Original Article Securing Livelihoods in Africa: Towards Multi-scalar Policy Frameworks Frederic Lapeyrew International Labour Organization, Geneva, Switzerland. E-mail: [email protected] w The findings, interpretations and conclusions in this article are entirely those of the author only. They do not necessarily represent the view of the International Labour Organization.

Abstract In a context marked by growing informal employment and acute vulnerabilities, breaking out of informality is increasingly seen as a major development challenge in Africa. This article analyses the adaptive capacities of informal economy actors. It emphasizes the need to explore crossscale influences on adaptive capacities to secure and improve livelihoods. The adaptability of the informal economy can be influenced by factors such as the macroeconomic context, access to financial, technological and information resources, infrastructure, social protection schemes and the institutional environment within which adaptations occur. This article provides a critical review of current policy debate on the informal economy and stresses the need to reformulate questions of policy intervention in a way that expands informal economy actors’ options for securing livelihoods rather than constrain them. Dans un contexte marque´ par une informalisation massive de l’emploi et des vulne´rabilite´s croissantes, la question de la sortie de l’informalite´ s’affirme comme un de´fi majeur pour le de´veloppement de l’Afrique. Cet article analyse les capacite´s adaptatives des acteurs de l’e´conomie informelle. Il insiste sur la ne´cessite´ de prendre en compte les influences des diffe´rents niveaux – local, re´gional, national et global – sur ces capacite´s afin de se´curiser et d’ame´liorer les conditions de vie. Ces capacite´s adaptatives peuvent eˆtre affecte´es par le contexte macroe´conomique, l’acce`s aux ressources financie`res, aux technologies et a` l’information, les infrastructures, les syste`mes de protection sociale et l’environnement institutionnel dans le cadre desquels les adaptations prennent place. L’article pre´sente une analyse critique du de´bat sur l’e´conomie informelle. Il met en avant le besoin de reformuler cette question de l’intervention des politiques publiques a` partir d’une perspective base´e sur la re´alite´ des pratiques dans l’e´conomie informelle et le dialogue social. Ce changement de regard implique de mieux comprendre comment les politiques de de´veloppement peuvent renforcer les capacite´s des acteurs de l’e´conomie informelle a` se´curiser leurs conditions de vie plutoˆt que de les contraindre. European Journal of Development Research (2013) 25, 659–679. doi:10.1057/ejdr.2013.5; published online 7 March 2013 Keywords: employment; informal economy; Africa; public policy; vulnerability; livelihoods

Introduction The analysis of the relationship between economic growth, employment and poverty reduction has gone through various phases in the debate about development. An important premise of the pioneers of development studies in the 1950s was that the benefits of economic growth would trickle down to the poor. This was still a central assumption underlying mainstream thinking in designing structural adjustment programmes in the 1980s and the Poverty Reduction Strategy Papers in the early 2000s (Easterly, 2001a; r 2013 European Association of Development Research and Training Institutes 0957-8811 European Journal of Development Research Vol. 25, 5, 659–679 www.palgrave-journals.com/ejdr/

Lapeyre Stiglitz, 2002; Jolly et al, 2004). However, the assumption of an automatic link between growth, job creation and poverty reduction has been called into question in recent years. The past 60 years of development strategies in developing countries provide strong evidence that, without employment-oriented policies, growth by itself cannot be relied upon to spontaneously translate into better incomes and jobs for people (Cornia, 2001; Easterly, 2001b; ILO, 2004; World Bank, 2012). High growth cannot be considered a sufficient condition for poverty reduction; the pattern and sources of growth, as well as the manner in which its benefits are distributed, are equally important from the point of view of achieving the goal of poverty reduction and social justice. A new consensus has emerged in recent years around the belief that the impact of growth on poverty will be minimal if economic growth is not associated with job creation, a shift towards better employment opportunities in the formal economy and an improvement in the conditions of employment in informal activities. In other words, growth should go hand in hand with better working and living conditions, especially in the informal economy. As a result, there has been a recent addition to the first Millennium Development Goal (MDG) of the United Nations, which focuses on the eradication of poverty and hunger, namely, ‘Reaching full and productive employment and decent work for all, including women and young people’ (ILO, 2009a).1 The fact that employment is included as a target attests to the international development community’s recognition of the crucial need for putting employment and decent work at the centre of economic and social policies (UNRISD, 2010). From this perspective, the economic growth objective should be reincorporated into an integrated development strategy in which growth is an important aspect, but no more important than the creation of productive jobs, the improvement of working and living conditions, the recognition of workers’ rights, the fairer distribution of income and the provision of basic social protection. This growing concern and political commitment to productive employment and social protection arguably implies developing new understandings of development, however. In many ways, the post-war modernization project can be seen as a vast campaign that denied the existence of a potential plurality of development paths, offering instead a vision of a single straight path to development based on the experience of developed countries (capitalist or socialist). Yet, for a while now there has been widespread awareness that more local socio-economic practices and institutions can also successfully manage vulnerabilities and secure livelihoods (Guha and Spivak, 1988; Hettne, 1990; Peemans, 2002). This is particularly true of the so-called ‘informal economy’. When this was ‘discovered’ in the early 1970s, it signalled the beginning of a shift in perceptions about popular socio-economic practices that went beyond inherently associating them with poverty and dualistic conceptions of the economy whereby they were the remnants of a traditional, precapitalist sector (ILO, 1972; Hart, 1973). Instead, informal economy actors came to be recognized for their capacity to combine production activities, the construction of networks of reciprocity and solidarity and their adaptive capacities to secure their livelihoods despite the multiform vulnerabilities they faced (MacGaffey, 1991; Thomas, 1992; de Villers et al, 2002; Trefon, 2004). When seen from this perspective, the informal economy is arguably the most visible sign of the existence of spheres of autonomy that populations are managing to preserve or recreate for the management of resources, and for the organization of work, production methods and lifestyles (Scott, 1985 and 1990; Meagher, 2010; Hillenkamp et al, 2013). Taking into account these ‘forgotten actors’ leads to a substantial reorientation of the current policy debate on sustainable development. This article provides a critical review of 660

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Securing Livelihoods in Africa current policy debates about the informal economy from a broader sustainable development perspective that eschews traditional modernization approaches. It particularly focuses on the adaptive capacities of informal economy actors, describing how informal economy actors systematically reposition themselves vis-a`-vis the State, markets, international and national policies to secure their livelihoods, and how this means that there is consequently a need to reformulate questions relating to policy intervention based on a more thorough understanding of the perspective of such informal economy actors. Such a paradigm shift, however, requires multi-scalar policy frameworks that address the challenges confronting the informal economy by supporting institutions and policies that allow local communities to enhance their capabilities to secure and improve their livelihoods through developing and protecting their economic and social rights (Christopherson et al, 2010).

