In the midst of rapid urbanization, the question of whether and how to formalize the informal economy is a growing concern. According to Caroline Skinner, the first step is to recognize the economic activities of informal workers and include them in the urban planning processes.

In a time where job creation and employment are front and center of economic discussions worldwide, it is hard to believe that some of the most significant employment generators are left out of the economic equation all together. Nonetheless, this is exactly the case for most informal economic activities. “Globally these activities, despite the fact that they are a significant source of employment, are very seldom dealt with as part of the economy,” Caroline Skinner, Urban Policies Programme Director at global action-research network Women in Informal Employment: Globalizing and Organizing (WIEGO) and Senior Researcher at the African Centre for Cities at the University of Cape Town in South Africa, explains.

These are also economic activities

Working conditions in the informal sector are far from ideal. Workers often lack basic rights, job security is almost non-existing, and their earnings can barely cover the basic necessities. Consequently, there are undoubtedly a real need for addressing these poor working conditions, but according to Caroline Skinner, our current efforts are too often simplistic and inconsiderate of the value and meaning of the informal economic activities. In reality, policy-makers tend to only consider the big players, like the banks and large scale manufacturers and industrialists, as part of the economy, hence most economic policies are targeted the formal economy.

To truly address the issues of the informal economy Caroline Skinner argues that we must broaden our conception of what constitutes the economy, and develop economic policies targeted at the informal economy as well: “In essence it is about saying: These activities are economic activities. Even though individual incomes are undoubtedly low, cumulative they are contributing to the economy.”

Photo Credit: Gerald Botha

Street vendors in Warwick Junction, South Africa. Photo Credit: Gerald Botha

Understanding the economic logic

The cumulative economic contribution of the informal economy is well documented in research, but we still experience a lot of misconceptions about the logic and operations of the informal workers. This might partly be due to the unusual way the informal economy functions, but, according to Caroline Skinner, we must not let ourselves be fooled by our initial lack of understanding: “When you see an activity in urban space where you think ‘that can’t happen’ or ‘that is illogical’, there is inevitably an economic logic that just needs to be understood. So we should really respect the existing activities, understand them, engage with the players and ask: ‘If we tweak this or establish this kind of infrastructure here, what would it mean for you?’ This is also to say that we should involve the people that the intervention is designed for.”

In her work Caroline Skinner has seen a lot of examples, especially concerning vendors, where good intentioned interventions have failed due to lack of inclusion of the economic actors involved: “What so frequently happen is that you have white elephants. Quite nice infrastructure is provided for people, but located with no acknowledgement of the fact that informal retailers are like formal retailers: They need passing feet. So if you have a fantastic set of facilities that are out of people’s way, it is just not going to work. And that has happened in so many places – consider the Dar es Salaam Machinga Complex or the Pasar Minggu Market in South Jakarta to cite just two recent examples. There is a will, but there is also a disconnect: They are not understanding the economics of what’s going on.”

The success of Warwick Junction

Still, there are examples of successful interventions. One of these being the Warwick Junction in Durban, South Africa, a primary transport and trading hub accommodating 460,000 commuters and 6,000 vendors every day, which used to be both unsafe and neglected. Vendors, lacking storage opportunities, protected their goods by sleeping next to it overnight and street kitchens, lacking proper cooking facilities, had open fires on the pavement with excess water and grease spilling into the city’s storm protection system. But through a pioneering process with a high degree of stakeholder involvement and consideration, new trade stalls with locked storage as well as pre-cast concrete cooking cubicles were put up, significantly improving the working conditions.

The experiences from this initiative led to the creation of the non-profit organisation Asiye Etafuleni that has continued the inclusionary development approach. They are now providing guidance and education to the vendors, serving as a knowledgeable partner for the city officials, and facilitating and supporting membership-based organizations for the working poor. While challenges remain, their work has shown a possible and productive way forward.

Photo Credit: Dennis Gilbert

Working conditions in Warwick Junction, South Africa. Photo Credit: Dennis Gilbert

State support is needed

Scanning the world for examples of successful integration of the informal economy into city plans you find some great, but ultimately all too few, cases. Looking at the success stories Caroline Skinner does, however, see common traits: “What is common to them all are two things: First, the state has played a proactive role insisting that the informal workers have been integrated into the urban fabric, either by allocating public land or by ensuring that state contracts go for example to cooperatives of waste-pickers rather than individual waste incinerator companies. Second, the workers themselves have been quite well organized. There has been collective action, either in unions or cooperative formations”.

These two common denominators both point to one of the fundamental challenges of the informal economy: Its economic actors lack influence and leverage in comparison to the other, mainly private, stakeholders. Caroline Skinner elaborates: “The state needs to proactively support the informal end of the economy. The formal players will look after themselves. They have got lots of resources behind them, which they can leverage. The role of the state should be to balance the interests of a range of economic players and ensure, in giving planning permissions for example, that there is space allocated to informal players.”

The tension between the formal and informal sector is in some ways inescapable. The private sector is looking for profitable markets, and the informal sector, operating in densely populated areas, often understands the poorer consumer market. “I don’t think that they [the private sector] are necessarily sinister but there is an element of the private sector and private property developers looking for where the informal operators are located and seeing that as an indication that there is a market. So there is this kind of dance between the formal and the informal economies”, Caroline Skinner explains. However, to avoid the informal economy coming out on the losing end each time the informal players needs help from the state: “What we [WIEGO] advocate is that the state does intervene in a way that supports the smaller players”, argues Caroline Skinner.

Reimagining the perfect city

In seeking support from the state, one of the key challenges is redefining how we envision our cities. There tends to be a conception of what a world class city looks like that does not include any form of informality, which leads to rather harsh interventions in the efforts of clearing be it street vendors or slums. This is very vividly seen in Brazil’s preparations for the 2014 World Cup, as it was also the case in preparations for the 2014 Sochi Winter Olympics and the 2008 Olympics in Beijing, just to name a few.

This tendency is, however, not only present in preparations for mega-events. It is a far more general problem, Caroline Skinner argues: “There is a mind-set among some of the powerful decision makers, about what we are aspiring to, what we want our cities to look like. There is a deficit in how we imagine cities.” To promote a new way of imagining the city WIEGO are focussing on show casing examples of successful inclusion: “WIEGO’s approach is to promote the cases where there have been inclusion, to demonstrate to city decision makers that it is possible to include informal workers in a way that enhances the cityscape.”

“The informal workers are up against a lot, so we need to look at how we imagine cities. We need a series of alternative imaginaries so that politicians, policy makers, and urban professionals can aspire to something that is uniquely southern and not to European or US models”, Caroline Skinner concludes with reference to her experience working in South Africa.

The eyes and ears of the street

The informal economy is by no means an ideal situation. However, simply clearing the informal areas will not solve the problems it will simply shift the same issues to another part of the city.

Acknowledging the contribution made by informal workers and including them in urban plans and processes is, according to Caroline Skinner, the only viable way forward: “It’s within nobody’s interest to have big urban management problems. But the way to solve it is to sit down with the players and work out strategies to deal with the issues that are of concern. Informal workers can be a very significant part of the solution. They are really the eyes and ears of the street, so if they feel like they are part of the city fabric they’ll play their role in progressive and interesting ways.”