Hi, Quartz Africa readers!
Informalities
It is near impossible to regularly cover the economies of developing countries without at some point needing to explore or better understand the impact of the dominant informal sector on a country’s economy.
This month the IMF noted that while the informal sector’s share of the global economy has been falling on average over the last decade, it was still at 34% in Sub Saharan Africa, compared with 9% in North America and 15% in the OECD countries.
But a closer look shows 34% likely underestimates things because it depends on how one defines and measures the informal sector. A paper by Brookings Institution fellow Ahmadou Aly Mbaye digs into how to analyze the informal sector using Francophone West Africa as a case study.
A few things jump out with this study, one being we need to take into account the different types of informal businesses from relatively large companies to one-person employers of fewer than five people and that they may or may not be registered with authorities. But they almost all don’t pay any form of corporate taxes.
Another point is how the difficult business environment of many African economies encourages small and medium sized businesses to remain informal. Unsurprisingly, high taxes and stifling regulation by a “low quality bureaucracy” top the list of grievances. Or to be more specific it is “how many taxes a company must pay and how much time it takes to declare and pay them, rather than the tax rates themselves which create a bottleneck for businesses.”
It’s worth noting these issues impact larger formal businesses as well. In Senegal one 2016 study found only 15 companies pay up to 75% of the state’s tax revenue.
So with challenges like these why would any business be formal if they could avoid it? Well, the simple answer is that at the larger end of the corporate spectrum much revenue comes from government contract work which requires being a formal tax-paying entity. And even for some medium-sized businesses they are more vulnerable to the vagaries of government agency harassment. For example, high profile small to mid-sized tech startups in Lagos and Nairobi have run into this problem—even when they do pay taxes.
This all has significant impact on jobs because it means African countries have to be overly reliant on the informal sector to create employment. Perhaps the real downside of an economy overwhelmed by the informal sector is that like the title implies, there are few formal employment contract and little employee protection. Even if a country had a minimum wage structure, these informal employers are under no obligation to observe it other than out of goodwill. It means many people working in the country are severely underemployed as they have few alternatives.
— Yinka Adegoke, Quartz Africa editor
Stories from this week
Nigerians spent half a billion dollars to school in the United States last year. New data from the Institute of International Education reveal that last year, Nigerians spent more than $514 million for education in the US—equivalent to just under a third of Nigeria’s entire education budget for 2019. The number of Nigerian students studying in the US has doubled over the last decade.
This new Sickle Cell disease drug holds promise but most sufferers won’t be able to afford it. US regulators this month approved groundbreaking medication by Novartis for Sickle Cell Anemia sufferers. But as Paul Adepoju explains, in Sub-Saharan Africa, which accounts for the highest disease burden, Adakveo will be out of reach for the millions of people who need it the most as it costs over $85,000 a year per patient.
Burkina Faso has replaced Mali at the epicenter of the Sahel’s security crisis. Fatal attacks on a local government official as well as a convoy of miners this month highlight the near-permanent threat posed by jihadist groups in Burkina Faso. While much attention has been paid to neighbor Mali—with a UN peacekeeping mission and French troops, Joe Penney explains the deteriorating security situation in the West African country means increased scrutiny of the regional military strategy is needed to nullify jihadists.
Africa needs to industrialize before focusing on free trade. The adoption of the African Continental Free Trade Area agreement is widely seen a critical factor in boosting intra-African trade. But, with the share of manufacturing in GDP falling in sub-Saharan Africa in the last 30 years, there’s a strong case to be made that leaders on the continent should spend more time focusing on one crucial step to truly benefit from free trade.
Year of Return comes full circle in Ghana after it grants citizenship to African Americans and Afro-Caribbeans. Activities to mark the 400th anniversary of the beginning of the slave trade in the United States reached a zenith in Ghana. As Kwasi Gyamfi Asiedu reports from Accra, over 100 African-Americans and Afro-Caribbeans became Ghana’s newest citizens in a celebratory ceremony led by president Akufo-Addo.
African brands are spending $40 million a year on marketing in the world’s richest football league. From a betting company and a national tourism board to a Chinese-owned mobile phone brand, Africa-focused brands are spending millions of marketing dollars on English Premier League teams to reach fans at home and abroad. As Yomi Kazeem notes, the marketing partnerships are supporting the world’s richest football clubs even as local African leagues struggle.
The Dealmaker
Copia Global, the Kenya-based e-commerce and logistics service for unbanked rural citizens, raised $26 million in a Series B round led by LGT Lightstone, with participation from Perivoli Innovations, Endeavor Catalyst, ELEA and Goodwell Investments, the Dutch-based impact investment firm. After operating only in central Kenya since being founded, Copia Global is now ramping up foe expansion across East Africa.
Nigerian EdTech learning platform, uLesson raised $3.1 million in seed-level funding from TLcom Capital. The platform, set to launch in February, will operate a subscription model and deliver app-based teaching modules to secondary school students. uLesson is founded by Sim Shagaya, former founder of Konga.
Chart of the Week
The battle to have Europe’s museums return thousands of stolen African artifacts is getting complicated. Research shows up to 90% of Sub-Saharan Africa’s material cultural legacy is outside of the continent. Yet, despite the recommendation of a French government-commissioned report, Ciku Kimeria explains the restitution of Africa’s stolen assets from France and other European countries still face major legal hurdles.
Other things we liked
Meet the Chinese workers behind Ethiopia’s construction boom. Construction workers come from far and wide in China to take part in construction projects across Africa often financed by Chinese state-affiliated backers—and they do it primarily for better money than they’d earn at home. For Der Spiegel, Heike Klovert met with Chinese construction workers and their local colleagues in Addis Ababa to find out what motivates them.
How colonial governance, modernization, and the process of informalization shaped Accra. In 1877 the British colonial government moved its administration from Cape Coast to Accra marking the beginning of the consolidation of its rule in the former Gold Coast. For The Metropole blog, Jennifer Hart explains how “colonial regulatory policy initiated a process of informalization, through which the activities of local residents were categorized as illegitimate, undesirable, and illegal.”
Conversations with young Nigerians about their faith. This year has been remarkable for debate and conflict when it comes to religion in Nigeria, from sexual assault in church to organized abuse of children in schools run by Imams there has been plenty of news to ponder. For Native, Saratu Abiola explores this philosophical conflict in Nigerian society by sharing and analyzing conversations and interviews over the last two years with young Nigerians.
ICYMI
The Africa Postdoctoral Training Initiative. Selected African researchers will be provided with two-year fellowships at the U.S National Institutes of Health. (Dec. 1)
Keep an eye on
Quartz Africa/BFA Making it Work podcast launch (Dec. 5): Quartz Africa and BFA will host an evening of insights and discussions on the future of work to mark the launch of the Making it Work podcast series. The three-part series discusses the global gig economy covering everything from the disruption of Uber and Bolt to the challenges of Jumia and the ubiquity of Amazon. If you’re in New York on Thursday (Dec. 5) you can join us by registering here.
RiseUp Summit, Cario, Egypt (Dec. 5-7). The 7th edition of the innovation and entrepreneurship summit will be held at The American University, Cairo.
*This brief was produce while listening to Welcome Home by Osibisa (Ghana). [Spotify]
Our best wishes for a productive and ideas-filled week ahead. Please send any news, comments, suggestions, ideas, Ghanaian citizenship and (discounted) Premier League jersey sponsorships to africa@qz.com. You can follow us on Twitter at @qzafrica for updates throughout the day.
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