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close this bookThe Transition of Youth from School to Work: Issues and Policies (IIEP, 2000, 188 p.)
close this folderChapter IV. The integration of youth into the informal sector: the Kenyan experience by Ahmed K. Ferej
View the documentIntroduction
View the document1. Background
View the document2. The growth of the informal sector in Kenya
View the document3. Vocationalization of the formal education system
View the document4. Accessibility to skill training in the informal sector
View the document5. Implications for education and training
View the documentConclusion

2. The growth of the informal sector in Kenya

Due to lack of employment opportunities in a shrinking formal economic sector, more people have had to seek an alternative livelihood in the informal sector. The informal sector was first officially identified by a 1972 landmark ILO study in Kenya that confirmed the existence of a parallel economy dominated by small businesses that absorbed a large number of persons that would otherwise be recorded as unemployed by economic surveys (ILO, 1972). The informal sector is described as consisting of «... all small-scale activities that are normally semi-organized and unregulated, and use simple labour-intensive technology... undertaken by artisans, traders and operators in work-sites such as open yards, market stalls, undeveloped plots, residential houses and street pavements... not registered with the Register of Companies, they may or may not have licenses from local authorities for carrying out a variety of businesses.» (GOK, 1997: p 72). The informal sector has been efficient at utilizing waste materials such as old tyres, scrap metal, etc. to produce goods that have found a ready market in the low-income sector of the society and, increasingly, the middle classes. The innovativeness and ingenuity of the craftsmen in the informal sector have been responsible for services being provided to the society that would have been imported or otherwise too expensive (Darrow and Saxenian, 1986). Numerous studies have shown that these small businesses have often been started with little capital by individuals and with virtually no support from government or non-governmental organizations (King, 1977; House et al., 1990; McCormick, 1988).

Their founders often start small businesses in the informal sector as self-employment ventures. Self-employment at best provides individuals with the autonomy and flexibility to realize their fullest potential, while at worst may represent survival activities for the marginal members of society. Enterprises in the informal sector are not homogeneous in size, in capital base or infrastructure. At the lower end of the sector, single or a minimal number of employees with a very small investment base characterize enterprises, while at the higher end they are often as well structured as any similar-sized formal-sector business. In Kenya, there has been a concerted effort by the government to encourage individuals to enter into self-employment as an alternative to wage employment, and to also create employment for others. Several non-governmental organizations have also been formed that focus on specific areas of the small business sector.

2.1 The Jua Kali Movement

'Jua Kali' is a Kiswahili phrase meaning hot sun. Although the term was originally used to describe informal-sector activities that took place in the open, it is now universally used to refer to all informal-sector activities. In Kenya, governmental attention on any issue can often be influenced by the amount of attention it receives from the President. When President Daniel Arap Moi, therefore, made some surprise visits to Jua Kali sites in 1988 to see first hand their operations, the informal sector received unprecedented publicity. The President directed that shades be constructed for the Jua Kali artisans, to protect them from the elements, and to provide basic infrastructure such as electricity and water (King, 1996). As the Jua Kali movement caught on, all urban centres in the country were being asked to set aside land for the construction of Jua Kali shades. A new government Ministry of Technical Training and Applied Technology was established in 1988, with one of its major objectives being the harnessing and developing of entrepreneurial efforts within the Jua Kali sector in the country.

In Kenya the terms informal sector, the micro and small-business sector and the Jua can be used interchangeably. Sessional Paper No. 2 of 1992 defines the category of an enterprise by the number of its employees. Thus micro enterprises are those that employ between zero and five employees; small-scale enterprises employ between 6 and 10; and small-scale industry 11 to 49 persons. An enterprise may fall within any of these categories but be considered to be formal because it is formally registered, has permanent structures, pays taxes, is licensed, etc. A similar-sized enterprise may be described as informal or Jua Kali, because it operates on temporary premises, even though it may actually be licensed. Sometimes whether to be categorized as formal or informal may be the choice of the operator in the advantages that may be gained, for example to escape paying taxes (King, 1996).

