“When prices go up, I have to reduce what I buy. But no one reduces the rent for my stall, house rent or the school fees for my children,” said a street vendor in Accra, Ghana, on X (formerly Twitter). This is the daily arithmetic of survival for millions of Africans.
“These systemic issues often intersect with challenges faced by the informal sector, diverting attention and investment away from supporting informal enterprises.”
Africa should not accept poverty as its destiny, especially when it is rich in natural resources and talented people. From oil in Nigeria to copper in Zambia, from gold in Ghana to the fertile lands of Kenya, the continent is rich. It also has the youngest workforce in the world. And yet, a majority of its people live on less than $2 a day.
Read also: Why decades of economic reforms failed to lift sub-Saharan Africa from poverty
The roots of SSA struggles
Why? Because Africa’s biggest challenge is not just what the world has done to it but what Africa has failed to do for itself.
Too often, leaders point fingers outward at colonial legacies, global inflation, or foreign debt. Yes, those external pressures exist. But they are not the full story. What about the missed opportunities, poor policy choices, corruption, and the failure to include the informal economy, the livelihood of over 80 percent of Africans in national development agendas?
Economist Paul Collier, in his book The Bottom Billion, identifies four key “poverty traps” hindering development in the world’s poorest countries, many in Sub-Saharan Africa.
These include the conflict trap, where civil wars and coups devastate economies; the natural resource trap, where resource wealth leads to mismanagement and corruption; being landlocked with bad neighbors, which impedes trade and development; and bad governance in small countries, where weak institutions exacerbate poverty.
These systemic issues often intersect with challenges faced by the informal sector, diverting attention and investment away from supporting informal enterprises.
At times, opposition to the informal economy has been violent. One example is the notorious Operation Murambatsvina (“get rid of trash”) in Zimbabwe in 2005, where thousands of informal traders and dwellers were evicted, their stalls demolished in the name of urban cleanliness and order.
At best, governments attempt to pull the informal economy into the formal economy often through rigid policies, not supportive ones.
Challenges and misconceptions
Antagonism is driven by a range of reasons. Informal firms typically do not pay taxes. Additionally, there are frequent reports of child labour, low wages (especially for women), poor working conditions, lack of job security, and a high incidence of HIV. These real concerns, however, have too often been used as justification to exclude, rather than reform, the sector.
Yet, as the Swedish International Development Cooperation Agency points out, many governments are unaware of the informal economy’s immense contribution, particularly the high involvement of women who dominate sectors like food vending, hairdressing, and textiles.
Far from declining, the sector is expanding. A World Bank report highlights a growing trend: even people with higher levels of education are now entering the informal sector as a career of choice, not as a last resort.
Read also: Nigeria, sub-saharan Africa economies well placed for 2025 – Moody’s Ratings
The need for inclusive policy reform
Across Sub-Saharan Africa, when minimum wages are adjusted, nobody accounts for those outside the formal system. When macroeconomic policies such as interest rate hikes or subsidy removals are implemented, it is the informal workers who suffer the most without palliatives, without safety nets. Is that the fault of external forces too?
Take the informal sector, the real backbone of Africa’s economy. It includes people pushing wheelbarrows, selling food by the roadside, tailoring clothes in open stalls, driving okadas, and farming small plots.
According to the African Development Bank (AfDB), the informal sector contributes about 40 percent of the continent’s GDP and up to 90 percent of employment in countries like Nigeria, Zimbabwe, and Zambia.
Yet these workers remain invisible in public policy.
According to World Economics, in Nigeria alone, the informal economy constitutes approximately 57.4 percent of its GDP. But much of that value goes untapped by the state, unprotected by labour laws, and untouched by government support.
According to the Brookings Institution, governments often promise to integrate this sector. But most efforts are either too complex or too rigid. Documentation requirements exclude many workers, while financing programmes are not tailored to their needs.
The African Centre for Economic Transformation (ACET) reports that support schemes for artisans and micro-enterprises are underfunded and poorly designed.
As a result, these workers remain stuck in a vulnerable, unprotected system. And when crises hit, like COVID-19 or inflation spikes, they absorb the shocks alone.
This isn’t just a missed economic opportunity, it’s a ticking social time bomb. The World Bank projects that by 2030, over 90 percent of the world’s extremely poor will live in Africa. Many of them will be trapped in the informal sector. Without targeted reforms, inequality will deepen and instability will grow.
In South Africa, youth unemployment and informal sector neglect have led to urban unrest. In Nigeria, northern insecurity is fueled by poverty and joblessness, especially among informal workers.
Emerging solutions and success stories
Africa needs more than high-level summits and borrowed blueprints. It needs policies that start from the ground up ones that ask: how can we make life better for the tomato seller in Lagos or the boda-boda rider in Kampala?
Some countries are beginning to answer that question.
In Uganda, the Economic Policy Research Centre (EPRC) proposes a hybrid approach: offer incentives for informal businesses to register while simplifying tax codes and providing mobile access to financial services. In Senegal, the government now partners with cooperatives to provide health insurance to street vendors.
These programmes are still rare, however. Too often, governments and donors focus on infrastructure megaprojects or FDI-driven formal jobs. But those tend to bypass the millions in the informal economy.
What’s needed is a different kind of infrastructure: the infrastructure of survival. This includes microloans, digital payment systems, simplified business registration, access to community health services, and affordable market spaces.
Yvonne Mhango of Renaissance Capital recently argued that Africa’s demographic dividend hinges on unlocking the productivity of the informal economy. “It’s not just about profitability. It’s about pathways to stability,” she said at an African Economic Research Consortium panel.
Rwanda provides an example. The government’s flat-fee social security model enables even the smallest business owner to contribute. In Kenya, digital platforms like M-Pesa have made it easier for informal entrepreneurs to receive payments, take small loans, and grow their ventures.
These solutions are not perfect. But they signal what is possible when the focus shifts from top-down control to grassroots empowerment.
The path forward
To make meaningful progress, leaders must also tackle corruption and inefficiency. Street traders often face extortion from local authorities or are harassed into paying unofficial levies. These practices drain energy and undermine trust. Reform must begin with empathy and accountability.
Because the informal worker is not a statistic. She is the woman who wakes at 4am to fry akara by the roadside. He is the man who walks miles to repair shoes. They are parents who can’t afford to stop working, even when sick. They are young people hustling to pay school fees.
Africa’s poverty is not written in stone. It is the result of choices of what is prioritised and what is ignored.
And that choice can still be changed.
It starts with policies that make room for the majority, not just the elite. It means recognising that Africa’s informal sector is not a problem to be solved but a foundation to build upon.
Until then, prosperity will remain a promise made on paper but not delivered on the pavement.
Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).
