Covid-19, The Informal Sector And Attainment Of The SDGs In Ghana

Covid-19 has delivered massive global shock Covid-19 has delivered massive global shock

Covid-19 has delivered massive global shock and left many governments trying various counter measures to protect its citizenry and stabilize their economies. Though the full scale of the social and economic impact of Covid-19 is yet to be ascertained globally, World bank anticipates that between 100 to 71 million people will be pushed into extreme poverty measured at international poverty line of$1.90. This according to the world bank will remain unchanged between 2020 – 2021. The estimate is an update of an earlier (April 2020) prediction that about 40 to 60 million people will be pushed into extreme poverty. Nonetheless, the new estimates were based on the shift in the epicenter from Europe and North America to the global south, increased death in the low and middle income countries, induced longer shutdowns and increase in the economic cost of the pandemic. The global growth is expected to contract between 5% to 8% in 2020.

Juxtaposing the growth rate of three countries which are home to more than a third of the world's poor i.e. Nigeria, India and the Democratic Republic of Congo to the rest of the world, it will be harder to have sustainable decrease in poverty headcount. Owing to the fact that, these three countries are forecasted to have per capita growth in real GDP of -0.8%, 2.1% and 0.3% and population growth rates of 2.6%, 1.0% and 3.1% respectively.

Meanwhile, the International Labour Organisation postulates that 1.6 billion of informal workers have been affected by the pandemic and have lost about 60% of their meagre earnings. Further estimates by the ILO also suggest that, high risk informal workers such as food services and retail trade where women are largely engaged is most affected.

Pre-existing social and economic vulnerabilities makes this picture gloomier as most developing countries pre-Covid 19 were faced with unhealthy working conditions and environments. About 80 percent of the world's population before Covid-19lived on less than US$ 10 per day, owing to the surge in neoliberal policies which greatly emphasized reduction in government spending, leading to debilitating impact on low-income workers and particularly those in the informal sector. In the midst of these drastic cuts of various government spending, employers also captured and expanded their market territories in cost effective manner. To this end, most employers resorted to maximizing their profits by downsizing and outsourcing. This change experienced in the labor markets resulted in a gradual expansion of "nonstandard" contracts and transition from "permanent jobs" – with employment contracts regarded as standard employment forms – to "temporary jobs" that are based on nonstandard "part-time". The ILO estimates that, 85.5% of employment in Africa is in the informal sector with 92.4% of workers in West Africa in the informal sector.

Ghana has about 88 % of its workforce employed in the informal sector, that is, the part of the economy that is not taxed, monitored by government, or included in any Gross National Product (GNP) with low income earnings. This sector is predominantly made up of medium-scale businesses consisting of producers, casual wage workers, home-based workers and street vendors, among others. These workers are mostly trapped in poverty since they do not earn enough to lift themselves and their families out of poverty. Also, their irregular income pattern often times deny them access to basic protections and services of the state. Informal businesses have challenges in obtaining financial assistance, lack the potential for growth, thus, trapping employees in menial jobs indefinitely as well as characterized by job insecurity, job instability and involuntariness for non-permanent jobs. This precarious nature of their work displaces them further from decent work.

Presumably, the covid-19 has further exposed the fragility of the informal sector and the inadequate measures put in place to better the sector. Partial lockdown, a countermeasure to stop the spread of Covid-19 was imposed on Ghanaians and lasted for three weeks because of the severe negative impact it had on the informal sector workers who needed to hustle every day for themselves and their family survival.

"I cannot ignore the impact that this lockdown is having on several constituencies of our nation, especially the informal workers, a very important part of our economy, who need to have a day out in the market or otherwise in order to provide for their families, who were having a lot of difficulties." H.E. Nana Addo Danquah Akuffo Addo.

