Digital technologies are not just for developed economies. They can also be useful in the informal economy, especially in Africa.
All too often, the debate over digital technologies focuses on developed countries and workers in the formal sector. However, the very same technologies can also boost informal business, especially in cities of West Africa.
A recent research seminar organized by the ILO in Dakar together with Orange Lab provided a compelling example: the women tanners’ cooperative of Guédiawaye.
The cooperative employs 86 women in the outskirts of the Senegalese capital Dakar. It was created in February 2016 and quickly developed, partly thanks to new technologies. Mobile phones helped to improve market access and negotiate better deals with suppliers. Similarly, mobile money applications boosted women’s access to financial services, giving them for the first time access to short-term savings options.
All kinds of businesses
Beyond this specific example, researchers from “Les Afriques dans le Monde” (LAM, Sciences-Po Bordeaux) presented an ambitious study based on a field survey conducted in the Dakar region between 2016 and 2017 in the wake of an initial quantitative survey of a representative sample of about 500 informal businesses. The quantitative data were supplemented with qualitative data obtained during semi-structured individual interviews in 50 businesses.
The LAM study highlights the relationship between the use of digital technology and the economic performance of informal businesses. It identifies four different groups of businesses.
At either end of the spectrum are the small enterprises of the informal survival economy, which are for the most part poorly performing small establishments in the retail or food sectors that use hardly any digital tools, and much bigger and more successful businesses, which are run by experienced entrepreneurs, are much more “connected” and, despite their informal status, have access to banks and credit.
Between these two groups are two intermediate segments in terms of performance: the inexperienced “gazelles” that tend to be run by entrepreneurs who are young, educated and connected (in particular via social networks), usually in trade, and the mature “gazelles”, which are headed by older entrepreneurs, tend to be active in services and use ICTs to coordinate with other businesses.
A first round-table session, between Sonatel (the local Orange affiliate) and several local start-ups – including Weebi and Yuxdakar – underscored the need to adapt digital tools to the very specific requirements of informal businesses, to alert such businesses to the possibilities, and to help them use those tools.
During a second session, the local players emphasized the emancipating power of digital tools for informal workers, showcased by the Guédiawaye cooperative mentioned above. According to the Senegalese Labour Ministry, digital technologies may also make it easier in the future to collect social insurance contributions and provide access to social protection via a simplified system for small-scale contributors.
In adopting a new recommendation in 2015, the ILO clearly made the transition from the informal to the formal economy one of its priorities. The aim of the new recommendation is to facilitate the transition to the formal economy, promote the creation of decent jobs and prevent informalization. At the time, the ILO recognized the importance of technologies for meeting those goals, stressing their usefulness, for example, in facilitating registration for and access to services.
Authors: Guillaume Delautre and Yacouba Diallo