Informal Employment in Africa: A Complex Reality The main employment-related problem in Africa is not so much one of widespread unemployment as a lack of remunerative work opportunities. This is because of low productivity and too few formal employment opportunities leading to both mass underemployment and poverty for a growing share of the labour force trapped in informal employment. The rate of unemployment in North Africa (10.8 per cent) is substantially higher than in sub-Saharan Africa (SSA) (7.8 per cent), where unemployment is simply not an option for most workers (ILO, 2012). However, open unemployment is just the tip of the iceberg; the greater problem in Africa is that most workers operate in the informal economy and earn so little from their work that they and their families are caught in a poverty trap (Fields, 2009, p. 18). Despite the fact that 17 African countries have experienced sustained annual growth rates exceeding 5 per cent for more than a decade, there has been no significant trickledown effect on employment and poverty (Benno, 2008). A recent study by the International Labour Organization (ILO) highlights the extremely high proportion of vulnerable employment in Africa (Albee and Sparreboom, 2011, p. 61). The proportion of workers in vulnerable employment (defined as own-account and contributing family workers) in Africa continued its modest downward trend from 73.9 per cent in 2000 to 69.7 per cent in 2012. Vulnerable employment accounted for 76.3 per cent of total employment in SSA, a rate that is double that in North Africa and comparable only to the rate in South Asia. Today, there are 243 million vulnerable workers in SSA, 62 million more than there were in 2000. Whereas vulnerable employment in the East Asia region has fallen by 40 million since 2007, it has increased by 22 million in SSA (ILO, 2012). Moreover, the incidence of vulnerability is much higher among women in the labour force than among men throughout Africa. A picture is similar with regard to the incidence of the working poor. Despite a notable decline in the 2000s, the vast majority of workers in SSA is poor, and as a consequence of the rapid growth of the labour force the number of working poor has continued to increase. The ILO provides recent estimates of the proportion of employees falling below the poverty lines of US$1.25 and $2 per day. Between 2000 and 2011, the proportion of working poor in SSA fell relatively modestly, from 56.3 per cent to 44.3 per cent at the lower poverty line and from 76.4 per cent to 67.1 per cent at the $2 per day poverty line (ILO, 2012). In such a context, the high growth rate of SSA’s working-age population puts r 2013 European Association of Development Research and Training Institutes 0957-8811 European Journal of Development Research Vol. 25, 5, 659–679

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Figure 1: Share of informal employment in total non-agricultural employment, by regions/sub regions (per cent). Note: The box chart shows the range of informal employment as share of total non-agricultural employment by region, based on the latest available observation for each country. The edges of each box correspond to the upper and lower quartiles, with the vertical line inside indicating the median value for each region. The ‘whiskers’ outside the box show the upper and lower adjacent values of the data. The outlier value in Latin America is Haiti. Source: OECD (2009), based on data from the latest available period in each region.

strong pressure on labour markets for youth. Such pressure is likely to continue as this sub-region is projected to have the highest rate of growth of the working-age population between 2010 and 2015. The informal economy has a disproportionate share of the working poor, as ample empirical research has shown that workers in informal employment2 typically have lower earnings and face higher risks of poverty than workers in formal employment (ILO, 2002a and 2011a; Bhalla and Lapeyre, 2004; UNRISD, 2010). Although some activities in the informal economy offer reasonable livelihoods and incomes, most people engaged in informal activities (i) are exposed to inadequate and unsafe working conditions, and have high illiteracy levels, low skill levels and inadequate training opportunities; (ii) have less certain, less regular and lower incomes than those in the formal economy, suffer longer working hours, an absence of collective bargaining and representation rights and, often, an ambiguous or disguised employment status; and (iii) are physically and financially more vulnerable because of working in the informal economy, which is either excluded from or effectively beyond the reach of social security schemes or safety and health, maternity and other labour protection legislation. Figure 1 shows the extremely high level of informal employment in non-agricultural employment in SSA compared with other regions and sub regions. From a policy perspective, tackling informal employment is a challenge as it encompasses very heterogeneous situations in both the informal and formal economies, with irregular or seasonal cycles.3 In all developing regions, self-employment accounts for a greater share of informal employment (other than in agriculture) than wage employment: specifically, self-employment represents 70 per cent of informal employment in SSA, 62 per cent in North Africa, 60 per cent in Latin America and 59 per cent in Asia. Selfemployment represents nearly one-thirds of total non-agricultural employment worldwide and constitutes as much as 53 per cent of non-agricultural employment in SSA, 44 per cent in Latin America, 32 per cent in Asia and 31 per cent in North Africa (ILO, 2009a). 662

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Securing Livelihoods in Africa 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

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Mali 2004 -Non agricultural employment

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Formal | Employees (excl. Domestic employees)

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Informal | Employees (excl. Domestic employees)

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Figure 2: Distribution of employment by status and informal/type of employment in selected African countries (Percentage of total non-agricultural employment in total employment). Source: ILO/STAT estimates. Data on distribution of male and female employment by status in employment and informality.

The share of own account and contributing family workers in total employment was 81 per cent in least developed countries (LDCs) in 2008 compared with 59 per cent in developing countries (ILO, 2010, p. 36). However, these aggregate data should not overshadow disparities in employment by status among countries, as illustrated by Figure 2. The first step towards designing effective interventions in African countries to improve conditions in informal forms of employment is to recognize the heterogeneity of informal activities. For example, consider the case in which informal workers are able to capture most of the value added they produce. These activities could include the self-employed or members from cooperatives or associative production units. Under such conditions, interventions that increase labour productivity in the informal employment will raise living standards, as workers will be able to capture the gains of the productivity improvements. Targeted policies to improve productivity could include access to credit and capital, educational programmes for skill enhancement and infrastructure development (for example, electrification). However, for wage workers in the informal economy, a focus on productivity improvements as a strategy to raise living standards would be far less successful if it is not associated with extending social protection or enforcing core labour rights and minimum wages (Heintz and Pollin, 2008, p. 61).

