Capturing The Informal Economy In South Sudan

UNMISS photo

 

By

Tarnjeet Kang

 

The Chasm between Communities and Institutions

 

During the course of my dissertation fieldwork in South Sudan, from 2014 – 2015, I found many discrepancies between the realities I witnessed and encountered on the ground, and the images that were being promulgated by the international community providing aid as well as the journalists reporting on conflict in the country. For outsiders that depend on these constricted views, it is easy to underestimate the level of labor and productivity that occurs in South Sudan to generate income and assume that the majority of citizens are complacently dependent on foreign aid due to underdevelopment and the conflict.

Unfortunately, this view was perpetuated at times by the international aid workers that I interviewed, and then exacerbated by representatives of the national government where it was purported that community members were too reliant on the government for services. However, in approaching my research project with an expanded view of what constitutes self-determination, productivity, and growth on the part of communities, I was able to contribute to the documentation of the vital role that community self-determination has in meeting the needs of citizens in areas where governments and NGOs have failed. This narrative is often missing from existing literature, which inherently limits our knowledge of both the historical and contemporary realities we encounter when designing programs, policies, and research studies.

Part of the missing narratives is hidden in the informal economy of South Sudan. Parents that I interviewed shared that they worked diligently to ensure their children’s school fees were paid, or medical costs were covered, by pursuing low-cost income-generating activities to raise funds. In order to document and institutionalize these missing narratives, I will argue for the inclusion and valuing of informal economies in current standards and measurements of economic development. Specifically, I will make a case for South Sudan’s extensive informal economy to be considered in country-based assessments and international indices. Given that the majority of the population participates in the informal economy in one form or another, this is a critical tool for policy-makers to possess in order to obtain a holistic perspective of South Sudan.

 

 

International Standards and Measurements

 

The International Labor Organization (ILO) defines the informal economy as “all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements” (International Labour Organization, 2009, pg.iii). This is the definition that many other international organizations and institutions refer to when conducting economic development activities and evaluation. Through a deficiency model, the informal economy is defined by what it is not, rather than what it can create and contribute.

When viewing country profiles on common sources of reference, such as the UNDP (“About South Sudan, 2018), the World Bank (“South Sudan”, 2018), IMF (“Republic of South Sudan”, 2017) and the CIA World Factbook (“The World Factbook”, 2018), South Sudan’s informal economy is not mentioned in measures of the economy. Prominent economic indicators such as gross domestic product (GDP) are featured in these profiles but lack the ability to reflect the country’s diversity and significant inequity.

Heavily influenced by the country’s production of oil, the GDP measure does not reflect the well-being of the people, or how much of the country’s population is vulnerable to poverty, conflict, forced migration, inflation, currency devaluation, etc., all of which influence the economic stability of average citizens. It also does not capture the labor and local resources used to develop local infrastructure and meet the needs of communities. Rather the GDP measurement reflects a standardized and unitary statistic to represent a nation’s level of production. As an indicator of South Sudan’s economy, the statistic is heavily skewed by the country’s oil production.

Despite the NGO and donor funding and programs to support informal income generation activities, there are currently no estimates of the size of South Sudan’s informal economy, which consequently has an impact on policy and decision-making processes in the country. It is estimated that 76% of the population engages in subsistence activities (“South Sudan: The Cost of War”, 2015).

A recent USAID report stated that the informal economy is strongly connected to animal husbandry, with 950,000 cattle farmers and 350,000 herders (“Assessment of USAID”, 2017, p.16), in a country where the population is estimated to be around 12 million. Barriers to the formal economy mean that many citizens resort to informal income generating activities including the making and selling of bread, beer, charcoal, dried grass, as well as laundry services, motorbike taxis, and market stalls that sell food items and imported goods (Lamb, 2011).

 

 

Need for New Measurements in South Sudan

 

If we continue to rely on existing and western-based indicators of development, it would be easy to underestimate the amount of labor and transfer of resources that occur in South Sudan daily. A review of global indices of economies and labor would either reveal no data available on South Sudan or describe a minimal economy that is fragmented, unstable and heavily reliant on revenue from oil production that is shared with the Republic of Sudan. This is largely a result of the informal economy in South Sudan being discounted from these measures altogether, even though the majority of citizens participate in the informal economy, whether as consumers or as vendors (although often as both).

