UNESCO Workshop on Surveys on Science, Technology and Innovation (STI) Policy Instruments, Governing Bodies, Policies and Indicators Harare 7-8 November 2012

Measurement of innovation in the informal sector

Dr Almamy Konté, Mariama Ndong

Outline 1. 2. 3. 4. 5.

Concepts and definitions Role and importance Informal sector in the framework of innovation systems Informal sector in Senegal Case study :Informal sector and Innovation process in the field of ICT in Senegal a. Purpose of the study b. Hypothesis c. Methodology d. Structure of the questionnaire e. Description of the sector •Findings •Type of innovations

Concept and definitions (1) Concept initially developed in an African context
First idea of the term "informal sector" appeared in 1971 in a study of Ghana made by Keith Hart;
In 972, in a report on Kenya's World Employment Program sponsored by the International Labor Office (ILO) the term was examined. One chapter devoted to the concept. Since these dates, lot of works have been done (by economists, sociology, etc) in order to give a statistical and common definition of the concept

Concept and definitions (2) Informal sector activities are changing constantly and definition evolving over the time.  In 1993, Proposal of an operational definition • Following recommendations from the Delhi Group on Informal Sector Statistics : • The 15th International Conference of Labor Statisticians (15th ICLS), adopt an international statistical definition of the informal sector which was subsequently included in the revised international System of National Accounts, and reflect the reality in developing countries.

Concept and definitions (3) Description of the concept defined during the 15th ICLS: 1. The informal sector may be broadly characterized as consisting of units engaged in the production of goods or services with the primary objective of generating employment and incomes to the persons concerned: units typically operate at a low level of organization, with little or no division between labor and capital as factors of production 2. Production units of the informal sector have the characteristic features of household or individual entreprises: expenditure for production is often indistinguishable from household expenditure 3. Activities performed by production units of the informal sector are not necessarily performed with the deliberate intention of evading the payment of taxes or social security contributions, or infringing labor or other legislations or administrative provisions : it’s not an hidden and underground activity

Concept and definitions (4) • Current definition is based in the following criteria: "informal sector are defined as “ all unregistered or unincorporated enterprises are owned by individuals or households that are not constituted as separate legal entities independently of their owners, and for which no complete accounts are available that would permit a financial separation of the production activities of the enterprise from the other activities of its owner(s)." • For statistical purposes, the informal sector is regarded as a group of production units which form part of the household sector as household enterprises or, equivalently, unincorporated enterprises owned by households.

Concept and definitions (5) Other terminology • Informal employment The 17th ICLS defined informal employment as the total number of informal jobs, whether carried out in formal sector enterprises, informal sector enterprises, or households, during a given reference period.

• Non observed economy The groups of activities most likely to be non-observed are those that are underground, illegal, informal sector, or undertaken by households for their own final use. Activities may also be missed because of deficiencies in the basic statistical data collection programme. "Measurement of the NonObserved Economy: A Handbook"

Role, importance (1) • The informal sector is not something specific to the developing countries but exists also throughout the world. • The informal sector workers continues to grow and present new characters: rural in urban areas, excluded from school, former unemployed, retrenched and even the modern sector of the modern players who opt for multiple activities. • The importance of the informal sector in the economies of developing countries is highlighted in national accounts.

Role, importance (2) Role of informal sector in poverty reduction : • The informal sector makes major contributions to the economy, particularly • in terms of employment generation • and its contribution to the GDP • According to ILO (2002), • 72% of those working in the non-agricultural sector are employed by the informal sector in Sub-Saharian Africa, • 78% when south africa excluded); 93% in Benin • 42,3% to gross national product (GNP) in Sub-Saharian Africa • Nearly 60% in Nigeria

Role, importance (3) • The assets of the informal sector in Senegal, estimated at 161,000 in 1960, become a workforce of 475,000 in 1980 to 638,000 in 1991 and one million in 1996. • In the second quarter of 2003, the region of Dakar have 281,600 informal production units(IPU), employing 434 200 persons in nonagricultural market sectors, about a quarter of the population of Dakar. • 97% of the jobs created in Senegal from 1995 to 2004 (World Bank Report) by the informal economy • In Senegal the contribution of the informal sector is always greater than those of the modern sector