Vulnerabilities and Crises: Resilience of the Informal Economy Strong empirical evidence based on the growth experience of many developing economies shows that sizeable informal economies can coexist and sustain themselves in parallel with the expansion of the formal economy and good growth performances (Castells and Portes, 1989). Growth resulting from an accelerated integration into the global economy is not r 2013 European Association of Development Research and Training Institutes 0957-8811 European Journal of Development Research Vol. 25, 5, 659–679

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Lapeyre necessarily conducive to the transition to formality. In analysing the relationship between growth and informalization, Heintz and Pollin (2005) have shown that higher economic growth can reduce the rate at which informalization increases in developing countries,4 though it cannot, on its own, create an environment in which informal employment actually declines. Their analysis also shows increasing rates of informalization, which are consistent with positive average rates of economic growth in a context of restructuring and flexibilization of production of goods and services at the global level (see also ILO, 2011a). These dynamic linkages of the formal and informal economies in a context of emerging new global value chains highlight the importance of understanding the ‘informality’ of the global economy (Carr and Chen, 2001; Chen, 2007). The informal economy should not be seen as a vestige of the past or a sign of backwardness, as workers and producers in the informal economy are linked to the global economy in various ways (for example, through global production networks, migration, global economic cycles and variations in global commodity and food prices) (Harriss-White, 2002; Guha-Khasnobis et al, 2006). Therefore, the informal economy is operating in an environment of complex formal and informal economy linkages that are affecting (i) the level of vulnerability of units in the informal economy; (ii) the functioning and capacities of actors in the informal economy; and (iii) the transition paths to sustainable development. In that context, a growing body of literature highlights the many initiatives of local actors (both individual and collective), most of them operating in the informal economy. These initiatives are driven by the need not only to survive or mitigate the impacts of crises and basic needs deprivation processes, but also to build a better and sustainable future in urban and rural areas that are connected in multiple ways – for better or for worse – to global economic trends (Itzigsohn, 2000; Folke et al, 2002; Tarrius, 2002; Meagher, 2010). Indeed, despite high levels of vulnerability and multiple sources of stress, informal economy actors display patterns and processes of resilience, adaptability and transformability that have demonstrated their capacities to manage major threats to their livelihoods such as climate change, structural adjustments programmes, global economic crises or depletion of important local collective assets such as land and water (Ballandier, 1957, 2008; de Certeau, 1984; Peemans, 2002; Hart et al, 2010). Analysing the functioning of the informal economy provides strong evidence in the debate on ‘ ywhether the informal sector should really be seen as a marginalized, “survival” sector, which mops up excess or entrenched workers, or as a vibrant, entrepreneurial part of the economy’ (African Union, 2008). This idea that informal economy actors have capacities and not just vulnerabilities has received increasing recognition in the past 20 years (Anderson and Woodrow, 1989/1998; Scott, 1990; Cannon, 2008). This is at the heart of approaches that recognize that local social systems can, and do, selforganize, despite limitations and stress factors (Gunderson and Holling, 2002; Berkes et al, 2003; Walker et al, 2004). The concept of resilience that has evolved considerably since Holling’s (1973) seminal paper emphasized the ability of groups or communities to adapt in the face of external social, political, economic and/or environmental stresses and disturbances. This adaptive capacity exists within communities to different degrees in response to short term or structural changes in living conditions (Carpenter et al, 2001; Trosper, 2002; IPCC, 2007). Field studies show that some strategies to respond to stresses and shocks tend to be both proactive and reactive,5 for example participating in mangrove replanting or sending household members in search of other livelihood activities outside the village. There is also evidence of small producers using the Internet to better determine what to produce that would appeal to foreign tourists. In most examples, people have been 664

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Securing Livelihoods in Africa rethinking local risk management strategies and the allocation of scarce or declining resources using multidimensional and associative strategies (Marschke and Berkes, 2006; Meaghers, 2011; Hillenkamp et al, 2013). To cope with the challenges imposed by the multiple processes that contribute to increasing vulnerability, the informal economic units can potentially rely on different types of resources. Polanyi (1944) identifies four modes of exchange of goods and services: the market, redistribution, reciprocity and domestic administration. Although it is true that a certain number of reciprocal relations adopt monetary forms, the principles of reciprocity and domestic administration in today’s world prevail mainly within the non-monetary economy (Laville and Nyssens, 2001). Securing and improving livelihoods in the informal economy requires an analysis of the particular forms of these complementary modes of economic action and coordination mechanisms in the informal economy. Not all of the practices of informal economy actors are conducive to a shared project for sustainable development and social justice, of course, and any naı¨ ve vision of popular practices in the informal economy must be avoided. The local is not necessarily beautiful; it is an arena of conflicts among horizontal and vertical actors with very unbalanced bargaining powers. Solidarity is not about feeling good or good feelings: it is a social construct that provides security but also produces control, dependency and sometimes social violence. The informal economy is often marked by the daily grind of interest, power, exploitation and inequality (Brint, 2001, p. 6). Moreover, resilience can be a factor in social breakdown or the emergence of new forms of violence when it is associated with the development of mafia networks, aggressive ethnic movements or sectarian fundamentalism (Roth, 2010; World Bank, 2010a). The new transnational organized crime (resulting from drug trafficking, counterfeiting, human trafficking, trafficking in oil, wildlife, timber, fish, art and cultural property, gold, human organs and small and light weapons) uses the most brutal forms of violence to impose its control over local resources (UNODC, 2011). Other groups instead have an important role in attempts to rebuild a social order based upon various forms of fundamentalism, around which they are trying to redefine the principles of reciprocity and redistribution. These realities are deeply transforming, weakening or even destroying large parts of security-enhancing community institutions (Davis, 2007). In addition, not all adaptations are sustainable and there is recent historical evidence that large-scale, systematic changes in the global climate have had profoundly negative impacts on many societies (de Menocal, 2001; Tompkins and Adger, 2003). The ‘resilient state’ is not always a ‘desirable state’ as it depends on whom and at what level decisions are made as to what is desirable. For example, a community as a whole may be resilient, but there will still be winners and losers within the community at the household level because some individuals will be better able to capture the benefits of adaptation. In addition, resilience at a given level is not always ‘positive’ when viewed from another level. External drivers, especially in relation to marketing opportunities, may enhance the income-generating ability of some households while rapidly degrading a region’s ecological system and the resilience of the community as a whole. For example, social resilience can be increased temporarily by exploiting ecological capital. Yet, it is commonly asserted that future climate change or extreme levels of vulnerability could push local adaptive capacities beyond the limits of adaptation. Furthermore, the cumulative effects of the increased frequency of events near the limit of the coping range may lower the threshold beyond which the system cannot cope/adapt/recover (Jones, 2001; Dessai et al, 2003). Despite the value of local coping knowledge and r 2013 European Association of Development Research and Training Institutes 0957-8811 European Journal of Development Research Vol. 25, 5, 659–679

