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DVA2603 POE DUE DATE 05-11-21
DVA2603 POE DUE DATE 05-11-21
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DVA2603Q1.EXPLAIN THE IMPACT OF THE REGULATIONS ON THE INFORMAL
SECTOR IN AFRICAN CITIES. (50)
The informal sector, also known as the underground economy, black economy,
shadow economy, or grey economy, is part of a country’s economy that is not
recognised as a normal income sources. The term “informal sector” is today widely
used in writings on both developing and developed countries. Their activities are
likely to be unregulated by the state and excluded from standard economic of
national income. Unlike the formal economy, economists do not include the informal
sector’s components of GDP computations. This means that countries are probably
richer than official statistics suggests. Most African cities are now passing labour
regulations which are having an impact on the informal sector’s operations.
The regulatory impact of African Cities on informal sectors is inextricably linked to
their developmental and service delivery roles. The ultimate impact of regulations is
a function of a particular city’s capacity to implement transformation (Adams, de
Silva, and Razmara, 2013). While uneven enforcement may be as a result of
capacity constraints, cities may often choose to implement certain regulations
selectively. This is especially true in relation to informal trading where businesses
are exposed to an unpredictable environment.
The issue of regulations is at the centre of many debates concerning the origins and
means of tackling the informal economy. In particular, the impact of labour
legislation, and more broadly, labour regulation, on the informal economy is a highly
contested issue which is embedded in the complex debates regarding the benefits of
regulation (Basole, 2014). Within economics, for example, some argue that
regulation impedes economic efficiency by generating extra costs, and indeed may
even be a driver of informality, while others believe that regulation is an essential
way to correct market imperfections and achieve redistribution.
There exist however several issues concerning the informal sector and labour
regulation that need attention. Legislation is often not implemented whether in the
formal or informal economy, or may not serve its initial purpose. Regulations can
also be out of sync with its environment and in need of amendments. Regulations
, are not always good-badly drafted and badly implemented laws can clearly have
negative effects (Bento, Jacobsen, and Liu, 2018). More generally, labour regulation
needs to be adapted to the context it is applied in, which is why it is important to
evaluate legal practises in the environment they are operating in. national good
practices in labour regulations are therefore not necessarily replicable in different
national contexts- a good legal practice adopted in one city may not have the same
results if it is transplanted in another environment. Nonetheless , while there is not
always a “one size fits all” solution to the regulation of labour, carefully crafted
regulation is an essential means of enabling the enjoyment of rights of all those who
work.
A currently influential strand of economic thinking, heavily influenced by mainstream
neoclassical economics, believes that labour regulation is a market externality that is
detrimental to economic efficiency, and therefore counter-productive. According to
the neoclassical theory, wage and employment are set by supply and demand, and
informality stems from a structural imbalance between too many job seekers and not
enough jobs (Darbi, Hall, and Knott, 2018). Most cities passed labour legislation so
that informal sectors will only employ locals. This is having a negative impact
towards the operations of informal sectors because they are ending up employing
people with questionable qualifications which will result in the provision of poor
quality goods.
Policy reactions to the informal sector typically vary between two extremes: some
focus on punitive and regulatory measures to enforce formalisation or evict vendors
outside the city, while other approaches focus on unleashing the untapped
entrepreneurial potential of the informal sector. Recent World Bank research in
Johannesburg finds evidence that both policy options may be unlikely to produce
positive impacts,
In other African countries like Zimbabwe, cities are passing regulations to completely
ban the use of natural gases by the informal sector citing climate change. Though it
is a noble idea, many informal organisations are suffering because of high energy
costs which are inevitably transferred to the customers (Jati, Giyarsih, and Muta'ali,
2021). A growing number of Zimbabwean cities are taking stand against the use of
natural gas because of their contribution to climate change. Since June, a dozen
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