2.2 Recent trends in the informal sector

As the informal sector has continued to be the main source of employment for the largest proportion of employed Kenya citizens outside of rural small-scale agriculture, so has more attention been focused towards its organization, development, and training. The government has produced several documents to articulate official policy, for example a major policy document entitled 'Creation of employment opportunities for a growing population', which was expected to guide the development of small enterprises from 1989 and Sessional Paper No. 2 of 1992 on 'Small enterprise and Jua Kali development in Kenya: In this paper, the government articulated its policy as one of providing a conducive environment for the development of the informal sector.

The development of training capacity in entrepreneurship within the country was also felt to be crucial for encouraging people to go into self-employment. The enhancement of an enterprise culture in the country through provision of pre-service orientation courses to students of post-primary training and post-secondary institutions, and provision of in-service courses for individuals already in business was initiated in all technical training institutions in the country.

Recently there has been a major World Bank initiative to inject some funding into training and technological acquisition within the informal sector. In 1994 the World Bank signed an agreement with the Kenya Government to fund the Micro and Small Enterprise Training and Technology Project (MSETTP). The World Bank is providing a credit of US$24 million for the project. The objectives of the project included: providing skill upgrading for about 60,000 enterprises, increasing access of small-scale entrepreneurs to technology and marketing information, and attendant infrastructure, and improving the policy and institutional environment.

2.3 The future of the informal sector

While government and the NGOs have been encouraged by the ability of the informal sector to absorb excess labour force in the country, there has been concern at the lack of growth of enterprises in the informal sector. Most of the enterprises stagnate at the bottom and do not show signs of growing into medium and large-scale enterprises. Sessional Paper No. 2 (1992: p. 4), states, «Compared to other developing countries, the number of Kenyan manufacturing firms employing 10-50 persons is relatively small. In the interest of balanced industrial development, there is need therefore to increase the enterprises in the category which represents the 'Missing Middle' in Kenya's manufacturing and industrial sector.» Growth of enterprises into the 'Missing Middle' is expected to accelerate growth of employment of opportunities and also provide more room for others in the crowded bottom.

The informal sector in Kenya can be said to have developed with little or no assistance from the outside. In attempting to intervene to help it 'grow' there has been concern that its dynamism, ruggedness and innovativeness maybe affected (King, 1996). The Sessional Paper No. 2 (1996) on 'Industrial transformation to the year 2020', noted that the role of the government was to "... provide all necessary assistance to the sector while keeping in mind that overly interventionist policy can threaten the very strengths that create prosperity" (p. 54). Thus much of the intervention has been in providing training, credit, and reducing the harassment of the entrepreneurs operating on public land or sites.

2.4 Entry into the informal sector

Although ease of entry into self-employment has been one of its most attractive features (Fields, 1990), House (1984) however, from his exploration of small-scale enterprises, concluded that the ease of entry was mostly confined to self-employment at the lower end of the informal system of the economy. Those in the upper end of the informal system would restrict entry by barriers formed by higher skill and capital requirements. Those who enter self-employment at the upper-tier level are closely associated with the formal sector through their business operations or from their previous training and experience (Fields, 1990). The capital with which the business was started may also have been accumulated while working in the formal sector. Many of those who enter at this level include retired workers (retirement age in Kenya is 55 years) and retrenched workers. Others are those who may be straddling between self-employment and wage employment. The formal sector provides them with a safety net to break their fall should their businesses fail, or should they be forced into early retirement.

ILO estimates that only one out of ten of those who complete school can find employment in the modern sector (ILO, 1988), with the other nine seeking employment in the informal sector, initiating some type of self-employment, or remaining with the family to assist in small-scale peasant agriculture. Due to lack of capital and experience the type of self-employment the youth could get into is mostly petty trading (ILO, 1988). Many of the youth fresh from school enter at this level. Another avenue of entry for a large sector of the youth population is through apprenticing with a skilled craftsman or entrepreneur.