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Lapeyre capacities, it needs to be understood that there are limits to autonomous adaptation because of numerous constraints (for example, extreme deprivation, poor infrastructure and market opportunities, and lack of skills). Adaptive management often seems to have prevailed in history, but that there are at least as many situations where what did emerge was not sufficient to maintain the adaptive capacities of the system. It cannot be assumed that informal economy actors left to their own devices will save themselves. To this extent, we need to move from idealizing local community initiatives to trying to understand which among these practices of resistance, survival, solidarity and security-enhancing livelihoods can lead to a reinvention of ‘being and doing’ together that could be supported by an appropriate policy framework. Empirical evidence suggests that the most effective adaptations are multi-scalar, which leads to a different reading of the informal economy and requires innovative policy intervention by the State. Case studies show the importance of exploring cross-scale influences on the informal economy in order to identify, formulate and implement relevant policies and appropriate interventions aimed at (i) strengthening adaptive capacities at local, regional and national levels; (ii) reducing communities’ vulnerability to shocks and threats; and (iii) securing and improving livelihoods (Walker et al, 2004; Christopherson et al, 2010). Recent research conducted on the shores of Lake Kainji in Nigeria and in the inner Niger delta in Mali confirms that, when considered pragmatically, the concept of resilience provides a useful framework to identify and implement appropriate interventions to reduce fishing communities’ vulnerability to shocks and threats. The resilience of a fishery is not exclusively related to the status of the resource. Where fishing communities are especially destitute, interventions need to prioritize communities’ basic needs, thereby allowing them to turn their attention to sustainable fishing practices (Redman and Kinzig, 2003). Developing multi-scalar synergies for securing people’s livelihoods requires, first of all, having a better knowledge of the strengths, weaknesses and limitations of the informal economy’s practices. As the saying goes, ‘you do not notice the absence of someone you do not know’. Moreover, the proliferation of practices in the informal economy to secure livelihoods has largely escaped the notice of policymakers for decades. This is mainly because those practices tend to be fleeting, moving, disconcerting and ambiguous realities that do not lend themselves to the sort of precise measurement, exact calculation or strict logic that appeals to the scientific and policymaking community. Demands for development in the informal economy are apparent more or less by inference. They can be captured only through a better understanding of everyday practices as actors in the informal economy do not care to explain the nature of their practices or justify them (Detienne and Vernant, 1974, p. 9). Just like an olive tree, which, when we look at it, tells us how the march of time has twisted it, lacerated it, how the wind and rain have forced it, year after year, to take that form, a form that is neither the fruit of chance nor caprice, but of necessity, an analysis of the reality of popular practices and their evolution over a long time is crucial. It allows us to understand the development needs of the people and the evolution of individual and collective practices that are perpetually reinvented in order to ensure the material and spiritual security of their lives. The local level is crucial from a policy perspective, as this is the level where people face vulnerabilities and stress factors and where associative initiatives to secure livelihoods occur. However, development policies should not simply focus on the local level as the solution to sustainable development. The valorization of local or informal economy actors in development dynamics requires a redefinition of the role of the State rather than its withdrawal. The question is how these adaptive local strategies can be strengthened by 666

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Securing Livelihoods in Africa government action, and how lessons can be scaled up and transferred. Local or community scales can face major global threats and solutions can go far beyond local resources or local adaptive capacities. Then the State needs to take action beyond the local level but also to provide local actors the means and skills to respond to those challenges. Another dimension of the problem is temporal as it is crucial to articulate short-term local demands and practices with long-term considerations for sustainable development. The State needs to coordinate the strategic planning process through deliberative and participatory institutions to manage (i) conflict dynamics between particular actors and interests; (ii) bargaining and negotiation dynamics; and (iii) compromise-building processes. This new policy paradigm based on the recognition of informal economy actors as actors of development calls for a ‘new pact’ between the people and the State based on capacity-building, empowerment and entitlements to social and economic rights. Government policies and household/community adaptations are not independent of each other; they are embedded in governance processes that reflect the relationship between households, communities, their capabilities and social capital, and the State. This policy shift could be implemented through support to the social economy and to the associative initiatives of the informal economy actors. Participatory budgeting experiments in Latin American cities such as Porto Alegre, Buenos Aires or Villa Salvador in Peru show that ‘participatory governance’ can be an effective and efficient way to fight vulnerabilities, reduce poverty and strengthen local communities’ adaptive capacities to mitigate crises and improve their livelihoods (Gret and Sintomer, 2005). Expanding informal economy actors’ option for securing livelihoods requires major social innovations to support ‘empowered deliberative democracy’ processes (Cornwall and Schattan Coelho, 2007). However, the dynamic of participatory governance is complex, context dependent and can be highly contingent in nature; it can also lead to less progressive outcomes (see, for example, Novy and Leubolt, 2005; Rodgers, 2010). This institutionalization of popular participation in decision-making processes is a powerful tool to support the development of a social economy. The social economy can provide complementary paths to development that bring together in a coherent manner the concerns of economic sustainability, social justice, ecological balance, political stability, conflict resolution and gender equality. In addition, as social economy enterprises and organizations (SEEOs) can be found in both the formal and informal economy, a policy aiming at supporting SEEOs could link – or bridge – the informal to the formal economy and facilitate transition to better working and living conditions. However, it requires an inclusive definition of the social economy – one that does not simply reduce it to a ‘non-profit’ sector but includes all cooperatives, associative initiatives of production/ distribution of goods and services, and informal mutual insurance groups or health insurance associations.

