Special Reports : The informal sector in Ghana

The origin of the informal sector in Ghana's economy can be traced back to the very beginnings of colonial capitalism in the then Gold Coast. Right from the outset, a dualistic economy with two distinct sub-economies emerged alongside each other. The key features of the colonial economy included primary commodity production for export, investments in mining, transportation and related services, infrastructure and public works, and social development.

On the one hand, a small formal sector covered essentially capital investment in mining, transportation, infrastructure, commerce, social services and administration with wage employment characterizing the existence and operations of labour therein. On the other hand, the promotion of primary commodities production for export and the import of consumer goods for domestic trade gave rise to large contingents of the labour force in both agriculture and petty trading who were either self-employed or hired under traditional or informal arrangements.

Even at such an early stage an essential feature of labour in the informal sector was its heterogeneous character that provided for varieties of peasant proprietors and agricultural labourers, distribution agents, buyers, transport owners and employees, porters, repairers, etc. (Ninsin, 1991).

The informal sector has received increasing attention in the development discourse of Ghana since the middle of the 1980s and the beginning of the 1990s. It has, in effect, been the target of some policy initiatives and activities by certain governmental and non-governmental institutions and organisations, including the trade unions. The attention to the sector at the intellectual and policy levels has arisen out of the realisation that the sector has not only persisted from the making of Ghana as a new nation state, but has also been dramatically expanding.

One of the overriding consequences of structural adjustment in Ghana since the mid-1980s has been the shrinking formal sector and the expansion of the informal sector. This has arisen particularly as a result of public sector reform that had massive retrenchment of labour as an important component.

While labour retrenchment was pervasive in the public sector as a whole, it is interesting to note that there was a decline in formal private sector employment as well.

The table below demonstrates trends in formal sector employment between 1960 and 1991.

According to Table 1, total formal sector employment fell from 464,000 in 1985 to 186,000 in 1991, demonstrating a loss of 278,000 jobs over a six-year period. Apart from the relatively few persons who opted for voluntary retirement or redeployment, the majority of those who were retrenched included young workers, labourers, cleaners, drivers, sweepers, messengers and workers in the lower grades of the public sector. Part of the reason for the composition of those who were retrenched was the application of the principle of "last in first out".

Among them were also many women workers because of their particularly low skills. Although women accounted for only 23.5 percent of the total formal sector employment, 31.7per cent of those who lost their jobs in 1987 were women.

While formal sector employment was falling fast, the economically active population was estimated to be increasing as well. One hundred thousand persons were estimated to be graduating annually from the educational institutions within the same period and entering the labour market. Of Ghana"s labour force, 16.1 per cent is currently estimated to be in waged employment, with the remaining being in self-employment, including the informal sector.

Meanwhile, the size of Ghana’s informal sector is placed at 80 percent of the total labour force (Hormeku, 1998). The large-scale retrenchment of labour, coupled with the inability to provide employment for the emerging labour force has created a large pool of unemployed persons who have naturally gravitated towards the informal sector.

1.2. Features and characteristics of informal sector workers

The decline in formal sector employment during the 1980s and 1990s and the expansion of the informal sector during the same period have together constituted one of the most enduring features of the structural adjustment programmes that have been implemented in Ghana.

Most of the studies on the informal sector in the 1990s focus on the urban component which provides a haven for the working poor. They include aged, young and women workers who are essentially low-skilled and are involved mainly in the services sector, and only to a lesser degree in the construction and manufacturing sectors. But in the last couple of years, interest has also grown in the rural informal sub-sector.

A large part of that interest has been generated by the work of the General Agricultural Workers’ Union, of the Ghana Trades Union Congress in organising rural workers, as well as through the intervention of some other non-governmental organizations. Interest in the sub-sector is also underlined by the fact that among Ghana’s relatively large labour force of self-employed workers, two-thirds are engaged in agriculture which is predominantly rural based.

Rural informal labour

A GTUC leadership group survey in 1995 produced an interesting panorama of informal sector activities in Ghana. For the rural sector, the following were identified:

(i) Agricultural activities. These are predominantly farming units dependent on family labour and are made up of a large number of small farmers in the rural and semi-urban areas. The farmers are mostly illiterate or semi-illiterate and have no formal training. Farming skills are acquired through apprenticeship.

