In this section we review what could be considered the strategies adopted by llim:f!Dl!JllllléBill 5lfXdiiDxr entrepreneurs to cope with sorne of the constraints we have identified and a1:naiy ~ 1Itt :iis important to remark first, that life inside the informai sector may be
summw
llllJP! mm <D.llOO ~ resilience, in which actors pursue their goals with sorne strong amount of patiem mdmbilliitt.w,
mxdllive up to every potential shock that cornes their way. This is considered them ~11: ~ that informai sector entrepreneurs adopt to remain operational for as long as · iili»Th lL.ii1titlle ~
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one wonder therefore that the Government of Kenya, which is today perhaps the center of most informai sector studies in Africa and from where the term "informai sector" derived its name use a
' local jargon, }ua kali, meaning tho se working under hot sun, to describe the unquestionable patience and resilience of informai sector workers.
As regards the credit constraint already identified, there do not seem to be any definite way of responding to the challenges it imposes on informai sector enterprises. Certainly, the fact of resorting to personal accumulation by individuals owning businesses in the sector, makes the credit problem more pronounced. The substitution therefore, of formai credit services (which are lacking) for intemally generated funds through total self-efforts, must be considered an example of strategies adopted by informai sector entrepreneurs to remain operational. Substitution takes the forms of family and friends' connection, through Which the entrepreneur could borrow and receive money, and sale of persona! or a part of a joint farnily owned property. Some-although as regards our sample only a few is involved as revealed in Table 4.14--Dvercome the financial problem through complementing their earning by moonlighting in between both the formai and informai sectors. And finally, the fact of almost all the entrepreneurs avoiding wage employment would constitute also an aspect of the strategies, since this would have meant sorne additional cost of remaining in operation than the enterprise could afford to pay.
In the same way as it seems to be with th~ credit problem, there is no direct or visible form of coping with the market constraint that the reader will recall, also constitute one of the problems facing informai sector entrepreneurs. In other words, the market constraint remains largely beyond informai entrepreneurs, with the only visible strategy entrepreneurs adopt resembling the wait-and-see or the hands-on-deck policy type in which they keep looking forward to better times to come (luck).
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Although none of the enterprises in the study sample had a record of prolonged closure, many attempt to introduce sorne amount of product innovation or differentiation in order to avoid the seemingly inevitable risk of closing down the enterprise for longer periods than before. While it is difficult to ascertain whether product innovation is bearing fruits and keeping informai sector enterprises running, the fact that product innovation in the sector is not rewarded and protected by patents and/or copyright laws puts most informai sector enterprises at risk of closing down almost infini tel y.
Under the general capital constraints, in particular the problems of tools, equipment, and general machinery, the evidence of enterprises clustering together in any one neighbourhood, suggests that they do so to derive certain economies of scale, not least so because this facilitates the exchange of tools as well as other general services between and among clusters, at little or no monetary cost at all. This attribute signifies intra-industry cooperation, and is a sign of a collaborative relationship that helps the relatively weaker enterprises to remain in operation for as long as this can, itself, be possible. Clustering, it is further observed, generally contn"butes to the prolonging of the life oftools and machinery, and spreading of appropriate forms of technology and know-how within the cluster(s), and in these ways clustering enables the enterprises to respond to, cope with, and/or gradually overcome the relative! y expensive capital constraint. The collection of refuses and scraps for recycling implied under scavenging (see Table 4.18), also demonstrates sorne evidence of efforts by informa! sector enterprises to deal wit4 the scarce raw material and expensive capital problems.
The last of the strategies we consider in this section regards the response by informai ector operators to the problem of land, or the associated problems in particular, of access to a workplace through squatting on unauthorised land. Apart from signifying as noted earlier sorne igoificant
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amount of insecurity regarding location, squatting apparently symbolises a strategy for occupying space without pay and is in this sense regarded an important cost control element by those involved in it. The use of kinship or relationships by tho se who work on space on a relative' s land is equally demonstrative of measures sorne informai sector operators take to occupy and use space without paying for it.
5.5 Potentials for Enterprise Growth: A Concluding Assessment
In undertaking an audit account of the prospects of informai sector enterprises to graduate from small to medium, this study has had to identify the most important bottlenecks, which hinder such possibilities. Against this major objective, the study did examine the features of the enterprises, which, together with the problems it had identified have important implications for enterprise growth and graduation in the informai sector. In ether words, the question these seek to answer is whether there are any strong prospects for the enterprises to grow involutionarily and become the viable enterprises that we ought to expect of them. This section takes up this question, and using the findings gathered in the study, makes a conclusive statement on whether the evidences could suggest any better than what the study hypothesizes.
The fust area which is likely to show that graduation by informai sector enterprises could be an uphill task, cornes from an examination of their size both in terms of the number of workers they employ, and the scale/volume of the transactions they undertake. Indeed, both are counted as small, and imply that much money could not be raised, nor can very large orders from customers be adequately handled. Evidently, the enterprises each singularly do not have a demonstrated capacity to receive and deliver large amounts of orders. For example, none of the carpentry workshops could each single-handedly take on the orders to supply say, a twenty-room motel the furniture it needs.