Towards Alternative Macroeconomic Policy Frameworks to Support Local Resilience A development policy framework needs to consider the local, regional and national levels, with the nation State remaining the core institutional level for preserving the policy space and coordinating local and regional development dynamics. In particular, the State has a fundamental role in establishing laws and standards to protect individual and collective economic and social rights. It also defines and controls the enforcement of regulatory r 2013 European Association of Development Research and Training Institutes 0957-8811 European Journal of Development Research Vol. 25, 5, 659–679

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Lapeyre frameworks to (i) support sustainable production patterns for sectors such as agriculture, transport, industries and services; (ii) protect workers’ rights and social cohesion; (iii) secure people’s access to basic needs (for example, food, shelter, health, education and productive employment); (iv) create an enabling environment for sustainable enterprises; (v) support social dialogue and workers and employers’ organizations; and (vi) develop the social economy through appropriate legislation and resource allocation. The scales of adaptive capacity are not independent, and local adaptive capacity depends on broader conditions. Indeed, the capacity of households to cope with vulnerabilities depends on the adaptive capacity of their community, which itself depends to some extent on the institutional frameworks at regional and national levels (Smit and Pilifosova, 2003; Yohe et al, 2003). At the local level, the ability to adapt can be influenced by factors such as managerial capacities, access to financial, technological and information resources, infrastructure, the institutional environment within which adaptations occur (especially the extent of decentralization), political influence, kinship networks and skills. In both urban and rural areas, informal economy actors are taking advantage of newly created polices that support community-based management initiatives (Marschke and Berkes, 2006; Amoukou and Wautelet, 2007). We now turn to the question of how informal economy actors’ capacities to secure livelihoods can be strengthened – or undermined – by policy frameworks. Because of cross-scale interactions, it is critical to identify the characteristics of appropriate legal, policy and institutional frameworks. The challenge is to determine how best to develop the appropriate governance architecture that supports flexibility and the ability to cope with shocks and adapt favourably to structural changes, taking into account that the resilience of a system at a particular scale will depend on the influences of the dynamics at other levels (upper and lower). Among the various policy tools that affect adaptive capacity at the lower levels (local and regional), we focus below on macroeconomic and sectoral policies, as well as on social protection policy. Recent research on the policy reforms of the 1980s and 1990s now concedes that macroeconomic stabilization efforts that often accompanied structural adjustment programmes, while probably preventing economic stagnation, were not designed to bring about self-sustaining, job-creating growth and poverty reduction (Stiglitz, 2002; ILO, 2004; Islam and Verick, 2011; ILO, 2011a). The past few decades have shown that the conventional macroeconomic framework has not been particularly effective in enabling governments to make significant progress towards the attainment of MDG 1b or the Social Protection Floor (SPF) initiative,6 which are key elements of the development agenda in Africa. Rather, it has contributed to the informalization of the labour market (Zagha et al, 2006; Islam, 2009; OECD, 2009). Therefore, there is a need for deep reform of the current mainstream macroeconomic framework, with the primary aim being the empowerment of macroeconomic policy managers in Africa to act as agents of development while maintaining price stability and fiscal sustainability (Epstein et al, 2010). Widespread underemployment and informality are structural characteristics of developing countries’ economies, especially in SSA, and are not a peripheral problem that can be addressed in isolation from mainstream development strategies. According to the World Bank’s Enterprise Surveys, an inadequate supply of electricity and transport is a major constraint in 50 per cent and 27 per cent of firms, respectively, in SSA. Thus, these areas require major investments (World Bank, 2010b). The Growth Report (2008) suggests that public investment in infrastructure amounting to about 7 per cent of Gross Domestic Product (GDP) is needed in developing countries as an important element of a national 668

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Securing Livelihoods in Africa development strategy, although many developing countries invest in the order of 2 per cent of GDP, or less and this is reflected in their growth rate (Commission on Growth and Development, 2008, pp. 33–35). Electrification, rural roads, health and education centres or local market places have a significant impact on private productivity, earnings of small-scale producers and the security of livelihoods of local economy actors. The issue of productivity is especially important because its level will ultimately determine the level of individual earnings and household living standards in the informal economy. Such vast public investment in infrastructure programmes should be combined with public works programmes (PWPs), which are another powerful policy tool to generate employment and develop local adaptive capacities. There is a renewed interest in PWPs in many African countries with a view to achieving the objectives of generating short-term employment, providing income support and creating and preserving infrastructure and other assets, including a productive natural resource base. The impetus comes from large-scale programmes such as the Productive Safety Net Project (PSNP) in Ethiopia and the Expanded Public Works Programme (EPWP) in South Africa. Many new PWPs are now being established in Africa with financial support from development partners. One of these is the Ghana Social Opportunities Project, which includes labour-intensive public works and conditional cash transfers. The conduct of monetary policy also has a direct impact on the informal economy through the development of domestic aggregate demand and access to productive assets (Heintz, 2009, p. 10). Although the prevailing macroeconomic framework in Africa monitors multiple aggregates, there is a good deal of emphasis on what might be called ‘nominal targeting’. The emphasis on using monetary policy to attain predetermined inflation targets is an appropriate approach when inflation is driven by excess demand. However, it is much less appropriate when temporary inflation surges occur because of supply-side shocks, which happened during the late 2000s in Africa as a result of the sharp increase in food, fuel and energy prices. In this case, attempts to curb cost-push inflation through restrictive monetary policies should be avoided. They are usually ineffective in curbing inflation, and, by raising the cost of borrowing, undermine investment and growth prospects, especially for micro-, small- and medium-sized enterprises in the informal economy, which are hit by credit shortages and weak domestic demand (ILO, 2011a). Central banks and financial authorities should facilitate broader access to finance without forsaking their prudential obligations and their role in safeguarding price stability. Therefore, it is important to consider what kind of monetary policy regime would best serve the development objectives of improving employment and reducing poverty (Epstein, 2009). A restrictive monetary policy can reduce the productive potential of an economy by limiting access to and investment in productive resources. At the opposite, developing credit and financial services can enable enterprises, including small-scale and informal enterprises, to acquire and accumulate productive assets. Macroeconomic tools, such as asset-based reserve requirements, development banking and loan guarantees, should be made available to support priority sectors with a high direct and/or indirect employment multiplier. Another important component of the macroeconomic framework affecting the informal economy is the real exchange rate. The available evidence suggests that the real exchange rate exerts a powerful influence on structural transformation and it is affecting the economic environment in which informal economy units operate (Rodrik, 2008; Epstein and Yeldan, 2009; Frankel, 2009; Frenkel and Rapetti, 2010; UNCTAD, 2010). Considering the heterogeneity of the informal economy, the effects of an exchange rate policy on r 2013 European Association of Development Research and Training Institutes 0957-8811 European Journal of Development Research Vol. 25, 5, 659–679