The implications of finding a mechanism to measure the informal economy include radically changing the way in which the agency and contributions of the South Sudanese people are perceived and documented in the context of economic development (in contrast to the dominating narrative of dependency on aid), as well as amending foreign aid and investment programs to reflect the new parameters of the country’s economy.

Many examples of participation in the informal economy in South Sudan are similar to that found in other countries: animal husbandry, food and drink vendors, the selling of second hand clothes often imported from neighboring countries, motorbike taxis, products created from locally sourced materials such as charcoal, woven grass fences, beer, snacks, crafts, furniture, farming, etc.

The informal economy is inclusive in nature, and includes both female and male vendors, occurs in both urban and rural areas, and also emerges in settlements such as an internally displaced person (IDP) and refugee camps where formal employment opportunities are scarce.  Even though these examples are not necessarily regulated or taxed, the activities are still well known by the government. For example, in many urban areas, the drivers of motorbike taxis (boda-bodas) often organize into local unions that represent these groups at meetings and events with government officials and other local leaders. Furthermore, civil servants at all levels of governance rely on services and products in the informal economy, as do their family members.

South Sudan’s informal economy depends greatly on imported products that would otherwise be inaccessible to citizens, rather than the sale of nationally manufactured goods which are limited in scope. Currently, the manufacturing capacity in South Sudan remains minimal, and only a handful of factories in Juba produce goods such as bottled water, beer, and clothing. The beverage factories often have to import their materials from neighboring countries, especially bottles, which makes these companies extremely vulnerable to inflation and currency fluctuations (as international trade tends to be conducted in US dollars).

In 2015 manufacturing companies began to shut down as a result of a shortage of U.S. dollars, thereby creating a shortage of bottled water in a country with already limited potable water and causing an inflation of the price of bottled water (Foltyn, 2015; “South Sudan capital”, 2015). Furthermore, the few goods that are exported from South Sudan are often traded in such a way that South Sudanese citizens at the local level reap few benefits. The natural resources that are extracted, such as crude oil, teak wood, and minerals, are exported with limited added value, in raw condition, and processed only after they have crossed international borders upon which they grow exponentially in value.

Although data was not collected for South Sudan, the World Bank’s surveys on the informal economy noted that the majority of unregistered businesses in select sub-Saharan countries had actually registered in their first year (Adams, de Silva & Razmara, 2013). This indicates that businesses in the informal economy are susceptible to external factors, and often short-lived. In a country such as South Sudan, such characteristics are even more pronounced, where the working class is impacted the most by significant inflation and displacement due to conflict. It is also noteworthy that the middle class in South Sudan is small, and therefore the majority of the population continues to fall under the label of working class and subsistence farmers.

There are several factors that influence a citizen’s ability to develop and maintain their livelihood in South Sudan, such as access to currency and resources, displacement, inflation, insecurity, and the significant infusion of foreign aid. Because of this, the ability to be flexible in pursuing livelihoods can perhaps be an advantage for a citizen that needs to adapt quickly to dynamic and unpredictable circumstances. The informal economy provides such flexibility, as well as low start-up costs, and thus creates accessible and responsive livelihood opportunities to most of the country’s citizens who grapple with significant development challenges.

Governmental regulatory institutions are not easily accessible to most citizens who live far from urban areas where national and state level government institutions are concentrated, which perhaps also contributes to the lack of participation on the part of community members in regulatory practices. Furthermore, the lack of returns through social services diminishes incentives to pay fees and taxes associated with operating businesses in the formal sector. This is further exacerbated by perceptions of corruption and nepotism within the government that occurs to the detriment of most of the population.

 

 

Understanding the South Sudanese Context

 

What makes South Sudan’s economy unique is the domination of highly skilled positions by international workers, whose foreign education and skills are often valued over the experience and familiarity with local working conditions that their national counterparts possess. Although the Government of South Sudan has attempted to address this issue by passing legislation that restricts the proportion of foreign workers hired in NGOs (“Laws of South Sudan”, 2016), such bills often lack enforcement and the resources necessary to implement them. It is also resisted by international NGOs who purport they cannot find adequately skilled and experienced professionals within the national population. In this regard, skilled South Sudanese professionals are often excluded from formal sectors because of such discriminatory practices.