(ii) Fishing and fish processing activities. These are found mostly along Ghana’s coastline and are mainly composed of married males aged between 18 and 40 years. These predominantly illiterate workers acquired their swimming skills through experience from their early childhood. The value added and processing activities that include smoking and marketing the fish is basically undertaken by women.

(iii) Rural agro-based processing activities. These include processing cassava into gari, cassava dough, of palm kernel, groundnut and copra oils, palm wine tapping, local pito brewery, local gin distillery, and traditional soap-making. These activities are dominated by married female workers, mostly over 30, and predominantly illiterate. Their skills are acquired from within the family. Their experience of seasonal underemployment is pronounced. Mostly married, with children, they lack social security protection.

There are also the forest product workers, mostly male, namely, carpenters, rattan and bamboo craftsmen, wood carvers and woodworking machine operators.  In a case study on the informal rural agricultural sector, six distinctive types of rural labour were identified as follows:

(i) Family labour. A distinctive characteristic of rural informal labour. It permeates all the sub-sectors within rural agriculture. It is predominant in both food and cash crop farming, and in fishing and agro-processing. From a labour market and economic standpoint, family labour is considered crucial for the survival and viability of the enterprise. It is also used as a kind of apprenticeship for the transfer of skills from one generation to the next.

(ii) Casual labour. Known in local parlance as "by-day", it is the next major type of labour in the rural informal sector. It is prevalent in the food and cash crop sub-sector where it is needed to carry out work including land clearing, preparation of mounds, planting, weeding, fertilizer and chemical application, and harvesting. Casual labour exists under different kinds of contract, and has a high level of mobility migrating from the northern half of the country and even from beyond the northern borders (from Burkina Faso) to work on cocoa, coconut and oil palm farms in the Asante, Eastern and Western regions of Ghana. In the Brong-Ahafo region, these workers are engaged on maize and yam farms and perform a variety of assignments, such as land-clearing and preparation, the making of mounds, and planting. They return to their regions of origin to make use of the farming season there also. Where they are not migrant, many casual workers also have their own farms where they grow crops for subsistence. Payment for casual workers is in cash, but can also be in kind.

(iii) Apprenticeship. Systems of apprenticeship exist within the fisheries and the agro-processing sub-sectors - especially in oil palm extraction, coconut oil extraction and shea butter processing. Apprentices are normally not paid, but they may receive cash as pocket money or, as in fishing, be provided for in kind, for example fish.

(iv) Permanent labour. This constitutes a relatively small proportion of the rural agricultural labour force. The size of the farm and the degree of permanence of the crop type determines to a large extent the permanence of labour. Perennial tree crops like cocoa, oil palm, coconut and rubber produce permanent workers.

(v) Communal labour. This is an arrangement by which farmers within an area bound by common agreement pool their labour together to assist each other in turns.

(vi) Child labour. This form of labour is an important component of the informal sector workforce. It is an integral part of family labour, especially in the rural set-up. Different categories of children were identified: those who had never been to school, those who had dropped out of school and those who were still in school but assisted their parents. Some children were engaged by a parent or a close family member and may be paid or not. They ranged between 8 and 10 years and more. There were also children employed by nonrelatives.

Such children, aged between 10 and 15 years, were usually out of school and fully on the labour market. Child workers are engaged in a wide range of economic activities. In the fisheries sub-sector across the coastal belt, these include mending nets, net dragging, scooping water out of a canoe, cleaning canoes and portage. In the farming areas, noticeably in the Northern and Upper East regions, child workers are engaged in land preparation, planting, weeding, harvesting, shea nut picking and processing. In the rice farms, both in the north and at Dawhenya in Greater Accra, children, especially girls, act as bird scarers and operate from sunrise to sunset. The different kinds of employment contract under which the various types of labour are engaged constitute their distinguishing feature.

A separate study on contract labour in the agricultural sector in Ghana demonstrated the persistence and growth of non-standard patterns of employment relations in the agricultural sector.

