Dr. Madina Guloba, a Research Fellow with Economic Policy Research Centre (EPRC), has raised concern over growing informal sector, which she says, outwits the formal economy.

Madina was delivering a presentation titled “Uganda’s Informal Economy: An Engine of Development?” during a workshop organized by Friedrich Ebert Stiftung (FES) in Kampala on September 14, 2017.

She blamed the rising informalities on low literacy rates, issuance of incentives to foreign businesses in disfavor of local firms, delays in registration and high population growth rates.

Citing UBoS 2016 statistics, Guloba said that about 13.67 million persons of the working age (14-64 years) are engaged in the informal sector, which represents about 98 percent of the total working age population.

In 2009/10, 88.9 percent of aforementioned engaged in the informal sector and this proportion increased by almost 10 percentage points in 2015/16.

Pic: Trends in informality in Uganda for working age by gender (%):14-64 years

 Informal Sector growth

Source: UNPS Datasets

Nonetheless all is not doom with the high rates of labour force participation in the informal sector given its contribution to GDP. “This has been mainly been through direct or indirect consumption of goods and services, which accumulates to about 75 percent of GDP,” Guloba noted.

“Generally, the formal sector remains non-attractive to most citizens unless government abates bureaucratic rigidities in firm registration and fosters a business climate that favors domestic formal firms,” she added.

The Government of Uganda has tried to formalize most ventures through avenues such as NSSF, tax payment and regulation however most taxpayers opt for non-taxable earnings.

During a panel discussion, participants raised fears that well-established people take over some of the initiatives aimed at addressing informalities for example the modern market stalls, thus driving many back to informality.

Dr. Fred Muhumuza, a Senior Economist in his counsel stated, “formalizing the informal sector calls for formation of associations to ease access to monetary credit and non collateral basis since 90 percent of Uganda’s sector is informal and therefore should not be demonized.”

 

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