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Lapeyre workers in informal employment vary. A competitive exchange rate through managed devaluations could hurt living standards of informal economy retailers of imported goods, particularly if they cannot pass on the cost increases as higher prices, or if demand for their products is highly sensitive to price movements. On the other hand, informal firms could benefit from a competitive devaluation if they supply specific goods and services to export-oriented or import-competing sectors. The impact on the informal economy of the exchange rate policy will also depend on the related trade policy. Trade liberalization tends to hurt import-competing informal producers and favours informal traders who benefit from lower import prices (Bacchetta et al, 2009; Davis and Thurlow, 2009). Cheaper imports may exert pressure on domestic prices and raise demand for imported products, thereby driving many informal local firms out of business. By contrast, domestic producers – both formal and informal – may be able to expand production as they are in a better position to take advantage of the new foreign market opportunities through trans-border trade; informal economy units could also benefit from outsourcing, local procurement and subcontracting arrangements related to the formal export sector (Chen, 2007). Finally, an appropriate integrated sectoral strategy – combining, for example, tax incentives, credit facilities, skills programmes, law setting and basic infrastructure – can support economic diversification by informal economy actors. Such diversification is crucial as it increases households’ abilities to cope and enables them to improve their livelihoods. The institutional context has a crucial role in fostering a diversification strategy by supporting the development of local cooperatives and producers’ associations, and providing resources and skills development to support this process. It could be complemented with the establishment of special funds to support craft or peasant production units based on the mobilization of local resources and know-how. A new pact between the State and local communities could also be forged by the creation of national funds for the social economy. The diversification of production, the processing of agricultural products, the development of value chains and craft activities, labour-intensive work to improve/develop local infrastructure and conserve local ecosystems are all activities that are mutually reinforcing. As such, they help improve adaptive capacities, reduce vulnerabilities and increase earnings and job opportunities.

Vulnerabilities, Adaptive Capacities and Social Protection It is now important to emphasize that neither the current MDG framework nor the mainstream literature hailing the resurgence of growth in Africa has paid much attention to the issue of social protection. A lack of development means that not only is there a high degree of deprivation, but also individuals and communities face a high level of multidimensional vulnerabilities (Wisner et al, 1994; UNRISD, 2010). Neither informal forms of social protection (support from a network of friends and family) nor private insurance solutions are sufficient to prevent large segments of the population from succumbing to poverty, and they are certainly inadequate for dealing with economy-wide risks, such as the global recession initiated in 2008. The description in the section ‘Vulnerabilities and crises: resilience of the informal economy’ on informal economy actors’ practices and adaptive capacities for securing their livelihoods implies the need for a better understanding of how to improve their access to resources when formulating social protection policies. This requires taking into 670

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Securing Livelihoods in Africa consideration market resources (stemming from the sales of goods and services), redistributive resources (issuing from eventual public policies, programmes of international organizations and international/national non-governmental organizations) and resources emanating from reciprocity relations (embedded in local networks of solidarity) and from the domestic group (such as family and household networks) (Laville and Nyssens, 2001). In Africa, the traditional system of distribution still functions, although it has changed considerably, as solidarity based on family, lineage or ethnicity is in crisis just as the State is in crisis in a context of growing vulnerabilities. This has intensified insecurity. The decline of vertical redistribution is partly offset by complex systems of horizontal solidarity – mostly based on associations – within which the system of circulation of money and goods has a crucial role through various mechanisms of reciprocity. The internationalization of support networks through migration also has an ever-increasing role. As a result, individual, family and collective mechanisms for securing revenue, and, more generally, livelihoods, should be carefully examined by policymakers in order to formulate appropriate poverty reduction and social protection strategies. Community-based arrangements in many places have shown their potential to fill the gap between household-level and national-level strategies for risk management.7 Those community-based risk management arrangements include all coordinated strategies used and managed by social groups for the purpose of protection against the adverse effects of different types of risk. They are characterized by low information and transaction costs, unwritten rules, interpersonal relations and social control mechanisms. They include informal mutual insurance groups, health insurance associations, savings and credit arrangements, credit associations, cereal/grain banks and community-based provision of public goods and services. However, most of these arrangements have the ability to manage idiosyncratic shocks, but are likely to break down in the face of covariate shocks (unless they find ways to transfer risk outside the community). There may also be significant holes in social safety nets based on informal institutions (Casson et al, 2010; Harriss-White, 2010). Many empirical studies have found that certain subpopulations – commonly including the poorest households or discriminated groups – are often excluded from informal insurance networks and there is limited, if any, risk pooling with others in their community (Dercon, 2005; Morduch, 2006; Amoukou and Wautelet, 2007; Msuya et al, 2007). Access to community risk management institutions is not necessarily equal, and their members do not necessarily benefit from the same level of protection within the community. When there are social or economic barriers to entry into associative forms of security against risks or inequalities in the level of protection against risks, social protection policy can potentially be deployed to help the community overcome them (Standing, 2011). Social protection programmes can support community-based mutual insurance groups in their efforts to build their capacity to tap into commercial reinsurance markets, which is necessary for sustaining large, correlated losses (Bhattamishra and Barrett, 2010). Moreover, subsidized participation can have favourable spillover effects for fully paying members by further diversifying the mutual insurance pool. In such cases, external intervention can alleviate problems that arise because of the small size of risk pools or weak diversification that is inherent in community-based arrangements. In recent years, many African countries have embarked on national programmes to extend social protection coverage as a key component of their development strategies (ILO, 2011b). Several African countries – Burundi, Ghana, Kenya, Mali, Mozambique, Rwanda, Senegal, the Untied Republic of Tanzania and Zambia – have recently adopted r 2013 European Association of Development Research and Training Institutes 0957-8811 European Journal of Development Research Vol. 25, 5, 659–679

