There is no universal definition of informal markets. However, the concept is originally applied to unregistered enterprises and productive activities that are not taxed or formally registered by the government. The International Labour Organization (ILO) broadly defines it as referring to “all economic activities by workers and economic units that are – in law or in practice –not covered or insufficiently covered by formal arrangements”. In essence, the informal markets are typically characterised by its ease of entry, low skill levels, labour intensive technology and small firm size.
It has since become increasing urgent to recognize the value that informal markets present, in terms of job creation and value addition. A lot of job opportunities are birthed from informal trading activities which are taken up by a great majority of women and youth draw. A study in 2019 conducted by the Centre for Trade, Policy and Development (CTPD), Hivos and the International Institute for Environment and Development (IIED) reported that the majority of the enterprises by informal traders provided enough resources to just sustain their families albeit with relatively little money. Whereas the contribution of the informal markets to the state treasury has not been determined, these markets clearly present an avenue to broaden the tax base.
Today, informal markets offer critical opportunities for business and employment to the majority of Zambians living in high density areas. A lot of locals in low- and medium-income demographics greatly depend on these informal markets for affordable, accessible and assorted consumables. Informal merchandisers and traders are the key suppliers of fruits, vegetables, meat products, clothing and household items. An interview discussion with one of the local manufacturers revealed that their supply chain has incorporated some informal traders but has helped them formalize in the same process. On a weekly basis, fresh tomatoes and chilies are dispatched from informal markets and are later processed into value added products like ketchup and chili sauce. Therefore, the potential for business linkages between the informal markets and the manufacturing sector of the economy are numerous.
Majority of informal markets are made up of resellers rather than manufacturers who are specialized in value addition. Study shows that the majority of vendors sell directly to end consumers in households, and the rest to businesses, including restaurants. This clearly proves that informal markets possess great potential to support value addition and contribute to manufacturing. Overall, informal markets should be given the necessary tools to maximize their indispensable role in the value and supply chains, as it is a cardinal step towards the development of the Zambian economy.
At the same time, most informal sector players rarely abide to compliance laws and regulations which are meant to protect consumers, the environment and generate revenue. The simplification of tax and registration procedures for enterprises in the informal sector is therefore a well to make sure there is formalization amongst these informal enterprises. In fact, very few vendors and traders are registered with the local council and tax authority, therefore, creating an avenue to evade market levies, ZRA taxes and social security for their employees. Due to the prevalent low levels of formalization in the economy, Government can design tailor made policies that ease compliance to laws and regulations amongst informal market participants.
In order to fully exploit the value of the informal markets, strategies between the informal markets and private sector players must also be put in place to support and facilitate for their development. One such way is to create sustainable business linkages between the informal markets and the business community, with the representative associations being pivotal in this process. This business linkages can also foster formalization of enterprises amongst informal market players, in the process of supplying raw materials which are used in the manufacturing process. Such linkages can be achieved through the Proudly Zambian Campaign (PZC), which is a government initiative whose main objective is to enhance the production and consumption of quality goods and services. Through initiatives like the upcoming Local Content Conference (LCC), different players from the formal and informal business sectors can dialogue on how linkages can be strengthened between the two sectors.
