The interplay between formal and informal firms and its implications on job in francophone Africa:...
Transcript of The interplay between formal and informal firms and its implications on job in francophone Africa:...
The interplay between formal and informal firms
and its implications on job in francophone Africa: case studies of Senegal and
Benin
Pr Ahmadou Aly Mbaye Professeur titulaire à l’UCADNancy Benjamin World Bank
University of Cape Town • School of Economics
PLANPLANI- Francophone Africa: a homogenous bodyII- The employment market in the nations of
the franc zone: a strong formal/informal duality
III-Cases of fierce competition between formal and informal: pharmaceuticals, used car imports, and moto-taxis industries
IV-Trading and outsourcing relations between formal and informal
V- The interactions between the formal and informal from our survey’s data
VI-The dominant factors of the rivalry relations or of the market between formal and informal: an econometric analysis
VII- Lessons learned
I- I- Francophone Africa: a Francophone Africa: a homogenous bodyhomogenous body
Business setup procedures and taxation in selected francophone African countries
Countries Business setup Taxation Number of procedures
Duration (number of days)
Costs (% of income per
head)
Require minimum capital (% of income per head)
Payment (number per year)
Duration (hours
per year)
Total to be paid (% of
profit)
UEMOA
Bénin 8 29 126,8 264,5 55 270 65,2Burkina Faso 3 13 46,8 353,9 46 270 42,7Côte d'Ivoire 10 32 130 184,6 63 270 44,4Guinée-Bissau 9 9 42,2 338 46 208 45,9Mali 4 8 86,2 331,9 45 270 51,1Niger 9 17 112,8 572,8 41 270 44,3Sénégal 4 6 64,4 192,3 59 666 45,5Togo 6 38 142,3 435,6 50 270 48,9CEMAC Cameroun 5 15 35,8 168,3 44 654 48,8Congo, République démocratique du
10 58 284,7 0 40 336 339,1
Congo, République du 11 161 55,3 80,5 61 606 64,5Gabon 8 57 14,5 22,3 26 488 43,5Guinée équatoriale 18 154 98,2 11,7 46 492 44,1République centrafricaine
8 22 172,6 444,1 56 483 67,4
Tchad 9 60 202 289,4 54 732 75,7
Country/Territory Political Stability and Absence of Violence/Terrorism
Control of Corruption
UEMOA Score Rang Score Rang
Benin 6,00 57,82 11,00 22,01
Burkina Faso 8,00 21,80 14,00 33,49
Côte d'ivoire 8,00 17,06 14,00 23,44
Guinée-Bissau 4,00 18,48
Mali 7,00 6,64 13,00 25,36
Niger 6,00 9,95 11,00 35,41
Sénégal 8,00 43,13 15,00 50,24
CEMAC score rang Score Rang
Chad 6,00 15,17 10,00 6,22
Cameroon 8,00 28,44 14,00 9,57
Congo, dem. Rep. 6,00 2,37 12,00 5,74
Congo, rep. 6,00 29,86 10,00 10,53
Equatorial guinea 4,00 50,24 9,00 36,36
Gabon 7,00 58,77 5,00 0,00
Governance indicators in francophone African countries
II- The employment market in the nations of the franc
zone: a strong formal/informal duality
Rate of participation by gender in selected countries
Women MenCountry (Years) Période 1 Période 2 Période 1 Période 2
Afrique de l’OuestNiger (2001/2005) 39,5 87,9 39,2 90,6Togo (2006) 80,3 80,6Burkina Faso (1991) 77,1 90,9Senegal (2006/2011) 50,1 72,8 44,5 68,5
Benin (2002/2011) 65,5 69,8 78,7 74,0Ghana (2000/2006) 71,6 66,6 75,8 71,0Sierra Leone (2004) 66,5 67,6Liberia (2010) 57,8 64,0Côte d’Ivoire (1998) 48,4 82,1Nigeria (2004) 47,5 61,7Mali (2004/2010) 36,3 46,8 67,7 74,1Cap Vert (1990) 41,8 85,2Sao Tome et Principe (1991) 37,2 77,3Mauritania (2012) 28,8 63,9
Afrique centraleRwanda (1996/2001) 85,6 86,4 88,4 84,5RD Congo (2005) 70,5 72,3Congo (2005) 67,5 71,6Tchad (1993) 64,7 80,8
Cameroun (1996/2010) 61,0 64,2 77,1 74,1Gabon (1993/2010) 55,0 39,9 70,8 58,2
Total Urban Rural
Benin 2,7 4,1 1,5
Burkina Faso 2,8 6 1,8
Cote d'Ivoire 2,3 3,6 0,7
Niger 3,9 4,9 3,2
Senegal 2,9 3,3 2,1
Population growth rate (annual average), 2010-2015
Source: Mbaye et al (2015)
Distribution of employment by formal/informal status
Source: Mbaye et al (2015)
Self-employment (% of firms)
III-Cases of fierce competition between formal
and informal: pharmaceuticals, used car imports, and moto-taxis
industries
The pharmaceutical market: coexistence of official and
informal drugs imports
Center for Purchasing of
Essential Drugs (CAM) in Benin
National Supply Pharmacy (PNA) in
Senegal
These agencies are responsible for :
Possibly reconditioning the productsEnsuring the availability of products at
the best prices Checking the quality of imported or
locally manufactured drugs Regulation of pharmacies
Purchasing Groups
Central and general
hospitals
Distribute essential generic drugs
Households
Black markets
Public distribution system of drugs
Local producers
Wholesalers
Pharmacie, Private clinics and health
center
RetailersConsumer
Private distribution system of drugs
