HABITATINTL. Vol. 16. No. 2. pp, 143-148. 1992 Printed in Great Britain.

0197-3975/92 $5.00 + 0.00 0 1992 Pergamon Press Ltd

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as a Home for Enterprise: nything Changed for the Informal Sector?

MALCOLM HARPER Cranfield School of Management, Bedford, UK

THE PURPOSE OF CITIES

Towns and cities are, above all, ‘income-generating projects’; people may find better health care, education, sanitation or even entertainment when they live in urban areas, but the basic reason for most people to come to, or to stay in, a town is their need to earn a living.

Only in a rentier economy, in fact, such as a retirement community, do people come together in urban places because of the services they can get there. In the vast majority of places, and particularly in poor countries, they come to towns and cities in order to provide services to other people, and thus to earn their living. In rural areas, a decreasing minority survive by themselves producing what they need, but just about everyone in a city lives entirely by selling her or his services to others. This may be done through employment in government or the private sector, or through self-employment, but everyone depends on being able to ‘sell’ his or her labour; everyone, therefore, is in a sense in business. Employment is not a peripheral necessity which planners have somehow to accommodate, but is the reason for the existence of the city.

In poor countries, the majority of city dwellers are unable to sell their labour to established public or private sector organisations, because there are more people than jobs. They, therefore, sell their labour, individually or with others, through less secure means, commonly known as the ‘informal sector’. The term ‘unenumerated’, which is sometimes used instead of ‘informal’, suggests that it is impossible to quantify the proportion of the population, or of the total urban income, that originates from informal as opposed to formal enterprises, however they are defined, but it is certainly well over 50% in most cities in poor countries. The proportion is also growing, nearly everywhere, because of shrinking public sector employment and increasing populations.

The language and even the cartographic conventions of urban planners, however, suggest that employment and incomes are important, but somehow peripheral. ‘Employment areas’ are coloured grey in land-use plans, and are usually allocated less area than ‘public spaces’ or ‘residential areas’. The ‘real’ purpose of a city, it is implied, is to provide somewhere for people to live, and perhaps to be governed, educated and entertained. The places where they are to earn their living are treated rather like sewers or railway lines; they are essential, but not central to the plan.

The position of the ‘informal sector’ is even less favoured. In spite of some 20 years of academic study and official protestations of recognition and even admiration, the day-to-day situation of micro-enterprise in most cities has not

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improved. Competition has massively intensified, as larger numbers have recourse to informal enterprise in order to survive, and the level of official harassment may even have increased. The city newspapers in places such as Jakarta and Lusaka regularly carry stories about the destruction and forced relocation of ‘illegal’ business sites, which are sadly the most common ‘service’ which most entrepreneurs receive from urban authorities. Should scholars not ask themselves why the battles of the past do not appear to have been won, rather than looking for new causes for the future?

THE GAP BETWEEN ‘STUDIES’ AND REALITY

In order to describe the gap between the ‘implications for policy-makers’ which so often appear, perhaps as an afterthought, at the end of research studies, and the reality of what has actually been done, it may be instructive to look at two important examples of what may be called ‘academic’ and ‘practitioner’ literature, both of which appeared some 10 years ago, more or less half-way between today and the earliest days of widespread concern for informal enterprise.

The essays in Casual Work and Poverty in Third World Cities, published in 1979’ and mainly written in the two preceding years, give a fascinating and moving insight into the reality of ‘making out’ in the informal sector, and they also analyse the reasons for official neglect and opposition. They say little about what needs to be done, in a specific sense, and comment critically on the ‘target group’ approach adopted by most assistance projects, in that this ignores the linkages and mutual relationships which are the key to the existence of informal enterprise.

‘The Pisces Studies’ (USAID’), is very much a practitioner’s document. It describes a number of projects, some initiated by foreign donors but most of local origin, which have succeeded in assisting the smallest economic activities of the urban poor. There is little mention of the ways in which the governments of the various cities where the projects are located have frustrated the efforts of people to help themselves, and no mention at all in the conclusions of how USAID, or other donors, might help the urban poor by persuading, training or otherwise encouraging policy-makers (whoever they are), politicians or administrators to stop doing things; assistance, it is implied, is a matter of starting new projects.

