Informal economy is not a choice. It’s the only option NRM left us

In the late 1990s, when the late Elly Wamala launched his popular song titled Boda Boda, I distinctly recall the enthusiasm surrounding boda boda among the public.

At that time, boda boda transportation was a novel concept. Decades later, the narrative has changed. The enthusiasm and anticipation that once captivated the public have transformed into a calculated, extended policy.

Frequently, young people and other unemployed individuals are criticized for selling their land to purchase boda boda, disregarding the reality that in earlier times, our grandfathers used land for agriculture. This was during an era when the government maintained a social contract with the population, and farming was structured around cooperatives, making it lucrative.

The current circumstances are different. After numerous seasons of labour, individuals come to the realization that it is no longer worthwhile, thus compelling them to seek alternative opportunities.

Like boda boda, a considerable segment of Ugandans engages in the informal sector. The government frequently lauds this as a testament to Ugandan entrepreneurship; however, the vast informal sector, encompassing street vendors and boda boda riders, does not signify true entrepreneurship.

Instead, it is a direct result of the government’s failure to create a formal and regulated economy. The procedure for officially registering a business, obtaining a trading license, and adhering to tax regulations is so convoluted that it principally acts as a barrier to entry.

For individuals living paycheque to paycheque, time spent waiting in lines translates to lost income. For countless Ugandans, the informal sector serves as the sole sanctuary from a system that is structured to marginalize them.

The journey towards establishing a formal business, complete with a license, and a permanent address, is burdened with bureaucratic obstacles and exploitative officials, rendering it an unattainable aspiration for the typical citizen. The bureaucracy creates only the preliminary layer of the problem.

At nearly every level, the system is supported by demands for bribes. For instance, the tax officer expects some type of payment to facilitate assessment. The health inspector demands a small tip, commonly referred to as “a soda,” to authorise the operation of the premises.

If there are any objections, they will employ all necessary measures to deny approval or to shut down the premises. For individuals working in the informal sector, this is perceived as a more straightforward and cost-effective way of running a business.

This constant, low-grade extortion acts as a regressive tax on the impoverished, siphoning off the resources that could otherwise be used to develop a legitimate business. For those on the streets, the greatest fear is not competition, but the state itself.

Law enforcement officers, known as Kampala Capital City Authority (KCCA), routinely conduct operations, confiscating the assets that people’s livelihoods depend on. This threat of arbitrary asset seizure destroys any sense of security or incentive to invest in a permanent and formal setup.

The informal sector, for all its risks, offers a mobility that provides a fragile defence against a predatory system. A culture characterized by survivalism, as opposed to one that fosters entrepreneurship, signifies a profound failure in economic policy.

The government has failed to establish the necessary groundwork for a formal economy, including clear regulations, property protection, and accessible institutions. Consequently, it has fostered a hostile atmosphere where the only logical option for most individuals is to stay informal, small-scale, and unnoticed.

The outcome is an economy that seems vibrant at first glance yet is inherently fragile. It is a system where the government gathers minimal tax revenue from its most significant labour force, where employees lack social security, and where aspirations are suppressed by the overwhelming burden of systemic dysfunction.

Unless the government addresses the core issues of governance, corruption, and accessibility, a vast number of Ugandans involved in the informal sector will continue to exist not as recognised entrepreneurs, but as unwilling participants in a defective system, their efforts serving as a silent reproach to a state that has failed to meet its fundamental economic obligations.

The writer is a political analyst and a student of LLB Law with Politics, Cardiff University.