Informal sector in the framework of innovation systems (1) • One recognizes the important role of the informal sector in the subsaharian African economy and improving the living conditions of populations. • But traditionally, Informal sector is excluded in the analytical study of innovation systems • Does it mean that there are no innovation activities in this sector, non innovative enterprises? • Is it isolated to the formal sector? • Lack of competences and skills • No knowledge generation • etc

Informal sector in the framework of innovation systems (2) What we know about innovation and informal sector: 1. Innovation is connected to market

- Informal sector respond very quickly to market demand, supply and social demand (adaptation to consumer’s preferences and income)

2. Innovation can drive growth and create jobs - Informal sector contribution to the GDP and job creations is now well known

Informal sector in the framework of innovation systems (3) 3. Learning process as basis for innovation: conversion of knowledge to value through learning and innovation process - Low level of education in the informal sector  Skills and competences to be improved - Need more data and information in the sector for identifying source of competences and knowledge generation

4. It occurs within clearly defined set of rules and norms - Small limited business, isolated - But a social capital (trust, social and cultural values and norms)

Informal sector in the framework of innovation systems (4) Lundvall, Edquist and Johnson (1997) see innovations as results of interactive learning, where knowledge is combined in new ways or new knowledge is created, either in connection with R&D or in relation to everyday activities such as production and marketing.

A broad National system of innovation approach • as tool for analyzing innovation processes in sub-saharian africa • as framework • to understand the dynamics, practices and complexity of the informal sector • to examine the structure, organization, role of associations and social relations in the informal sector

Informal sector in the framework of innovation system (5) • An Innovation policy taking into account of local conditions, economic inequities, demographic challenges and informal economic activity (Innovation and the development agenda) Inclusive innovation policy A strategy (type of innovation)

Informal sector in Senegal Senegal has one of the most informal economies in sub Saharan Africa: •

The informal sector is the lifeblood of the economy. Since the 80s, the contribution of the informal sector in the GDP is always greater than those of the modern sector

•

The assets of the informal sector in Senegal, estimated at 161,000 in 1960, become a workforce of 475,000 in 1980 to 638,000 in 1991 and one million in 1996.

•

The largest employer in the country: 97% of the jobs created in Senegal from 1995 to 2004 (World Bank Report) by the informal economy

•

In the second quarter of 2003, the region of Dakar have 281,600 informal production units(IPU), employing 434 200 persons in non-agricultural market sectors, about a quarter of the population of Dakar (0,6% of Senegal area, 1/5 of the total population).

Informal sector in Senegal Policy issues: In order to make informal work more visible on the administrative level: • In 1993, the government tried to charge the VAT (value added) to informal workers • Finally, three types of taxes have been created, specially adapted to their way of working: the equalization tax, business license and tax package. • Today, all the informal employees pay at least something • Since 2000: A department in charge of the informal sector • Presently : Ministry of Craft, Tourism and Relations with the private sector and the informal sector – "Intermediation Unit with the private sector and the informal sector"

Informal sector in Senegal Role of the Intermediary organizations • To increase their productivity, informal workers are organizing in unions (syndicate) . There are a dozen of corporations and the most important is the National Union of traders and industries of Senegal (UNACOIS) with more than100,000 members (formal/informal). UNACOIS offers its members the following opportunities and services : • • • • • • • • • •

Promotion of economic activities Research and facilitation of partnerships and other opportunities Strengthening economic and financial capacity Advocacy at the decision-making Facilitating access to credit Support for integration in the circuits of production Support in the national and international trade Promotion of local products in international markets Development of Micro-projects and Large Projects Associative vitality and affirmation of the economic operator as a social figure