It is not surprising that a book such as Bromley and Gerry’s’ should take a rather more distant view, but what is more disturbing is that there is so little in common between the two approaches. Both start from concern for people in cities who live by informal enterprise, but that is where the commonality ends. For those whose task is to study and write, it is easier to propose generalities which may be impossible and for which they certainly cannot be expected to take responsibility; and for those whose task is to develop and implement ‘projects’, it is easier to do more than to propose that others do less.

The academic community tends to believe that a battle has been won when the issue has been conceptualised, analysed and has formed the subject of numbers of conferences and papers. Fashions change, and new topics are taken up, even though the world outside the university has been relatively unchanged by what went before. If this fate has befallen the ‘urban informal sector’, why, and what can be done about it?

’ Bromley, R. and Gerry, C. (Editors). Casual Work and Poverty in Third World Cides. Wiley, Chichester, 1979.

‘The Pisces Studies: Assisting the Smallest Economic Activifies of the Urban Poor. Agency for International Development, Washington, 1989.

City as Home for Enterprise 145

WHY DOES THE GAP EXIST?

It may seem paradoxical that the governments of countries and cities whose main problem is the lack of remunerative employment opportunities should persist in attempting to destroy this effective means of job creation, but there are many reasons why this should be so, most of which are very familiar.

Policy-makers and planners are generally not themselves major purchasers of goods and services from informal enterprises. They are drawn from the dite, who buy from supermarkets, travel by private cars and live in officially provided and formally constructed houses. To them, urban micro-enterprises are a nuisance rather than a source of services. Vendors, porters and handcart pushers clutter the streets, delaying the passage not of pedestrians, nor even of bicycle rickshaws, but of officials in cars. It is significant that customers are not mentioned in the newspaper articles, except insofar as they are alleged to be exploited by the vendors from whom they voluntarily buy; councillors and senior party members make their purchases elsewhere.

The tlite are personally harassed by informal entrepreneurs, but they are also professionally threatened by them. Unlicensed, unplanned and unsubsidised enterprises compete ‘unfairly’ with those provided by the authorities, and informal businesses spring up without reference to the colours on land-use plans, in places where other poor people need them, rather than where planners said they should be.

One trainee planner even suggested that informal enterprises in Dodoma should be relocated in industrial estates3 and even, in discussion, included roadside barbers. There is no evidence that anyone tried to put his recommen- dation into effect, but he was a candidate for higher degree at a well-known English University School of Planning, and he presumably patronised a ‘formal’ hairdresser, in a ‘neighbourhood centre’ conveniently near to his official residence. The &a kali barbers, scattered wherever their customers needed them, were an affront to his professional ability; their very presence showed that planning had failed, and he would not have been the first practitioner to try to remedy a disease by removing its symptoms.

The traditional function of administrators is to maintain the status quo; managers and entrepreneurs develop and innovate, but administrators then take over and preserve and strengthen the structures which others have created. This is often quite proper and legitimate, but when the structures are out-dated, and may even have been imported irrelevancies when they were first set up, the task becomes very different and very difficult; societies throughout the world are attempting to combine public accountability and what has traditionally been regarded as private enterprise, and poorly trained, badly paid and inadequately supported urban officials are perhaps the least able to resolve the dilemma and, at the same time, those most under pressure to do so.

Low pay can be compensated by misuse of official powers, and regulations which restrict micro-enterprise are among the easiest to exploit for this purpose. At the lower levels of an urban administration, the market inspectors, the police, and others who are responsible for actually implementing the harassment which is implied by the regulations, are often among the worst paid, and both need and are in a position to gain from petty corruption. They thus have a vested interest in retaining or even strengthening the controls; administrative resistance to change, professional UWZOUY propre at the higher levels and personal gain at the lower levels represent a powerful combination against change. It is perhaps surprising that there have been any improvements at all.

“Nyanda, A., Employment in the informal sector and the development of Dodoma, Thesis, Nottingham University, 1983 (unpublished).