Gasoline distribution market
Petroleum products
Illegal imports from Nigeria
Zoua Zoua in Cameroun
Kpayo in Benin
2009
Formal Gasoline distribution in Benin
Formel Informel Total volume
(cubic meter)
value (billion CFA)
volume (cubic meter)
value (billion of CFA)
volume (cubic meter)
Value (billion of CFA)
Gasoline 36900 212,175 732355,35
219,707 769255,35
431,882
Lamp oil 8000 4,32 56131,098
33,679 64131,098
37,999
Diesel 148000 82,14 262511,83
137,819 410511,83
219,959
Total 192900 298,635 1050998,3
391,204 1243898,3
689,839
Imports of petroleum items in Benin (2009)
Foreign exporters and domestic importers
Very large capital, operate in the illegal areas and through intermediaries
Importers
Not officially recognized
wholesalers
Two categories:Intermediate wholesalers
that operate as commercial agent
Independant wholesalers have means transportation such as pick-ups ans small boatCarriers
Large importers bring gasoline by ship; the bypass customs and bring gasoline in motocycles specially modified
RetailersBuy from wholesalers/imports through a complex distribution. Retail is an activity that involves a single individual who may assited by their parents or famility in cases of unavailability
informal Gasoline distribution in Benin
Automobile trading market: new cars versus used cars importing
Used car dealers
Oover 10% GDP, are intended to cover the needs of Benin’s domestic market
In 2014, on nearly 150,000 vehicles imported
Distribution network of used vehicles
ImportersCustoms brokers
Other actors in the Chain
IImports come mainly from Europe and the USA
Over 150 importers in the park10 employees who are charge
recovery of vehicles at the port and washing of the vehicles
Formal brokers who approved by customs
Informal brokers who are not licensed and their formal counterpart to make customs for their clients
SellersGuards driversPark administration
personnel
Public transportation service market: the motorcycle taxis in Douala
Approved importers Distributors Mechanics and spare
parts dealers
Parks babysitting and
washers
Owners of motorcycle taxis
Drivers of motorcycle taxis
IV. Trading and outsourcing relations between formal and
informal
City Dakar Cotonou
Firms using different size counterparts as
clients
52,50% 33,33%
Share of firms selling
to
Big enterprises 1,67% 12,50%
Small enterprises 36,67% 21,67%
Appreciation of the
trend of
subcontracting over
time
Increasing 64,52% 90,00%
Decreasing 6,45% 2,50%
Stable 16,13% 7,50%
share of firms working with intermediaries(%)
City Sales to the
government
Trading with households
or household enterprises
Dakar 10,17% 77,50%
Cotonou 31,67% 65,00%
Share of firms trading with the government, households and household enterprises
Dakar Cotonou
Insurance 3,33% 2,50%
Building and public work 16,67% 27,50%
Commerce 31,67% 42,50%
IT materials 1,67%
Customs clearance 1,67%
Kitchen utensils 3,33%
Carpentry 12,50%
Other 41,67% 15,00%
Total 100,00% 100,00%
Sectors affected by subcontracting
Fixity of workplace
Taxation Registration Access to bank loan
Honest accounts
More than 5 employees
Social Security
Dakar 53,68% 56,52% 59,46% 65,00% 55,56% 73,81% 80,95%
Cotonou 77,50% 33,01% 43,75% 37,50% 35,71% 54,55% 53,85%
Firms trading output to smaller enterprises, by informal criteria
Fixity of
workplace
Taxation Registration Access to
bank loan
Honest
accounting
More than 5
employees
Social
Security
Dakar Very
satisfactory
93,88% 95,65% 93,02% 91,67% 94,87% 93,55% 94,12%
Not
satisfactory
4,08% 0,00% 6,98% 0,00% 2,56% 6,45% 5,88%
No response 2,04% 4,35% 0,00% 8,33% 2,56% 0,00% 0,00%
Cotonou Very
satisfactory
80,65% 82,35% 85,71% 100,00% 84,00% 88,89% 85,71%
Not
satisfactory
9,68% 14,71% 9,52% 0,00% 14,29% 11,11% 7,14%
No response 9,68% 2,94% 4,76% 0,00% 4,00% 7,14%
Appreciation of level of punctuality and professionalism of small firms in their relation to bigger counterparts, by criteria of informality
Fixity of
workplace
Taxation Registration Access to
bank loan
Honest
accounts
More than
5
employees
Social
Security
DAKAR Excellent 15,38% 16,00% 17,65% 0,00% 16,67% 36,36% 42,86%
Good 42,31% 44,00% 35,29% 20,00% 44,44% 27,27% 42,86%
Fair 26,92% 24,00% 35,29% 80,00% 22,22% 36,36% 14,29%
No response 15,38% 16,00% 11,76% 0,00% 16,67% 0,00% 0,00%
Cotonou Excellent 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00%
Good 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00%
Fair 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00%
No response 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00%
Levels of loan recovery from smaller firms, by criteria of informality
