1998). However, most of its market is probably directed toward other members of the informal sector, providing a cheaper source of goods and services (ibid). Perhaps the underpinning cause of IS is poverty and the necessity to survive and earn any income no matter how little as a survival and coping strategy. The sector thrives on the possibilities of producing or selling anything that will generate income (Souza and Tokman 1976:355). Indeed, the size of the would increase during times of economic crises or instability.


The informal sector plays a crucial albeit contentious role. It occupies a space where institutions and productive economies are absent (Simone 2004 pp24), creates jobs and eases unemployment however most of these jobs are poorly paid and inconsistent. Where local governments, with a lack of resources, find it difficult to meet the needs of the citizenry, the informal sector emerges to provide essential services. In spite of this, the IS has certainly being marred by governments’ attitude towards it. Generally, most governments ignore the positive impact on employment and the subsidy IS provides the formal sector, highlighting instead the sector’s non-compliance with state regulations, in particular tax regulations. This largely ignores the premise that informality is often the response of operators who are unable to comply with difficult, irrelevant or prohibitive rules and regulations or who do not have access to market institutions; The rules and regulations that impact on economic activities determine transaction costs but also offer some security however IS operators do not have access to these enabling laws and therefore do not enjoy the benefits.
Finally, it is recommended that towards the goal of poverty alleviation in the MDGs, African governments support the informal sector as a mean to job creation as the relationship between poverty and the informal economy reflects that provision of decent work for those in the sector would go a long way towards eradicating poverty. Besides the aforementioned subsidy of the formal sector, the IS contributes largely to the GDP of some economies. Recent attempts to estimate the contribution of the informal economy to GDP put the share at between 7 and 38 per cent of total GDP in 14 countries in sub-Saharan Africa (Geneva:ILO, 2002


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