We have already referred to one example of the possible effects of aid- financed training, in an irrelevant environment, but foreign interventions in urban areas of poor countries may also have played some part in perpetuating or even strengthening the employment destruction propensities of urban authorities. Aid interventions are ‘projects’, finite, neatly delineated, with a beginning and an end. They are thus more likely to be associated with new roads, civic constructions or small industry estates or training schemes, rather than with the untidy, slow and largely immeasurable process of changing attitudes and removing restrictions.

Development, and in particular aid-financed development, is largely per- ceived as a process of adding activities and doing new things; nobody likes to stop doing old things, or to liberalise the controls administered by their department, even if these are largely unenforced. Donors are dependent on the goodwill of governments, and a project proposal which is intended to curtail administrative authority and remove regulations is unlikely to be accepted.

The alliance against change is thus a powerful one, but there have been some significant, if isolated, examples of change, where the authorities appear to have had a change of heart; they are no longer enemies of enterprise and destroyers of jobs, but may even have become allies of informal enterprise. How has this happened, and what lessons can be learned?

EXAMPLES OF POSITIVE CHANGE

Every reader will no doubt be familiar with examples of changes where people in a city in a poor country have overcome the inertia and self-interest of the authorities and have thus been able to remove some of the constraints to enterprise. It is only possible here to mention some countries where there have been some improvements, and to make some tentative suggestions as to why this might have happened.

In Malaysia, street vendors and other urban micro-entrepreneurs have for many years been allowed and even encouraged to occupy whole city streets, to take over car parks during the evenings and indeed to dominate the food-service trade and other sectors. Because the economy has been well managed, and the abundant natural resources have been intelligently exploited to maximum advantage, more jobs have been created and there has, therefore, been less pressure for informal employment. Nevertheless, the ‘problem’ of informal enterprise has been successfully converted into an opportunity, enhancing the city environment and providing job opportunities.

One reason for this unusually liberal attitude has been the inter-communal tension between the majority indigenous Malays and the very large ‘alien’ Chinese minority. The majority hold the political power, and own most of the land, but the minority control the commanding heights of the economy. The political pressure for Malays to play a greater part in the economic life of the country is therefore irresistible, but it is clear that it would be both impractical and disastrous to attempt to expel the Chinese. Micro-enterprise is one way in which the Malays can enter business, so there is a rare congruence between political necessity and the interests of the informal sector. The happy results can be enjoyed any evening in any city in Malaysia.

Ghana represents a very different case, but the well-known agglomeration of small workshops known as the Suame Magazine, on the outskirts of Kumasi, is another example of a micro-enterprise sector which has been allowed, if not actually encouraged, to operate without significant constraints and has therefore been able to play a major role in the local and the national economy, providing

City as Home for Enterprise 147

goods and services for the national market and even to neighbouring countries, and creating thousands of jobs. How has this happened?

Ghana has perhaps suffered as much as any country from economic mismanagement; the currency became almost valueless, and foreign currency was so absurdly under-valued that it became almost unobtainable even by the the. The formal economy was, at least until recently, fast disappearing, but it was being replaced, and its demise was being hastened, by the fast-growing informal economy in places such as the Suame Magazine which grew up in its stead. Before the introduction of the Economic Recovery Programme, structural adjustment under another name, it might have been reasonable to predict the virtual disappearance of the formal sector, as official interest rates, foreign exchange rates and other controls became daily more meaningless; in such conditions, a ‘real’ economy began to emerge.

Some recent data4 suggest that the Economic Recovery Plan may not, perhaps unfortunately, have come too late to save the formal system. Its impact on businesses in the Suama Magazine is uneven, and is more a function of the type of product they make than on their scale or degree of informality, but it would be sad if recovery enabled the authorities to re-erect the barriers to enterprise which collapsed under the pressure of earlier necessity. Whatever may be its future, however, the urban informal sector in Ghana has been allowed to develop so far not because of conscious political decisions but because it became indispensable.

In Kenya, the cause of informal enterprise has recently been legitimised, under the label of &a kali, or ‘hot sun’, referring to the conditions under which micro-entrepreneurs have to work. It is too early to say whether the official statements and politician’s speeches, or even the pronouncements of the President himself, will result in anything more concrete than officially provided shelters for a small minority, but if we assume that the trend is more than cosmetic, how can it be explained?

