CHAPTER ONE
Introduction
The thesis seeks to evaluate the prospects and challenges of informal entrepreneurs in Ghana; drawing lessons from Agbogbloshie market. This chapter provides the background to the study, statement of the problem, research objectives, and research questions, the significance of the study, as well as chapter disposition.
Background
Over the past decades, and in recent times, informal entrepreneurship has become a dominant force in most economies of the world; more especially in Sub-Saharan Africa. In this study, the term “informal sector”, “informal economy”, and “informal entrepreneurship” are used interchangeably. Globally, 1 in 6 (17%) of the non-agricultural workforce are found in the informal sector (International Labour Organisation [ILO], 2012). According to ILO (2012), the number of the workforce engaged in non-agricultural informal activities differ from global regions. For instance, 8.5% of workforce engaged in non-agricultural informal entrepreneurial activities are in Europe and Central Asia, 10% in South Asia, 11% in the Middle East and North Africa, 19% in East Asia and the Pacific, 23% in Latin America, and 26% in Sub-Saharan Africa.
In particular, most markets in Sub-Saharan Africa have been deregulated by governments to promote informal entrepreneurship (Itzigsohn, 2010). The informal sector continues to grow at an unprecedented rate in most developing economies as the practice to avoid tax (Slemrod & Weber, 2012) and as a means of improving upon livelihoods.
Despite the growth of the informal economy, getting a precise definition is still a work in progress (Webb, Ireland & Ketchen, 2014). There has not been any consensus yet in terms of what actually constitutes informal economy/entrepreneurship in literature. Part of the difficulty may be that informal economy means different things in different economic landscapes. It is particularly related to the multidisciplinary nature of the concept. For instance, Webb et al. (2014) define the informal sector as activities within the economy that are not within the confines of the institutional boundaries, yet legal. On the contrary, LaPorta and Schleifer (2008) categorised activities within the informal sector as unofficial or unrecorded economic activities operated by registered firms or unregistered firms that avoid the payment of taxes. Similarly, ILO (2002) explains the informal sector as comprising every activity by all workers and economic units in the economy that are in law or practice not covered or covered insufficiently by formal arrangement (ILO, 2002).
Nwabuzor (2005) viewed the informal sector as a defiance to evade regulations from government. In spite of the absence of confluence around a unitary construct on informal entrepreneurship definitions, Williams (2006) and the European Commission (2007) iterate that there is a general agreement that the informal sector represents production and sales of goods and services that are unrecorded or undeclared for tax and social security reasons at the time it ought to be declared. Therefore, this study adopts the ILO depiction of the informal entrepreneurship and subsequently reads informal entrepreneur in this study as “those individuals whose economic units and services are unregulated or covered or recorded insufficiently for the purposes of taxes by formal arrangement”. It is essential to clarify that the notion of informality in this study does not include criminal activities and does not include activities considered as illicit or illegitimate trading of goods and services (ILO, 2002; Smith & Christou, 2009). For instance, human trafficking, prostitution, among others
are not considered informal activities in the study context. Hence, informal sector in this study is characterised as visible trading activities and services that, in spite of its illegality in terms of payment of ‘normal taxes’ (based on income) and business registration, participate in producing and distributing authorised goods and services in the economy.
Within the developing country context, entrepreneurial pursuits are deep-rooted in both formal and informal sectors (Olarenwaju & Olabisi, 2012). Without exception, activities of informal entrepreneurs have been described as having diverse potential and are an important aspect to economic development (Kus, 2014; Chong & Gradstein, 2007; Van Stel, Carree & Thurik, 2005; Ahmad, Ibrahim & Ismail, 2011). In Malaysia for instance, during the Asia financial crises from 1997 to 1998, where the Malaysian economy became slower and people had no jobs to do (Suhaimi, Al Mamun, Zainol, Nawi, Permerupan, & Malarvizhi, 2016), they started establishing businesses in the informal economy to improve the prospect of the sector (Idris & Siwer, 2003). The available places to do business and the ease of entry into the informal economy in the country offered opportunities for people to earn income (Idris & Siwar, 2003). Although, there are prospects in the informal sector, informal entrepreneurs also face some challenges that significantly hamper their business activities. These challenges limit their sales, productivity among others (Kantor, 2000).