Informal sector measurement Surveys conduct by the National Statistic and Demography Agency • Methodology: 1-2-3 Survey (employment, informal sector and household consumption) developed by DIAL (Développement, Institutions et Analyses de Long terme) and adopted by Afristat as best methodology for measuring informal sector. • Phase 1 (employment) gives a comprehensive picture of the conditions of employment of labor • Phase 2 (informal sector) : units from the sampling frame consisting of the heads of informal units identified in Phase 1, are surveyed on their production • Phase 3 (household income): households expenditure, role of informal sector in the demand of households Two objectives : monitoring household living conditions and an macroeconomic approach of informal sector

Case Study 4 Case Studies: 1. Assessing the impact of grassroots innovation in agriculture Brigid Letty and Zanele Shezi (South Africa) 2. User innovation in Mozambicans Business Enterprise Sector for Maputo province: Presence of user innovation Júlia Eva Baltazar Zita and Avelino Hermíneo Lopes (Mozambique) 3. Mobile banking: a financial solution for the poor Tashmia Ismail (South Africa) 4. Innovation in the Informal Sector in Senegal Almamy Konte and Mariama Ndong (Senegal)

Purpose of the study / Questions The study should help to develop indicators for better understanding of the innovation process in the informal sector in Senegal. Questions: 1. What are the adaptation’s mechanisms of the informal sector? 2. What are the innovations (if they exist) in this sector? 3. What are the processes? 4. And how they come to fit into the Senegalese market?

Hypothesis "Innovation in the informal sector of ICT and trade in Senegal goes through the capitalization of the social potential taken into account the social demand.“  Importance of the social dimension -- Social potential (Innovation is a means used to gain a competitive advantage, ex.: social network) & -- Social demand (The goals of innovation and the needs of society have always been perceived as having a link).

Methodology (1) Three combined approach Littérature review + Survey + Life story (success story) 1. Literature review Definition of the informal sector used in the study (from national statistic and demography agency): "All production units that do not have a National Identification Number for Companies and Associations or taxpayer number. They are also units, both on the side of employers and workers, that do not maintain official accounting records." Name of the production units: Informal production units (IPU) "Dynamic and socio-economic roles of the informal sector of ICTin West and Central Africa" – Senegal, Burkina Faso & Ccameroon

Methodology (2) 2. Survey Exploratory phase • Identify our parent population based on some significant criteria • Identify sites where the IPU working in the field of ICT are more representative in Dakar • Use of snowball technique. (people are used as a source of identification of additional units).

3. Life story (success story) Interviews with entrepreneurs that evolved in the sector

Structure of the questionnaire Six sections: 1. Information on the respondent 2. Socio demographic information on the owner/creator/manager of the IPU 3. Nature and structure of the IPU and activities 4. Organization of the work 5. Commerce and Marketing 6. Partnership and Collaboration

Description of the sector • • • • • • • •

Actors (IPU, modern sector, Government, Social group) Activities (nature, type, etc.) Relations Funding Organization Marketing strategy Sources of informations Barriers

Findings (descriptive analysis) • The IPU in Senegal are very close to the family

Findings (descriptive analysis) In Senegal, the informal sector is known for its assimilation into the Mouride community

Findings (descriptive analysis) The division of labor obeys mainly to criteria that are strictly social (family affinity and friendly affinity 55%)

Findings (descriptive analysis) The payment options are threefold: a commission, quota or by monthly salary.

Findings (descriptive analysis) IPU activities are generally financed by own funds, family resources, "tontine"

Types of innovation Three possible types of innovation : 1. Organizational innovation 2. Marketing innovation 3. Social innovation

Types of innovation Organizational innovation The organization of work from the human resources management to the modes of payment follows the norms of distributive logic based on the social values such as hospitality, honesty, solidarity, sharing.

Types of innovation • Organizational innovation: Figure 15: Relationship with customers

Figure 16: Relationship with suppliers

Types of innovation Marketing innovation The marketing strategy passes generally through social networks

Types of innovation Social innovation: Any new approach, practice or procedure or any new product developed to improve a situation or solve a social problem and having found a buyer at the institutions, organizations or communities (Camil Bouchard) Design and implement creative responses to social needs.

Someone who never made a mistake has never tried to do something new A. Einstein

Merci Thank you Dieureudieuf