The Kenyan small-scale sector has been receiving aid for many years, however, without any dramatic changes in government pronouncements or practices. It may be that recent enthusiasms arises more from the current political situation, where the ruling group, coming from a minority tribe, needs to create an urban power base. Whatever the reasons, political pressures, in the not too undemocratic one-party situation of Kenya, have clearly played an important role in the recent apparent ‘adoption’ of the informal sector by those in power.

To judge from these examples, therefore, and from other more local successes in some cities in India and in Latin America, an official change of heart appears to have arisen, either from political pressures or from collapse of the formal alternative. In either case, there is little that professional planners, or foreign advisers, can do to influence the situation; the encouragement of democratic processes, whereby the people’s political voice is not wholly a function of their existing wealth or power, is, or should be, an underlying goal of any external intervention, but perhaps any more direct efforts to help the urban poor are doomed to failure, or at best minimal effects.

AN OPPORTUNITY FOR COLLABORATION

There is, however, one more positive approach which is applicable at least to some types of services, and where the interests of urban planners and informal entrepreneurs can coincide, rather than being implacably opposed. This can be

4Dawson, J., An investigation of the development of small-scale industry in Kumasi, Ghana, 1973 to 1988, Thesis, Brunei University, 1989 (unpublished).

no better described than by the title of a recent book, The Private Provision of Public Services.” The term ‘public’ is used to describe services, such as education, transport, water or sewerage, which are usually provided by public institutions, for reasons of natural monopoly, social or economic externalities, or the practical difficulties of levying charges other than through taxation.

Private provision is often referred to as ‘privatisation’, with its implications of massive transfers of ownership, sometimes for political rather than immediately obvious economic reasons. In many cities in poor countries, however, services of this kind are often available only to a fortunate few, usually the better-off, and poor people have to obtain them from private suppliers. Water vendors, unlicensed taxi-operators, shopkeepers with telephone connections who offer telephone service to others, for a profit, all these and many others are examples of private, usually ‘informal’, suppliers who fill the gaps left by inadequate public providers.

Unlike most ‘privatised suppliers’ in the UK or elsewhere, these people usually operate very small, even one-person, businesses, and rarely carry out the whole supply task. They usually play some role in the distribution system, extending the publically provided service further than the public supplier is able or willing to do. This disaggregation of the task has arisen usually because of the inadequacies of the public supplier rather than through any management decision, but the effect is generally towards equity, in that the service is extended to more people. They may, and usually do, pay more for it than those who receive it direct from the public source, but they do at least receive it.

Such ‘public service retailers’ are often illegal, but to an extent uncontrollable. In some places, the public provider has realised that this branch of the informal sector can, in fact, serve the interests of the authorities, the provider and the consumers, and have permitted, or even actively encouraged, this type of disaggregation of public service provision. Roth mentions many examples, including water vendors in Abidjan and Santo Domingo and local piped-water suppliers in Guatemala City and Santiago in Chile.” The most familiar service of this kind is, of course, transport, and many authorities have enlisted informal entrepreneurs to cope with peak periods, as in Colombo; to supplement public capacity, as in Calcutta; or even to take over the whole urban transport system - as in Buenos Aires -when the financial losses and inadequacies of the public system mean that it is no longer sustainable.

In such urban areas, the choice is often not between public and private provision but between private and no provision. If the authorities enlist the assistance of informal enterprise, they can at least be no worse off personally, in that they are not giving up any rights which they were previously able to exercise, they can substantially reduce public dissatisfaction and gain goodwill from the newly enfranchised private suppliers. It may be that alliances of this sort, formed usually in desperation, will lead in the future to greater official recognition of the positive role of informal enterprise.

It is not clear that the urban authorities who have recognised the role of private providers of ‘public’ services, such as transport in Manila or water in many Francophone African cities, learn through this collaboration that private suppliers of ‘private’ services, such as food vendors or small retailers, also have a vital role to play in providing services which are just as essential as ‘public’ services. It is to be hoped, however, that cooperation in one field will lead to recognition in others; total breakdowns in public services are probably more effective catalysts of change than academic conferences, whether these focus on the future or the past.

‘Roth. G.. The Private Provision of Pttblic Services. World Bank/Oxford University Press, Washington, 1987.