In an attempt to handle this negative ramifications, the government of Ghana sort to provide food for some informal workers but discontinued shortly due to the lifting of the ban. Other measures put in place to curb the spread of the Covid-19 like the restrictions on economic and social activities, border closures, travel bans, spontaneous social distancing had many informal actors going out of business and losing their capital. By happenstance, these occurrences have further raised the red flag about the bad nature of Ghana's informal sector and calls for measures to address poverty, hunger, good health and well-being to gravely limit its threats on the lives of informal sector actors' survival.

Amidst all these happenings, one global goal that needs conscious effort to progressively have it achieved is the Sustainable Development Goals(SDGs), built on the millennium development goal. This goal has become vital and feasible in this period because, it is a global call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030 and highlights the need for social and economic inclusion. It was adopted by Ghana and other 192 countries and hinges on 17 goals. For the purposes of this write up, the focus will be on decent work agenda (goal 8). The decent work agenda when diligently pursued and achieved will lead to the profound attainment ofending poverty for all (goal 1), freedom from hunger (goal 2) and health and wellbeing (goal 3).

The Decent work advocates for equal, fair income and safe working conditions. According to the international labour organization, decent work involves opportunities for work that are productive and deliver a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organize and participate in the decisions that affect their lives and equality of opportunity and treatment of all women and men.

Since its adoption, Ghana has been advancing the attainment of the SDGs.

Ghana is developing a holistic strategy for targeted SDGs, budgeting, tracking, as well as involving the SDG impact investment ecosystem in financing of the SDGs. As part of Ghana's effort to improve transparency, the ministry of finance has developed a tracking system which allows for tracking of budget allocations at target level, at all levels of government and across ministries and tracking of actual expenditures a tool for online tracking of all SDGs related information. The Ministry of Finance has as well launched an annual Accra SDGs investment fair initiative to facilitate national resource mobilization process. However, according to the Ghana SDGs budget report, there is a global financing gab which makes mobilization of resources the lifeline attainment of the global goals.

Thus, the sharp economic downturn the pandemic has presented is likely to threaten decent work agenda and informal workers' financial constraint will most likely remain salient because the pandemic will aggravate the existing precarious working conditions of informal workers. This notwithstanding, if data is collected and actual impacts assessed, effective and efficient corresponding measures can be embarked on to roll out better policies to eradicate poverty in the informal sector. Additionally, government can tailor its Covid-19 response to cover some requirements of SDGs.

Measures that seeks to formalize the informal sector for collective gain and social security insurance must be aggressively pursued and made permanent. Also, government must collaborate with the TUC to provide accurate post covid-19 assistance to workers.

Informal sector reforms have now become very relevant than ever and so Government should facilitate resilient monetary and lending policies that would help informal sector to acquire funds easily for business growth and expansion while creating employment for others. Though government has launched packages to assist SMEs it has limited coverage but to encourage a wider coverage, government should provide the enabling environments for financial institutions to provide sustainable support to revamp the informal sector.

Covid-19 again provides a new normal for the informal sector since most of its actors are out of business and seek a comeback. Government can chance on this and through existing institutions or establishment of new ones, train the informal sector on business literacy and capacity building. This training can incorporate the importance of tax payment to help government raise more revenues from the sector since it employs a greater percentage of the workforce but remains nontaxable. This has become a very important policy option because the pandemic has left a tight fiscal space and will be detrimental for future prosperity if resilient options to loosen the fiscal space is not explored.

Since the inception of Covid-19, Technology (hidden hero) has played a key role and it is critical for the government to embrace digital inclusion. In that, financial assistance to the informal sector can be given through digital cash systems to reach many workers in the informal sector and also to promote the use of technology. If technology is widely patronized, Ghana can make greater stride post Covid-19 economic recovery.

As John Maynard Keynes theorizes, decisive and coordinated efforts to provide home grown reforms such as creating universal social protection to curb the increasing poverty rate while underscoring the attainment of the Sustainable Development Goals to be extensively pursued for a faster post Covid-19 economic recovery.



Eunice Asiedu

MA Economic Policy Management

[email protected]