A second distinguishing factor regarding South Sudan’s informal economy that needs to be considered is the extent to which international NGOs introduce, fund, and regulate some of these activities in the informal economy through their programming designed to support “income-generating activities.” At the top of the international aid hierarchy, major donors such as the World Bank, IMF and the UN promote policies that expect informal economies to evolve into formal economies as a sign of economic growth, and essentially as a return on investment for aid and loans that are distributed. This is evidenced in reports by ILO (“The informal economy in Africa”, 2009) and the World Bank (“New Study Reveals”, 2016). However, in the middle of this hierarchy, we witness NGOs supporting the training of community members in skills that would restrict them to the informal economy to alleviate poverty. This contradiction means that while donors are demanding a formalization of economies, the programming they support indirectly on the ground is more expansive in its reach.

Thirdly, although it is a land-locked country, South Sudan provides a particularly unique opportunity for economic activities as it shares international borders with six other countries. These borders extend across local communities organized by ethnic groups that were fragmented with the creation of international borders and are often the site of international markets and trade that support the basic needs of citizens. These borders are porous in certain areas and lack immigration regulations; thus, much of the economic activity that occurs around border areas goes untracked. Furthermore, because of the great dependency on imported manufactured goods and food items, changes at the border due to insecurity, road, and weather conditions, as well as political disputes, means that community members across the country are vulnerable to fluctuations in trade.

Lastly, with low population density, most South Sudan’s citizens reside in rural areas and are cut off from urban market places and government institutions. As a result, they rely more upon the informal economy to meet their basic needs and to purchase goods and services that their urban counterparts would be able to purchase from vendors that fall under the formal economy. With an estimated 80% of South Sudanese residing in rural areas (“Key Indicators”, 2011), this level of dependency on the informal economy may be greater than that observed in other countries.

 

 

Challenges to the Existing Discourse on the Informal Economy

 

Global economic development standards utilized by financial institutions are often predicated on capitalist models, which in turn determines the definition of growth and success that developing countries are held to. This reflects a top-down approach to assessing South Sudan’s economy, rather than evaluating what currently exists in the diverse country and developing an economic model that reflects the resources it contains and is responsive to the development and economic goals of its citizenry. In this regard, “informal economies” are viewed as conditions to be diagnosed and eliminated, rather than natural occurrences that need to be understood and nurtured in the interest of citizens. The burden of labor to “fix” the issue of the informal economy will ultimately be attributed to the citizens of developing countries, such as South Sudan. Consequently, the burden of responsibility when mismatched economic models fail will be theirs to acquire too.

Acknowledging the existence and nature of the informal economy in South Sudan, as well as developing the tools to it accurately measure, goes beyond having more representative economic statistics. It also entails challenging the prevailing homogenous narratives of what constitutes labor, development, and growth. Attempts by economists to evolve the international discourse on informal economies seek to attribute the existence of informal economies to either bad governance or a lack of development. However, the third line of thought is left out of this: informal economies are communities’ responses to addressing local supply-demand dynamics, and also a method of meeting their own needs. Expanding the discourse in this manner to see what is created, and not just the deficiencies that exist, also allows for us to acknowledge and examine the diversity in informal economies, found both within and across communities in South Sudan.

The measurements of economies, whether formal or informal, often occur at the level of outcomes, by valuing output (in terms of production and availability of services, manufactured goods, etc.). However, a different perspective is obtained when we view an economy from the measure of participation rather than dependency. If we were to acknowledge that the majority of the country’s citizens both participate in and rely on the informal economy – as sellers and consumers – a different perception of South Sudan’s economy and productivity are created. It also reverses the flow of information and power in the economic models that guide development policies and the allocation of resources.

Furthermore, we begin to understand that describing the informal economy as South Sudan’s “shadow economy” is a misnomer; in fact, based on citizen participation, the unregulated segment of its economic activities constitutes the most significant portion of the country’s activities, and therefore warrants respective consideration in policy, research and economic evaluation. Viewing the presence of such an expansive informal economy as a stage of pre-development is rooted in capitalist models that view citizens that participate in such economic activities as deficient in skills and consciousness. Rather than being a “lesser” economy, it can be argued that the informal sector is South Sudan’s economy, and is the creation of citizens’ attempts to meet their own needs, generate income and participate in entrepreneurship.

 

 

Recommendations

 

To add utility to the critiques presented in this article, recommendations are provided for policymakers to incorporate into current practice:

One key tool that could allow policymakers and the international community to understand the country’s citizens better is a current population census. At this time, it is unknown what the exact number of South Sudan’s population is. In 2008, a census was conducted by the Republic of Sudan (prior to independence); however, this was greatly disputed by South Sudan and deemed unrepresentative. In 2010, southern Sudan conducted its own census. Since then, many refugees have returned to the country as a result of independence, and new refugees have been created and forced to flee the country due to conflict. Births and deaths have occurred but not been systematically recorded in the context of national statistics.

