Plate 9.5: Gas Welders Working along Madzindadzi Road
2.7 Conceptualising Informality
There is a convergence of views in trending concepts in urban informality. The converging views feed from a background inscribed by diverse theoretical and disciplinary perspectives on urban informality. There is, therefore, a definition quagmire and a plethora of alternative views as one attempts to break the puzzle of what defines informality. Informality varies in intensity and dimension in parts such as land, housing, immigration and economy. Owing to this interdisciplinary nature of informality, there are several definitions which are often contradictory and somewhat clouded with confusion. It has been posited that defining informal work presents many challenges and perhaps the best means to define it is to identify its characteristics (Schneider, 2005).
39
Extending the proposition of using characteristics in defining informality, some sources advanced that informality is best conceptualised when viewed using the analogue of a continuum scale with two extreme ends of compliance and non−compliance (IADB, 2006;
Yiftachel, 2009). In between these extremes are various forms and degrees of compliance ranging from registration requirements to temporariness of operation, and extends to include working conditions and level of productivity. Figure 2.3 diagrammatically shows the continuum scale illustration of informality.
Informal Enterprises
Figure 2.3: Continuum Scale Defining Informality (IADB, 2006; Yiftachel, 2009)
Use of generic labels informal/formal in defining has been discouraged (Kanbur, 2009).
Instead, proposition made by Kanbur (2009, p. 1) is that:
Informality and formality should be seen in direct relation to economic activity in the presence of specified regulation(s). Relative to the regulation(s), four conceptual categories that can help frame the analysis are: (A) regulation applicable and compliant, (B) regulation applicable and non‐compliant, (C) regulation non‐applicable after adjustment of activity, and (D) regulation non‐applicable to the activity.
Interpreting this four−factor frame of analysis, only categories A and D merit the label formal, and categories B and C can be regarded as informal with different degrees of complexity (Kanbur, 2009). This conceptualisation can be likened to the tax evasive strategies explained
Non-compliance Compliance
Varying degrees of compliance on issues such as:
Registration
Working condition
Temporariness of operation
Place of operation
Tax-contribution
Fully adheres with all governments’ regulations Do not adhere to any
governments’ regulation
40
in Box 2.1, Section 2.5.1 (Keen and Kanbur, 2015). Perhaps, juxtaposing the four−factor frame of analysis with tax evasive strategies sheds light on defining informality. Table 2.2 provides a comparative assessment of the two conceptualisations.
Table 2.2: Comparative Assessment of the Two Conceptualisations (Kanbur, 2009; Keen and Kanbur, 2015)
Four-Factor Frame of Analysis (Kanbur, 2009: 5)
Tax Evasive Strategies (Keen and Kanbur, 2015)
Comment
A: Stay within the range of the regulation and comply.
Large firms that declare truthfully and pay the full amount of tax.
Firms in this category merit the label formal since they fully comply with regulations.
B: Stay within the range of the regulation but not comply.
Ghosts, falsely declare below the tax threshold or not declare at all;
Cheats, which produce above the threshold and declare some, but not all, of their sales.
Non-compliance, through cheating or acting as ghosts, qualify firms in this category to be informal. It is critical to note that such tendencies are illegal.
C: Adjust activity to move out of the ambit of the regulation.
Adjusters are large enough to generate maximum sales above the threshold but choose to operate just below the tax threshold to avoid tax.
Deliberate adjustment by firms to operate below the tax threshold merit the label informal.
D: Outside the ambit of the regulation in the first place, so no need to adjust.
The smallest firms, declare truthfully and pay no tax because their maximum sales are below the tax threshold
If the aim is to tax the informal sector, small firms need nurturing so that they grow beyond the tax threshold and subsequently contribute to fiscus (see Muponda, 2012)
Among a wide spectrum of concepts surrounding informality is informal economy; informal sector; informal enterprise; and micro−enterprise. Informal economy/sector/enterprise defines any economic activity which do not fully adhere to specified regulations (Kanbur, 2009; Keen and Kanbur, 2015). The variances between the words economy, sector and enterprise is on
41
contextual application across disciplines. Economists mainly use the words economy and sector to explain an economic grouping, whereas business analysts mainly use the word enterprise which can be compared to entrepreneurship when one considers entrepreneurship to mean simply the start−up of new ‘small’ firms (Muponda, 2012). It has been further asserted that business activity includes innovative actions by firms or individuals, such as the formation of new products or servicing of existing products (Muponda, 2012). Informal enterprises can either be micro or macro, since the emphasis not on size, but on regulation. It can be assumed that micro−enterprises are small firms within or outside the informal sector.
This study centres on the informal enterprise, regardless if it is unregulated or deregulated.
Informality is visible at all stages of production; tertiary, secondary and primary (Dube and Chirisa, 2012; Majumdar and Borbora, 2012; Shah, 2012). An example of Assam in India was used to give evidence on the development dynamics of informal manufacturing (Majumdar and Borbora, 2012). Part of the evidence revealed that Assam has been termed ‘mini India’ because a number of people migrate to this region in pursuit of employment. Apart from creating employment, the contribution to national income by informal manufacturing, both in volume and value of trade, is quite significant (Pedersern, Sverrisson, and Van Dijk, 2004; Luebker, 2008a; 2008b; Majumdar and Borbora, 2012).
Culminating evidence from theories reviewed, experiential evidence on validity of reviewed theories, disciplinary perspectives and trending concepts in urban informality has revealed that informal activities happen in space. As argued in Section 2.5.4, space is the domain of spatial planning which aims to condition and facilitate socio−economic processes (Bertolini, 2006).
This facilitation, through planning law, is essential since players with diverse interest compete to use land and land−embedded resources.
42