Informal sector has long been portrayed as a marginalized and unproductive part of the economy that only provides income opportunities to the poorest and should disappear with economic development. In this view, informality is closely tied to poverty as the working poor will usually resort to it out of necessity than being driven by business opportunities. The fact, however, that many developing countries have significantly improved their economic profile in the last decade without shrinking their informal economy is now fueling the debate around the perception of informal sector as marginalized or survival sector, versus a potentially vigorous entrepreneurial sector. Estimated to account for more than 30% of economic activities, informal sector in Angola has a wide range of businesses that could easily fit in both perspectives.
The predominance of small trading activities on streets and markets of Luanda’s peri-urban areas, for example, can certainly make one, at first instance, associate informality with poverty and poor employment conditions. To perceive the importance and potential of this sector, one has to further look into the wide range of economic activities it involves i.e.:
Between furniture making, manufacturing of wearing apparels and other knowledge-based artisanal works and handicrafts, informal manufacturing activities probably have the highest profile in term of the quality of outputs produced and building human capacity by creating skilled workers. Their knowledge-intensive nature can make these activities, if supported appropriately, an important channel to sustainable and inclusive development.
Consisted of minibuses, unregistered taxis and motorcycles, informal public transportation is widely used for intra-city travelling in Luanda and other major Angolan cities. It is counted among the most important sectors in term of revenue given its important role in providing transportation mean to the majority of the urban and peri-urban population.
Self-organization of water supply in different areas of Luanda province stems from the lack of direct water connection in many households. Bulk water-sellers would usually use their tank truck to get water from government built water filling point (“Girafas”), to sale to households and businesses. More specifically, informal water supply in Luanda includes the services who pump water from the river Bengo or Girafas to fill tank trucks, the bulk water seller who use the tank trucks to supply water to households’ water tanks and households who resale water from their tanks to neighbors. These activities generate sizeable revenue and account for an important part of informal activities in Luanda.
A strong concentration of informal trading activities is usually observed in highly populated areas such as Cacuaco, Viana and Cazenga municipalities in Luanda province for example. Taking place on streets, markets and homes, trading appears to numerously be the most important informal activity. Beside municipality organized-markets, each neighborhoods would usually organize themselves and turn an open space into a little market to answer immediate demand for households’ goods that are found more convenient to not travel too long to buy. Informal trading can be as small as mobile street trading or as big as a convenient store. The importance of a trading business, in term of revenue, is mostly related to the type of premise where it takes place; and the considerable number of nicely built stores involved in informal trading would suggest that the revenue stemming from this type of activities should not underestimated.
Fishing, Agriculture and Mining
Artisanal fishing mostly occurs at coastal provinces outside of Luanda. Fishes are either sold fresh in specialized markets (e.g. fish market in Benguela) or are smoked, salted, dried or put in other preserving state to sell at later stage or export to other regions. This is an important market in Angola given its large coastline.
Informal agriculture mostly takes place in rural areas outside of Luanda province and holds an important role in providing food to urban and peri-urban areas. Much of agricultural products sold in markets and streets of urban and peri-urban areas usually come from family farming in rural areas, so informal agriculture assures food security for a large part of the population.
Like in any country with rich mineral endowments, Angola also has small-scale mining that’s usually involves a lot of informality. There is a growing interest in understanding this type of informal activity given the sizeable revenue deriving from it and its potential contribution to local development
The remaining informal activities mostly consist of services like hair salons, barbers, repairing (cars, motorcycles, shoes and other type of repairing) and others. These services usually take place on street or from home with an access to a main street. Construction activities, music, art and other creative industries also have important proportion of informal activities.
With wide range of activities involved, sizeable revenue derived and provision of employment to a large part of the population, it is indeed time to start looking beyond the presumed necessity-driven characteristic of informal sector and unleash its entrepreneurial energy that has been held back by different challenges. Financing issues due to perceived high credit risk, lack of proper infrastructure to allow businesses to thrive properly, strict regulations (or lack thereof) that usually lead to mouse and cats game between the police and informal businesses, and lack of proper knowledge on business management, usually feature among practical challenges faced by informal sector. Clear identification and understanding of the challenges in Angola will require an adequate study to properly inform our understanding on this matter.
Despite the growing interest in this sector, there still exist gaps in regards to properly understanding its working mechanisms, measuring its contribution to economic activity and designing adequate intervention programs. To fully tap into its potential for sustainable and inclusive development, Quantum Global has initiated the informal sector project in which we will design and use original and adequate data collection methods, analyze the trends and patterns to have a comprehensive understanding of the sector, and design best practices for interventions programs to inform stakeholders’ decisions.
Supporting and developing entrepreneurship for sustainable and inclusive development is our main interest, so guiding SMEs funds and capacity development through “entrepreneurship” ecosystems accordingly are among our key priorities. Another informal sector support comes from its relationship with the formal sector. Building procurement relationship between informal or small business and large corporations is, for example, one of the many ways to use their linkages as mean to support informal sector. Many other important factors will be explored to build a sound model of entrepreneurship development.