The sporadic development of national infrastructures (because of conflict and funding) has meant that reliable collection and dispersal of information is impacted. If a census was to be conducted in South Sudan, it could provide vital information in understanding the state of the country’s economy and give policymakers the contextual information they need to design responsive and relevant economic models. In turn, this will allow the Government of South Sudan to refrain from using models imported from international customary practice and choose locally relevant frameworks instead.

When a better understanding of the demographics of South Sudan’s population is obtained and institutionalized, it is now possible to build a new economic model, from the ground up, that is inherently responsive to the needs of the country’s citizens. Rather than beginning the planning and design process from the “top,” with international economic models with pre-conceived ideas of growth, success, and progress, we begin with the needs of the community as articulated by South Sudanese citizens. By building from the communities upwards, community buy-in is also more likely, thus increasing the likelihood of greater success with the resulting economic development programs created.

A new model would subsequently warrant the development of new standards of success and growth, as well as measurements of progress towards attaining these benchmarks. This includes creating alternatives to GDP, Gini coefficient, trade balances, etc., to better articulate the diversity of experiences in the country and the inequity between the urban elite and the working class in rural areas. These new modes of assessment should also reflect changes that occur because of non-monetary investments at the local level, inflation, conflict, displacement, as well as changes in policy at the national level.

Rather than relying on a single standardized measure to represent the economic status of the country, incorporating multiple measures that account for local diversity and inequity is imperative. For example, the labor and investment of resources, and income obtained from informal activities such as cattle herding, subsistence agriculture, construction of homes, collection of firewood and water, homemade beer, crafts, etc., should be considered a citizen’s contributions and participation in the local and national economies, rather than a ‘shadow economy’ that has insubstantial value. To do this, researchers need innovative tools to document and analyze the contributions of citizens through labor in informal settings, the use of non-monetary currencies, as well as short-term income generating activities.

These new tools can be used as mediums of communication with the international community in portraying a more holistic and accurate representation of the economic activities of South Sudan and its citizens. This, in turn, changes the dynamics of negotiations for international aid and investment opportunities to maintain the agency and power of the South Sudanese people, while also inserting the missing narratives of community self-determination into the conversation.

Within South Sudan, improved measures of the intricacies of the informal economy will provide policymakers at all levels of the government with the ability to make informed and locally relevant decisions regarding the citizens that they serve. Such measures are critical in a country that is diverse in terms of livelihoods, cultural practices, exposure to insecurity and conflict, as well as access to natural resources and educational opportunities. This is also particularly useful in the decentralized structure of government as outlined in the country’s transitional constitution, in which policymakers at the local level share much of the responsibility in advocating for the communities that they represent.

By emphasizing locally relevant economic growth and success over comparative analysis, the needs of South Sudanese citizens are prioritized in policies and development programs.

 

 

Conclusion

 

In addition to expanding economic measurements and standards, understanding the historical context of South Sudan is vital. Several decades of civil wars have hindered the development of national infrastructure, as well as destroyed capacities at the local level to maintain long-term livelihoods. Investments in land, livestock and local materials often have to be abandoned during times of conflict and forced displacement, which drastically reduces the return on investment for community members. This is exacerbated by the fact that citizens often fear the return of conflict to their community after rebuilding their livelihoods and losing their investments repeatedly.

In expanding the parameters of what constitutes South Sudan’s economy, it is not just NGOs and donors that benefits in terms of designing aid programs. In having their labor, knowledge and contributions formally acknowledged, the agency and self-determination of the South Sudanese people become institutionalized on an international scale, as opposed to being silenced in the current mode of operating in the country. Furthermore, in a country where the elite often exploit the country’s resources and oil revenue, singular measures such as the Gini Coefficient (46.3 for South Sudan (“Human Development Indicators”, 2014) do not adequately measure income inequality if they cannot adequately capture the income and labor of citizens in the first place.

When economic measures more accurately represent reality, they become tools of communication; they are able to illustrate better the concentration and distributions of resources, decision-making powers, labor, and income-generation, which in turn provide citizens and policymakers alike with the information needed to advocate for the communities of South Sudan.