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Lapeyre national policies that support the extension of social security or are preparing national social security strategies. Some promising examples have emerged in a number of African countries. Programmes that aim at linking employment and social protection objectives include the PSNP in Ethiopia (which, with 7.3 million beneficiaries, is the largest in Africa), the EPWP in South Africa and the PWP in Rwanda. In addition, the Social Opportunities Project in Ghana aims at enhancing access to employment and incomeearning opportunities during the agricultural slack season in order to increase access to conditional cash transfers and improve the economic infrastructure in target districts in the relatively poor northern parts of the country (Ellis et al, 2009; ILO, 2011a, p. 35). A number of other African countries are pursuing strategies of gradual extension of social security coverage and are investing strongly in social protection. This includes countries that have recently graduated from LDC status, such as Botswana (1994), Cape Verde (2007) and Maldives (2011). Examples above from African countries show that it is possible to gradually move towards ensuring universal access to health care and a basic level of income security in line with national priorities. However, how can gaps in financing be assessed with respect to core development goals? An ILO study examined 12 countries, of which seven are in Africa (Burkina Faso, Cameroon, Ethiopia, Guinea, Kenya, Senegal and the United Republic of Tanzania), to calculate the fiscal requirements using projections for the 2010– 2030 period (ILO, 2008). It was found that the fiscal requirements ranged from over 10 per cent of GDP (Burkina Faso) to a little over 4 per cent (Guinea). In principle, a set of basic social protection benefits is not out of reach for developing countries, but its progressive implementation may require a renewed commitment to domestic resource mobilization and, in some cases, transitional assistance from donors (ILO, 2008).

Conclusion: Towards Multi-scalar Policy Frameworks In efforts to improve living and working conditions in the informal economy, diagnoses and proposals vary. Some believe it is about expanding the capacity and outreach systems of institutions that were primarily and historically designed to address larger and formal sector wage employment situations; others believe reform should go much further by rethinking or reinventing the policy frameworks, instruments and culture of outreach to suit the specific conditions of the informal economy. Reviewing the relative weight of coercive actions against policies that favour incentives and support measures, and recognizing the need for extended social dialogue, bottom-up approaches and innovative institutional frameworks for better responding to people’s needs should be core components of the debate on formalization and poverty reduction. Informal economy actors are not passive recipients of interventions; rather, they are participants in development with adaptive capacities, who are securing their livelihoods, with varying success, through household and community practices and institutions. Such a vision of the informal economy helps explain different responses to similar structural circumstances even if the conditions appear relatively homogeneous (Long, 2001). The concept of resilience is important to avoid assuming that the same drivers of change are at work everywhere and that by simply pulling the right levers the appropriate drivers will respond and deliver the required outcomes. The tendency of dominant theoretical paradigms of planned intervention is to conceptualize policy intervention as essentially linear in nature, implying some kind of step-by-step mechanical process whereby policy is 672

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Securing Livelihoods in Africa formulated and implemented leading to certain results, after which the process can be evaluated in order to establish how far the original objectives have been achieved. However, the considerable diversity of informal economy practices and institutions militate against one-size-fits-all policy responses and suggest that a very diverse and rich array of possible responses are likely to emerge (Chapple and Lester, 2010). This means giving more thought to how national policymakers can encourage ‘transformative development from below’ and thus foster synergies, modularity and connection with the regional and the national levels in ways that expand options for securing livelihoods rather than constrain them. If these changes are to occur and the scope for appropriate policy responses is to change, the actions and policies of a very large number of different agents of change have to be coordinated vertically and horizontally at different spatial levels (Hudson, 2010). A multi-scale approach is critical to any livelihood analysis in order to enhance our understanding of the forces influencing livelihood security. Thus, the scale of analysis needs to be made more explicit, yet at the same time cross-scale interactions need to be taken into account so as ‘bridging institutions’. In particular, signals that travel ‘bottom up’ may be less effectively delivered or not delivered, because information generated at the lowest levels by informal economy actors may be degraded or eliminated before it reaches the top because of the lack of effective bridging institutions. Thus, an extended social dialogue and organization/unionization of informal economy actors are crucial. Policymakers need to ‘listen and learn’ from local actors, and be guided not by ‘inflexible approaches’, but by well-informed practices based on a sensitive understanding of the everyday problems confronting informal economy actors. This implies a greater recognition of the strategic contribution that local knowledge, organization and participation can make to sustainable development. The challenge is to develop a shared system of social regulation based on ‘institutional compromises’, which may find an appropriate way to bridge regulatory controls formulated by the State to support sustainable development and the autonomous regulation developed by informal economy actors for securing livelihoods. For too long, the ‘forgotten actors’ of mainstream development strategies had no choice other than to opt for an ‘exit’ strategy (Hirschman, 1970), securing their livelihoods through informal institutions and practices within the informal economy. Therefore, exploiting multi-scale synergies and strengthening adaptive capacities of local actors are possible only through building a global cooperation development project based on compromises and trust between the State and its people (Favereau, 2004); in other words, informal economy actors need to cooperate and opt for a ‘voice’ strategy. The ‘voice’ option always involves the decision and capacities of informal economy actors to play the game and co-manage ‘bridging institutions’. It is an attempt to change the situation rather than to escape from it, which is related to the expectation that development policies can be oriented in the right direction through democratic institutions, empowerment and social dialogue. The normal behaviour of non-altruistic actors when they decide to play a cooperative game (for example, to commit to systemic reforms or to development strategies) is to ponder the trust that can be placed on both the initiative (its credibility) and the initiative taker (its ability to achieve its objectives). Informal economy actors will play the cooperative game only if they think that the rules of the game are fair, and that the strategy has a strong probability of succeeding and achieving its objectives in securing and improving livelihoods. In other words, they will participate only if they trust it, and expect r 2013 European Association of Development Research and Training Institutes 0957-8811 European Journal of Development Research Vol. 25, 5, 659–679