Against this backdrop, exploring the challenges and prospects of informal entrepreneurs has become necessary.
Problem Statement
Research on informal entrepreneurship has mainly emerged from developed economies. Over the years, research on informal entrepreneurs from these developed economies has focused on characteristics of informal entrepreneurs (Williams, 2006; Aidis et al., 2006;
Williams, Nadin & Rodgers, 2012a; Mróz, 2012); challenges of informal entrepreneurs (Benzing, Chu & Kara, 2009; Halkias, Harkiolakis & Caracatsanis, 2011); motives for entrepreneurs operating informally (Chen, 2012; Williams, Nadin, Barbour & Llanes, 2012b; 2013; Mitchell, Busenitz, Lant, McDougall, Morse & Smith, 2002; Williams, 2009; Williams & Lansky, 2013) as well as the possibility of formalising the informal sector (Dellot, 2012; Williams & Nadin, 2012; 2013; 2014; Barbour & Llanes, 2013; Williams, Nadin, Barbour & Llanes, 2013).
In Sub-Saharan Africa, informal entrepreneurship has been focused on the supply of a labour force to ensure economic growth, and the contribution of the informal sector to gross domestic product (Aidis et al., 2006; Evans, Syrett & Williams, 2006; Gurtoo, 2009; Llanes & Barbour, 2007; Williams, 2006; 2011).
Moreover, informal entrepreneurship in Ghana has devoted much attention to women’s entrepreneurship (Chu, Benzing & McGee, 2007; Dovi, 2006; Dzisi, 2008; Korantemaa, 2006; Adom, 2016; Boachie-Mensah & Marfo-Yiadom, 2005), assessment of the feasibility of upskilling informal workers (Debrah, 2007; Haan, 2006; Haan & Serriere, 2002; Palmer, 2007a; 2007b; 2009), as well as problems with regards to financing informal businesses (Abor, 2007; Abor & Biekpe, 2009; Anuwa-Armah, 2005; Aryeetey et al., 1994; Tagoe, Nyarko & Anuwa- Armah, 2005).
However, it appears prior research has not adequately explored the challenges and prospects of informal entrepreneurs in Ghana (Azmat 2013; Muhammad, Akbar & Dalziel, 2011; Singh & Belwal, 2008; Adom, 2016). Therefore, Adom (2016) calls for an immediate research to properly understand and address the ills of informal entrepreneurship in Ghana.
As aptly noted by the United Nations Environment Programme [UNEP] (2009), economic instruments that may work for one set of the problem in one country may not be sufficient to address more severe problems in another country. The research, therefore, would help to address the challenges faced by informal entrepreneurs in Ghana and beyond by suggesting innovative and effective solutions and/or strategeies to the challenges being faced. Against this background, the research seeks to evaluate the prospects and challenges of informal entrepreneurship in the Ghanaian economy with emphasis on traders at the Agbobloshie market – based in the Greater Accra Region. Agbogbloshie is considered the ideal context for this study because it is one of the largest informal settlements in Accra that harbours many informal trading activities from different places in the various regions in Ghana. This research further examines how these market men and women take steps and seek ways to circumvent the challenges they face within the informal sector
Research Purpose
The fundamental purpose of this study is to evaluate the prospects and challenges of informal entrepreneurs in Ghana, with much focus on Agbogbloshie Market in the Greater Accra Region
Research Objectives
The general aim of this research is to evaluate the prospects and challenges of entrepreneurs; identify what hinders their ability to develop strategies towards prospects and/or to mitigate challenges in the informal sector of Ghana. The exact objectives of this research are as follows:
- To understand the reasons informal entrepreneurs in Agbogbloshie set their businesses in the informal sector;
- To identify the challenges confronting informal entrepreneurs in the informal economy;
- To explore the steps these informal entrepreneurs, take to curb the challenges they face; and
- To identify the prospects of informal entrepreneurs in the Agbogbloshie market.
Research Questions
In order to accomplish the above objectives and purpose of this research, the researcher is guided by the following questions:
- Why do informal entrepreneurs set up their businesses in the informal sector?
- What is the nature of the challenges of informal entrepreneurs?
- How do these informal entrepreneurs mitigate the challenges they face?
- What are the prospects of entrepreneurship in the informal sector?
