The universe of the informal sector in Burkina Faso is diverse and undulating. Electronics, mechanics, weaving, catering, trade, welding, food processing, etc.

Despite the possibilities of getting out of it, many players remain there for various reasons. Overview at the end of the year in the world of informality where the transition to formality is very slow or even unwanted by the first concerned.

Economy of the periphery, resourcefulness, survival or subsistence activity or even System D refer to the informal sector. It is characterized by the precariousness of jobs and means of production, the absence of a work contract, of wage labor, of social security. Economic activity is most often carried out there without legal existence or accounting management.

Gombila Ernest Kaboré, owner of a welding workshop in Wayalghin, a popular district of Ouagadougou, is immersed in this informal universe. His unit, created in 1997, i.e. 23 years old, has not yet been registered in the Register of Commerce and Personal Property Credit (RCCM), which should give it an official existence. No IFU number (unique financial identifier) either. Mr. Kaboré himself does not have a professional card. Revenue inflows and money outflows are not recorded anywhere! No contractual relationship exists between him and his two employees and three apprentice trainees. No staff member is declared to the National Social Security Fund (CNSS). "Our activity is not structured, we work in a mess here," he says, with a brief burst of laughter.

“Very recently, my landlord let me know that I could register with the CNSS, contribute to it and benefit from a retirement pension. Unfortunately, it's too late for me, ”he regrets, his face tense.

On this morning of December 16, 2020, sitting on a piece of wood in front of the house serving as his seat, the old Kaboré observes his employees at work, in part of the alley at the edge of which his workshop is located. Welding of a grid there, sawmill of iron bars here! Heterogeneous sounds mingle with the sparks. It is the daily life of the places which often goes from 7 am to 6 pm. “Despite my age, every day I am there at 7 o'clock. Children often arrive at work at 9 a.m.,” he complains. At the same time, a semi-trailer truck parks and waits to be welded.

The 62-year-old man's marriage to welding, which had become his main source of income, began in 1981, on the proposal of his father-in-law, after five years (1976-1981) in the cocoa and coffee plantations in Côte d'Ivoire. 'Ivory. He began as an apprentice welder, then employed in the metallic welding company Pascal Zongo until 1994 when the company closed its shop. Gombila Ernest Kaboré refuses to sink with the company. He plans to open his own welding workshop. Three years of digging gutters in the capital allowed him to gather the means to realize his dream. “At first, ironwork didn't excite me. I do not regret having accepted the proposal of my beau, ”he rejoices. Today, the activity allows him to support his wife and 4 children.

“Per month, we have no less than 300,000 F in profit. But since the work is not well organized, we cannot save money. All this is due to illiteracy,” he argues. Mr. Kaboré says he left school at CP2, in his native Zorgho.

Here, we do not know the delights of the end of the month. The 'loot' of the day is distributed in the evening between the boss, the employees and the apprentices. The 'site manager', as his employees affectionately call him, keeps part of the day's receipts in anticipation of charges for rent and taxes, which amount respectively to 25,000 CFA francs per month and 50,000 CFA francs on average. the year. The two employees receive per day between 3000F and 5000F depending on the entries. The apprentices each earn between 700F and 1000F. In the event of a “serious” work accident, the costs of treatment are shared between the victim and the employer, who manages minor injuries.

This informal management of the company is not without consequence on its development. Mr. Kaboré and his employees seem to be aware of this. "If the company had a formal existence, I could have developed it better and my children could benefit from it", recognizes the sixty-year-old. Kassoum Kaboré, an apprentice and then an employee in this welding unit for 19 years, will not soon forget this market for making trolleys and wheels that the workshop has just lost. “On November 15, we missed a market of 6.2 million CFA francs from a local structure. The reason is that we were asked for documents that we could not provide, due to the informal nature of our business,” he confides, shaking his head.

Why so many years without ever taking the step towards formality? “It is not the fear of taxes that keeps us in the informal sector, it is rather ignorance. We are in a fake world, it is difficult to have trusted men to help you! People will come and ask you to give the documents for your plot, they will help you and after that there are problems, ”argues the sixty-year-old.

Pauline Ouédraogo has been weaving the traditional loincloth, commonly called Faso dan fani, since 1988. The family courtyard serves as her production workshop. She works with four weavers whom she pays by the task, at 750 FCFA or 1000 FCFA for a woven loincloth. Dame Ouédraogo has not been in informality for three decades of joy of heart. “Getting formal is a very good thing. But this requires financial means to make investments and create a favorable working environment. I miss these resources, ”she explains, head down.

Unlike Ernest and Pauline's unit, Noufou Kaboré's business, 'Faso Poulets', has a legal existence. After having practiced the sale of chickens from his parent from an early age, Mr. Kaboré, tried to modernize the activity. From his father's makeshift poultry sale shed, he now carries on his business in a fitted out, attractive setting: glazed, tiled and clean premises. In 2013, his company was registered with the RCCM and had an IFU number. He has the merchant card. Better still, it has a trade name, 'Faso Poulets', in due form. Purchase from farmers and traders and resale of poultry of local breeds and flesh, live, roasted or plucked, constitute the core business of 'Faso Poulets'. This entrepreneur employs about ten people including four members of his family.