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Lapeyre that the community will benefit from investment in this collective initiative (Lapeyre, 2006). To be successful and transform society in a way that better secures livelihoods, multi-scale policy frameworks need to convince households and communities to participate. It will work only if stakeholders do not prefer to be cautious and wait, or exit (Reynaud, 1997). It means that the actors have to take a gamble and trust in the fairness of the project. Shared regulation, linking social actors with different and sometime antagonist objectives, is by no means easy, and can only be achieved after a slow process of negotiation and collective bargaining to produce ‘institutional compromises’. One of the main lessons learnt from the collapse of the bureaucratic socialist systems is that bureaucratic initiatives to transform society – that is, the history of intra-systemic reforms – have systematically met with resistance from their populations, who have chosen the ‘exit’ option. The lack of ownership of reforms and people’s lack of willingness to play the game have led to the failure of most initiatives. This crucial problem also affected Bretton Woods institutions, which were trying to implement structural adjustment programmes through the imposition of conditionalities. Structural transformation implies the mobilization of those forms of social creativity that cannot be stimulated in a context of social fragmentation and growing inequalities (Lapeyre, 2004). As Bowles and Gintis (1995, p. 411) have argued, ‘More equal societies may be capable of supporting levels of co-operation and trust unavailable in more economically divided societies. Both cooperation and trust are essential to economic performance, particularly where limited or asymmetric information make both state intervention and market allocations inefficient’. The research agenda relating to the securing of livelihoods needs to explore the processes that support and strengthen adaptive capacities, highlighting the important role of networks, community arrangements, associative dynamics, collective learning and informal institutions. The capacity of communities to manage resilience and transformation determines whether they can successfully avoid crossing into an undesirable regime or succeed in crossing into a desirable one. Their adaptive capacity is a vector of resources and assets that represent the asset base from which adaptations and transformations can be made in the informal economy (Adger and Vincent, 2005). Nonetheless, as stressed earlier, care should be taken not to romanticize informal economy practices, as these can reflect power structures that may themselves undermine resilience. There will always be multiple pathways within the ‘response space’, but the policy challenge is to develop institutional structures that match the ecological and social processes that operate at different spatial and temporal scales and that address the links between those scales. The State can manage cross-scale interactions to prevent a loss of resilience, strengthen adaptive capacities of households and communities, or help them overcome major problems that are endangering their adaptive capacities (such as in the case of organized crime organizations, deprivation from access to the commons, or climate change). One important aspect of improving capacities to manage resilience lies in identifying the ‘early warning’ indicators of an undesirable change in a situation. Perceptions of and responses to such indicators at the national level must occur before the point at which intervention would be ineffective or useless, with adverse consequences at the local level. Finally, in a large majority of countries in the South, the legitimization – or relegitimization – of the State will depend on its ability to create institutions that allow, in a coordinated way, the largest possible majority of local communities to expand their economic and social rights. The voice of work in the informal economy must not only be heard but understood. This requires an appropriate institutional setting for social 674

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Securing Livelihoods in Africa dialogue, capacity-building and organization of the actors concerned. These are crucial priorities for effectively channelling their demands and enabling them to participate in shaping solutions to their problems and to improvements in their living and working conditions.

Notes 1. 2.

3.

4. 5.

6.

7.

Following the 2005 World Summit, the Inter-Agency and Expert Group on MDG indicators developed a new target under MDG 1 (Target 1b): Achieve full and productive employment and decent work for all, including for women and young people. Informal employment comprises: (i) own-account workers and those employed in their own informal sector enterprises, (ii) contributing family workers, irrespective of whether they work in formal or informal sector enterprises and (iii) employees holding informal jobs, whether employed by formal or informal sector enterprises, or as paid domestic workers in households (Hussmanns, 2004; ILO, 2002b; ILO, 2009b). Employment in the informal sector refers to the total number of jobs in informal sector enterprises. For practical reasons, the concept is measured as the number of persons employed in informal sector enterprises as their main job. Informal employment, which encompasses all of the jobs included in the concept of employment in the informal sector, except those that are classified as formal jobs in informal sector enterprises, refers to those jobs that generally lack basic social or legal protections or employment benefits and may be found in the formal sector, informal sector or households. For a comprehensive description of the conceptual framework of employment in the informal economy, see: http://www.ilo.org/wcmsp5/groups/public/—dgreports/—stat/documents/ presentation/wcms_157467.pdf. For the 20 countries in their sample for which adequate data exists for both informalization and per capita growth over a sufficiently long time period. See, for example, the results of the ADAPTIVE Project, which explored local-level coping and livelihood adaptation to climate change in South Africa and Mozambique. The project set out to identify characteristics of successful adaptations at locations that had significantly different climate patterns (Osbahr, 2007). On 5 April 2009, the High Level Committee on Programmes (HLCP) of the United Nations System’s Chief Executives Board for Coordination (CEB) committed to decisive and urgent multilateral action to address the global crisis, deploying all United Nations resources and capacities for rapid and effective responses. An agreement was reached on nine joint initiatives. The sixth initiative is the Social Protection Floor Initiative (SPF-I), which provides essential services and transfers to all in need of such protection so that they do not fall into abject poverty. The ‘Strategies and Tools against social Exclusion and Poverty’ (STEP) global programme of the ILO had an important role in the recognition of the fact that health micro-insurance schemes constitute a complementary and valuable strategy for extending social security to all. Moreover, STEP paid a special attention to the relationship between the local and national levels.

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