Relationship Dakar CotonouFriend 34,69% 67,50%Relative 2,04% 12,50%Same kinship network 4,08% 2,50%Same religious network 2,04% 5,00%Professional 57,14% 12,50%Total 100% 100%
Dakar Cotonou
Existence of loans 41,94% 97,50%Type of loan In cash 88,89% 100%
In kind 11,11%Modalities of repayment Weekly 3,28%
Dayly 14,75%Monthly 80,33%Other 1,64% 100%
Appreciation of level of repayment
Good 40,74% 100%Excellent 14,81%Fair 29,63%Other 14,81%
Relationship to the subcontracted firms
Loans granted to subcontracted firms
Distribution of big firms with level of productivity obove median productivity which trade or not with small
informal
Distribution of firms bigger than average, which trade or not with the small informal (%)
Distribution of firms which express confidence in the future an trading with small informal (%)
Distribution of firms which express intention to move to another sector an trade or not with small informal (%)
Share of exporting firms which trade with small informal (%)
Share of firms exposed to competition with small informal among those with productivity level above median
Share of firms with size above average which are exposed to small informal competition (%)
Exporting Big firms exposed to small informal competition
Big firms not exposed to small informal competition
Dakar Yes 3,4 15,5No 96,6 84,5
Cotonou Yes 7,7 19No 92,3 81
Ouaga Yes 4 8,6No 96 91,4
Douala Yes 14 13,5No 86 86,5
Yaoundé Yes 4,5 16,3No 95,5 83,7
Libreville Yes 11,5 10No 88,5 90
Share of exporting firms exposed to small informal competition (%)
Share of firms with professional membership which are exposed to competition from small informal (%)
Existence of a professional membership
Bigger firms exposed to small informal competition
Bigger firms not exposed to small informal competition
Dakar Yes 30,5 36,2No 69,5 63,8
Cotonou Yes 9,7 37,5No 90,3 62,5
Ouaga Yes 15,4 19,4No 84,6 80,6
Douala Yes 25,6 40,5No 74,4 59,5
Yaoundé Yes 9,1 23,3No 90,9 76,7
Libreville Yes 11,5 20No 88,5 80
VI-The dominant factors of the rivalry relations or of the market between formal and
informal: an econometric analysis
(1) (2)Variables statut3 statut4logProdvte -0.243*** -0.0531
(0.0910) (0.0601)logTaille -0.338*** -0.297***
(0.128) (0.0804)logSalaire -0.108* -0.0401
(0.0632) (0.0508)logAge -0.389** -0.0753
(0.182) (0.126)client: grandes entreprises -0.490**
(0.227)fournisseur: grandes entreprises 0.0166
(0.216)Entreprise exportatrice -0.715 -0.454
(0.760) (0.380)Accès au prêt bancaire -0.277 -0.330
(0.378) (0.234)Secteur d'act. (Ref. Commerce)BTP 0.0169 -0.637
(0.797) (0.448)Autres Industries 1.082*** 0.279
(0.416) (0.264)Services 1.175*** 0.228
(0.406) (0.273)Constante 3.889** 1.969*
(1.630) (1.085)Observations 472 440
Standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1
An econometric analysis of the determinants of partnership (trading or subcontracting) and competition between formal and informal
An econometric analysis of the determinants of partnership (trading or subcontracting) and competition between formal and informal
(1)
Variables statut4
logProdvte -0.0739
(0.0610)
logTaille -0.164**
(0.0834)
logSalaire -0.0334
(0.0508)
client: grandes entreprises -0.386*
(0.226)
fournisseur: grandes entreprises -0.107
(0.218)
Entreprise exportatrice -0.358
(0.379)
Accès au prêt bancaire -0.323
(0.236)
Firme utilisant e_mail -0.697***
(0.224)
Souscription à la sécurité sociale -0.700***
(0.255)
Constante 2.737***
(1.054)
Observations 439
Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
VII- Lessons learned
One general remark one can make in the light of our results is that the main obstacle to subcontracting in Africa is the regulatory framework.
Most of the countries we have investigated have developed outsourcing fairs which are suppose to connect big and small firms in outsourcing ventures.
And labor codes do not encourage such ventures. Big firms which outsource to small ones to benefit
from lower labor costs are exposed to huge fines in case an issue arises between the outsourced firm and its staff.
Positive interactions between formal and informal firms, in terms of trade or outsourcing, only involve low technology intensive sectors (trade, services, building and public work).
In areas where more technological capabilities and more human capital and better organization are needed, outsourcing to small businesses is almost no-existent.
mainstream outsourcing in business relationships, African governments should seriously consider reforming the labor code to make it less restrictive, and encourage bigger firms to diminish labor and other related costs through subcontracting..