B & FT Editorial: Stimulus support to MSMEs can be used to formalise informal sector

An opportunity has presented itself for the country’s large informal sector to be formalised. The Trades Union Congress (TUC) is urging the state to use the database it is collating for SMEs to access the stimulus package it recently pledged the micro, small and medium enterprises, to formalise the informal sector.

As part of requirements for accessing the GH?1billion stimulus support, prospective applicants are required to have Tax Identification Number (TIN) and be registered; must employ between one and 99 people; and must be a member of a business association – and the TUC believes this can form the basis to finally formalise the sector, which according to studies employs about 80% of the country’s workforce and contributes significantly to national output.

Formalisation of the informal economy has been on the table for some years now, with very little success achieved so far. However, Dr. Kwabena Nyarko Otoo, Director-Labour Research and Policy Institute, TUC, believes the GH?1billion Coronavirus Alleviation Programme (CAP) Business Support Scheme could be used as an opportunity to springboard the vision into reality.

Dr. Otoo, who spoke at an event jointly organised by the Friedrich Ebert-Stiftung Ghana and TUC, noted that though the pandemic has caused devastation in many jurisdictions cutting across various sectors of the economy, the informal sector has been hit the most.

Recognising this, government instituted a stimulus package for this important segment of the economy to help revive micro, small and medium enterprises which have suffered immensely as a result of the economy’s lockdown and its attendant restrictions.

The criteria required to access the fund requires documentation and honouring tax obligations among others, and the TUC believes this could be used as a starting point to formalise the informal economy by creating the needed database.

Inadequate data on the sector makes it very difficult for social and economic intervention programmes to reach deserving businesses and individuals, particularly in times like these when the pandemic is causing great distress.

The pandemic is having a disproportionate impact on informal economy workers, who constitute over 80 percent of the total workforce. The stimulus can be used to formalise their activities and ensure they can be reached at any given moment they are needed; and also improve their eligibility to access credit from financial institutions since they can easily be traced.

The suggestion offered by the TUC is one that government can work with to streamline its activities.