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They lack the machinery and the qualified manpower to deal with large amounts of orders flexibly.
Thus among other things, it can be contended that the small size of the enterprises, all by itself, imposes a limit of a type.
A second related con cern is the amount and level of the technical skills of both the workers and the entrepreneurs. Most entrepreneurs typically start their businesses with a specifie skill. Such skills tend to be easily accessible to others as well, and make it easy for new activities to be initiated in near-saturated markets. In other words, these skills are largely not of the type which restricts entry to sorne informai activities where such a restriction will be desirable to make the activity profitable.
The low level of sophisticated skills is also attributable to the generally low educational background ofworkers in the sector (illiteracy), such that available technical know-how in the sector tend to lack the theoretical backing they require. Moreover, the discovery of the uniformly low educational attainment of the entrepreneurs suggests ~hat many are unsurprisingly ill-equipped in such areas as investment evaluation, business organisation and general management capabilities, leading to questions about the amount and level of entrepreneurial capabilities inside most informai sector enterprises.
Thirdly, limits are also irnposed on the potential of the enterprises by what could be regarded as the fmancial squeeze in which informai sector entrepreneurs are, as noted, firmly trapped. The reader will recall the discussion on this in the previous sections. However, it is worth concluding here that the shortage of working capital implied and experienced within months of start-up, is a serious limitation on enterprise growth. This, in addition to the irregular supply of raw materials which was seen to characterise many of the enterprises, undermines indeed their ability to respond to market
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demands or large demands that rarely come by. Accordingly many are threatened to operate on stop-and-go basis.
A fourth growth-dependent factor that is considered an important indication of the potentials there may be for informai sector enterprises relates to the amount of linkages they have with the formai sector. The importance of linkage cannot be over-emphasized as a measure of the degree to which the informai sector is integrated in the overall economie system. The reader will recall the three types of linkages, backward (supply-side), forward (demand-side) and technological, mentioned in the Chapter on Literature. Where any ofthese is found to be weak or virtually non-existent, it is a big question then how mutually dependent and supportive the informai-formai sector relationship is or can be. Y et, the results on this point at a virtually non-existent relationship especially on the forward side (i.e. on the side of the demand for informai sector products by formai establishments).
Accordingly, the formai sector is not patronizing the informai sector; at least not to any signi:ficant degree as far as our study sample is concemed. Linkages serve as a mechanism for transmitting growth from formai to the informai sector and vice versa, and where found non-existent, there are doubts about the already weak enterprises making any significant progress at growing/ graduating.
On the basis of the foregoing, the main conclusion regarding the sixty small-scale production enterprises is that they would need to be assisted in many different ways, including assistance of credits and markets which are the two most contended constraints identified from a review of the responses obtained in this study, if they were to grow involutionarily. Certainly without the market to sell and the credit to run acquire the needs of an efficient enterprise, there is hardly anyway that the enterprises can move from the edges of marginality to the heights of thriving establishments.
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Finally, in this section ends we introduce an excerpt from an lLO report (1985), that describes a
"modal" entrepreneur based on sorne country studies. This is done to provide the reader with sorne
insight into the background of those who manage the affairs of enterprises inside the informai sector, and whose social, educational, and cultural backgrounds all affect the way in which the enterprises are run. Importantly, that understanding is an important part of the conclusion of this study in that it shows the calibre of people we are talking about and how they relate to the businesses they run. The report writes (emphasis added in parenthesis):
The entrepreneur is 35-54 years old, married to one [or two] wife(s), and has five children. Three more dependents live with him. He was born in a secondary city or a rural area of farming parents without formai education. He went to school for six years [or a little beyond this] and th en had five years' apprenti ces in the formai and [largely in the] informai sector. He started his active life at twenty-one and has already had three different jobs. He has worked as a master in the informai sector for [by far] more than six years. He rents the premises and land [paying 15% of his sales as rent per month]. [Besicles the three dependents he already lives with] he has three workers, two of them apprenti ces. Ali the workers are family members [or relations]. He pays his workers [not regularly though] much less than the official minimum wage, although he himself makes a reasonable living [or simply put, eams reasonably weil]. He does not pa y taxes.
His household incarne is somewhat higher than his enterprise income because sorne of his family members [if he is that very lucky] are engaged in other income-eaming activities and because he himselfhas [or may have] other sources of in come. Altogether, the family spends two thirds of its total income. The other third is not reinvested [since the entrepreneur hardly keeps a commercial bank account] and its destination is uncertain. It probably goes into speculative investment-housing-and rather more frequently into social spending, for community and family celebrations such as baptisms, weddings, funerals, and religious feast da ys [for the most part of the year in the Gambia, there is at least one such ceremony to organise or attend]