The study showed differences in the conditions of employment of different groups of agricultural workers. Factors that accounted for the differentiation included: nature of contract (written or verbal); employer responsibility to the work process in terms of provision of work tools; protective clothing and general health and safety; levels of skill of workers; levels of remuneration; and access to social security protection and other benefits. Health and safety as an aspect of working conditions is particularly singled out for poor showing.

The labour market reasons that are adduced for the growth of contract labour include employer concerns for productivity gains and cost effectiveness. As for the workers who labour under contract agreements, they essentially acknowledge them as rare opportunities for securing wage employment.

Urban informal workers

The urban informal sector in Ghana, as elsewhere in Africa, is remarkable for its heterogeneity and variety. Studies on the urban informal sector in Ghana reveal a wide range of operations in the urban informal sector that can be grouped under (i) services; (ii) construction; and (iii) manufacturing.

i) Services:

• urban food traders and processors include food sellers in the market, itinerant wholesalers and retailers, bakers, caterers and cooked-food sellers. These workers are mostly women, predominantly illiterate or semi-illiterate. They acquire their knowledge and skills largely from family. They are also low-income earners and have no social security protection;

• health and sanitation workers - chemical sellers, drugstore operators, funeral undertakers, night soil carriers, refuse collectors, traditional/herbal healers, attendants in private maternity homes, and traditional birth attendants;

• domestic workers, who are also predominantly women;

• repairers of watches, refrigeration equipment, radios, mechanical or electrical/electronic equipment, mostly young male workers under 45 and have either received some basic education or are drop-outs, but among whom are to be found skilled workers whose skills are largely acquired through years of apprenticeship;

• garages - auto mechanics, sprayers, welders, vulcanisers, auto electricians, many of whom received some basic formal education alongside many drop-outs, and acquired their skills through years of apprenticeship;

• graphic designers, mostly males between 25 and 50, about two to six workers in each unit who acquired their skills through limited vocational training and apprenticeship;

• audio-visual workers - photographers, cinema/video operators, performers, musicians, film-makers - are skilled workers who have received basic formal education but limited formal vocational training and apprenticeship - who are mostly male but among whom the number of females is increasing;

• hairdressers and barbers/private security men who are aged workers with very low educational standards, ill-equipped, lack job security and opportunities for career advancement, and without any social security protection.

(ii) Construction: Construction workers - masons, carpenters, steel benders, small-scale plumbers, house-wiring electricians, and carpenters who are mostly male, aged between 20 and 40 and are mostly school drop-outs. Electricians often have some basic training, while all the other groups go through years of apprenticeship.

(iii) Manufacturing: In this sub-sector of the informal sector, the predominant activities cover food processing, textile and garments, wood processing and metal works. Women dominate food processing while men constitute a clear majority in metal works and wood processing. Apprenticeship is the most common form of skill acquisition and employment in urban informal manufacturing units.

Common needs of rural and urban informal workers

In general, it can be said that labour standards in the informal sector are not in conformity with those that apply in the formal sector. Informal sector workers lack social security, economic support and legal protection. There are common needs that are differentiated among various groups of informal sector workers, rural and urban. They include:

(i) social needs - job security, health care facilities and the promotion of occupational health and safety, protective clothing, protection against income losses during sickness, annual leave and maternity rights, minimum wage, general infrastructure and environmental sanitation; and

(ii) economic needs - training and education for skills development, basic tools, business premises, financial credit, marketing opportunities.

While labour legislation and practice widely provide for the interests of all workers, they nonetheless reveal some limitations with regard to informal sector workers. Labour legislation does not adequately cater for casual labour with respect to written contracts, worker’s compensation, labour inspection, annual and maternity leave. With regard to regulatory institutions, the ineffective functioning, where they existed at all, of Public Employment Centres, Labour Inspectorate and Minimum Wage-Fixing and Monitoring Machinery have been noted. Similarly, the marked disuse of the wide discretionary powers of the public authorities for labour protection has been cited.

Link to The Statesman : Special Reports : The informal sector in Ghana