Informality and Inclusive Growth in Sub-Saharan Africa

Abstract

Despite relatively high growth rates, improvements in poverty and inequality have been constrained in many developing countries over the last decade, suggesting that economic growth has not been inclusive. In part, this relates to low levels of participation in the formal economy as well as high incidence of informality and unemployment in these countries. This research seeks to explore the relationship between informality and inclusive growth in sub-Saharan Africa, with a particular focus on South Africa. South Africans typically hold one of two opposing views on the informal sector. The first is that informality should be encouraged as an under-utilised source of new employment; the second is that it should be discouraged as an inferior source of employment. The central research question is therefore: ‘Do informal labour markets promote or constrain inclusive growth?’ In order to examine the hypotheses, we use three different methodologies. Firstly, we undertake a regional evidence synthesis examining literature and case studies from the sub-Saharan Africa region. Secondly, we expand on the South African case study and examine the nature of transitions within the labour market. Thirdly, we examine to what extent income shocks may impact the likelihood of engagement within the informal sector.