The Covid-19 crisis has exposed the vulnerabilities of the working poor in urban settings in developing countries. This column combines insights from the experiences of street vendors in Uganda’s capital with research evidence on the effectiveness of policies to improve the lives of unprotected informal workers.
Irene, a 56-year-old Ugandan, sits on the side of the road in a colorful dress, trying to sell biscuits and candies to an empty street in Kampala. In an effort to curb the spread of Covid-19, people in the Ugandan capital have been confined to their homes in recent weeks, leaving street vendors without customers. ‘But I can’t stay home; how will we eat?’ she says.
Irene’s situation mirrors that of millions of street vendors worldwide, reliant on day-to-day commerce for survival. Losing their daily wages as a result of health measures has severely threatened their livelihoods.
‘We haven’t received sufficient support from the government, but this is not surprising. The government is good at international affairs, but never cared about us [street vendors]. We always need to fight hard to secure our needs’, says Irene.
While the current focus has been on emergency measures for vulnerable populations, the crisis has highlighted the urgency of considering a longer-term regulatory framework to protect the working poor.
Street vendors and Covid-19 relief measures
A substantial proportion of Ugandans have to resort to informal work to make ends meet. Yet this work often faces limited social, political, and legal support, leaving the working poor vulnerable to shocks like Covid-19.
The pandemic has simultaneously exposed their vulnerabilities and their systematic exclusion from urban processes. The government rolled out food packages to support vulnerable groups affected by lockdown, including taxi drivers and street vendors. But the exclusion of most of them from databases implies that authorities don’t have an estimate of the number of people affected, their exact locations and their level of needs, which hinders the targeting of relief measures.
Many vendors complain of slow distribution: ‘The lockdown was imposed two weeks ago, and we still haven’t received any food assistance’, says Margaret, a young woman selling vegetables.
The working poor and vendors associations were not consulted about the food relief schemes, and those who received the aid reported that the packages didn’t properly account for their needs to be able to stay home. ‘The food packages don’t include sugar or charcoal, how are we supposed to cook without these? Our only option is to keep working on the streets to get money to buy those’, says Irene.
This dissatisfaction reflects the persistent disconnect between authorities, their schemes, and poor workers’ realities. To cover their basic needs, the working poor, particularly street vendors, have been forced to defy stay-at-home orders, face police threat, and risk their health to keep working.
Marginalization of street vendors
Historically, street vending has been perceived as an unproductive impediment to development, and vendors have often been blamed for congestion. But Marie, a young vendor who had still not received food aid and needed to sell bananas to feed her family, describes vending as ‘a good and flexible business’, and a way to enroll her children in schools. A World Bank study of Uganda finds that most street vendors tend to be women supporting large families as sole breadwinners.
‘If I can have more capital, I can even buy more bananas to sell and make more money’, Marie says. One study finds that while vendors reinvest profits in their businesses, profits tend to be variable and hence they sometimes need to accumulate capital through savings. With limited access to affordable loans, this is their main way of purchasing stocks to grow their businesses.
Marie recognizes that it has not been easy to work in Kampala, even before the virus: ‘We need to hide from the KCCA [Kampala Capital City Authority] officers, as they don’t allow us to work on the streets. We wish they could be nicer since we buy our goods from market vendors who pay fees to them.’
Nonetheless, street vendors have been deemed illegal and the KCCA, the government entity responsible for Kampala, has cracked down on vendors, confiscated their goods, and evicted them from the streets.
‘A few days ago, KCCA officers came and took all my goods and those of the other vendors on the streets, claiming that we were not respecting social distancing. Before the virus, they would also do the same under the pretext that we’re not respecting sanitation standards’, says Peace, a fruit vendor. ‘We understand it’s their duty to enforce regulations, but instead of treating us violently, why don’t they give us clearer steps to follow?’
This handling of street vendors impedes their productivity and, in turn, their ability to accumulate capital to invest in their businesses and increase their earnings. Accordingly, while street vending has enabled them to feed and educate their families, its restrictions have curbed their ability to develop resilience to shocks.
Poverty reducer, not impediment to growth
Authorities should acknowledge that the value of street vending lies in its ability to generate economic opportunities for a sizeable number of residents and help them to escape extreme poverty. Rather than hindering the activities of the working poor, facilitating the recovery from Covid-19 and resilience in the face of future crises will require supporting them. The crisis offers an opportunity to bridge the gap between unprotected informal workers’ needs and authorities’ actions, and to rethink inclusion mechanisms for these workers.
The global research/policy network ‘Women in Informal Employment: Globalizing and Organizing’ (WIEGO), which focuses on improving conditions for informal workers, has established a framework for these workers, highlighting the importance of:
- registering them through simplifying registration and offering benefits,
- extending their social protection and legal right,
- and increasing their productivity through improved access to financial services and public spaces.
While in July 2019, the KCCA proposed the Regulation of Street Trade Ordinance aimed at regulating street vendors by giving them licenses, the ordinance failed to include beneficial policies such as those outlined by WIEGO. It proposed annual license fees that most street vendors cannot afford, gave the KCCA the power to deny licenses without reason, and didn’t mention how vendors will benefit from regulations. It is essential to rethink this ordinance based on WIEGO’s framework.
The Covid-19 shock has sparked conversations about the urgency of cash transfers to the vulnerable, including street vendors. Their productivity and resilience are predominantly linked to access to capital, which is essential both to increase profits and to smooth consumption and prevent poverty, particularly when faced with a negative income shock.
A study in Uganda shows that providing vulnerable women with cash grants of roughly $150 and basic business skills led to a doubling of their microenterprise incomes, mainly from petty trading.
Nonetheless, with limited resources, it might be challenging to scale up cash transfer programs. Accordingly, alternative mechanisms should be considered to enhance workers’ access to capital, such as increasing savings to improve their resilience. A study in Kenya shows that enabling street vendors to open savings accounts at no cost (albeit with withdrawal fees) led to increases in savings, productive investments in their businesses, and expenditure levels.
Reducing the cost of loans for the working poor is critical. One option is investing in effective credit scoring that links borrowers’ behavior to their identity, helping lenders use borrowing history or other predictors of future repayments to approve new loans.
Studies show that credit bureaus and credit scoring software based on verifiable client data led to an increase in repayment performance and to more efficient credit markets with benefits for both lenders and borrowers in Guatemala and Colombia.
In cities where unprotected informal workers form a large workforce, development processes should prioritize protecting their efforts to secure their livelihoods. As such, guaranteeing their social, political, and economic rights should be central to a Covid-19 recovery strategy.
For Irene, the most important aspect of the crisis is to learn from it: ‘People should learn to save and invest, but the government should also support poor self-employed people’.
Ghida Ismail is a researcher in development economics currently based in Uganda. She is working with Innovations for Poverty Action (IPA) and the World Bank on impact evaluations to better inform policy on effective poverty reduction approaches.