The profession seems to feed its man. “We can sell 100 chickens a day. Before, we did not consider chicken sellers. Today, when we show up, we're not ridiculous,” says Noufou Kaboré, smiling, chechia screwed on his head. Thanks to this activity, formerly little valued, the boss of 'Faso Poulets' drives a car, has a home; he and his mother performed the 5th pillar of Islam, the pilgrimage to Mecca!

But in addition to the administrative formalities, the management of the company borders on the informal. “Here, we do not keep accounts. In the evening, we take stock of the sales and we pay the employees who are members of the family at 2000F/day. The other employees are paid 30,000F per month, ”reports the boss of the place.

In addition to the remuneration of the employees, he pays an annual 200,000 FCFA of municipal tax for the occupation of empty space, 150,000 FCFA of monthly rental charges and 200,000 FCFA of taxes, under the contribution of microenterprises previously referred to as the contribution of the informal sector.

According to Noufou Kaboré, the fear of higher taxes is holding back the momentum of many actors in the informal sector to go formal. “Paying tax is a legal obligation to which everyone must submit, provided that it is within reach of the taxpayer. The problem with tax officials is when you improve your work environment to attract customers, they tax you more. For them, it's because you make big profits that you make investments! Whereas often, you went into debt to hope to win over customers,” he laments.

When he made the decision to improve his chicken outlets, he had to override the warnings of those around him. “If you put a tile here, you will have a lot to do with taxes,” the neighborhood kept telling him. "Many people think that to formalize is to give the tax administration the opportunity to file them and track them down regularly, forgetting that the entrepreneur is the first beneficiary of the formalization", adds the tax inspector and head of Department of Legislation at the Directorate General of Taxes, Idrissa Ouédraogo. For this "modern" trader, imported chickens of dubious quality, the disorder in the marketing of poultry, especially during the holidays, really slow down the development of his business. On the eve of the holidays, spontaneous informal vendors, whom the tax authorities will never be able to impose and who have no rental or staff costs, come from villages or farms and sell gallinaceans directly, at a lower price, in the streets of Ouagadougou. , he complains.

Noufou Kaboré pleads for a better organization of the poultry trade, with a minimum of safeguards. Added to this is the difficulty of accessing funding. “If you ask for a bank loan of 5 million FCFA, you will be told that it is too much for a simple chicken seller! These are outdated ideas! 5 million is just the purchase price of

2,000 chickens at 2,500 F. During the end-of-year celebrations, we can sell 1,500 to 2,000 chickens. On the 5 million, we can make a profit of one million FCFA”, he explains.

The question of guarantees is another concern for actors in the informal economy, underlines Mathieu Tiendrébéogo, a young motorcycle salesman. His company TMS Motos, created in 2018, does not yet have a formal existence. “I preferred to start by opening an informal business before formalizing it. If I have to wait for all the necessary documentation before I start, the papers risk coming to find that the meager resources mobilized here and there are no longer there, ”he argues.

For the welder Kaboré, the State can, through small public contracts, taking into account the specificity of the informal sector, help small economic units to develop, formalize and create more jobs. “My two employees and their families live from my workshop. I contribute to fight against unemployment”, he hastens to add. There are companies that have state contracts of 100 thousand tables-benches, he continues. Placing a public order for only 1,000 table-benches from a small welding company would be enough to propel it towards formalization, faith of 'site manager'. According to the president of the National Council of the informal economy (CNEI), Salifou Nikiéma, to encourage the informal sector to take the step towards the formal, there is a package of things to do. First of all, substantive work to be done in terms of communication to dispel preconceptions and bring about the necessary change in mentalities.

Because, in the collective perception of informal actors, there is an obvious correlation between tax increases and formalization. Better, they do not see any advantage in creating formal enterprises, prospects for improving business with formalization. "If the CNSS and the general tax department set up a guarantee fund allowing for financing without guarantee, with, for example, as conditions of access, compliance with its tax obligations and its social security contributions for the last three years , we would see a frantic race towards formalization, ”says Mr. Nikiéma. To also breathe life into this sector of 'resourcefulness', the president of the CNEI invites the public authorities to enforce commercial regulations.

He says he does not understand that wholesalers do retail, in violation of the laws, in full view of everyone! The solution also lies in encouraging local consumption, by reserving 35% to 45% of public procurement for the informal sector, he suggests. According to President Nikiéma, there will be no development without the informal economy which represents 92% of the active population.

As proof of this, Rwanda has reached the level of development where it is today thanks to better supervision and support for the informal sector. But all this must be done in consultation with the actors for a better targeting of the problems. Because, he concludes, the evils of our country come from our intellectuals who lock themselves in air-conditioned offices to make decisions or laws that are out of phase with the concerns of those who languish under the sun and the rain!

Mahamadi SEBOGO

[email protected]

The benefits of formalization.

Each year, an average of 12,000 formal businesses are created in Burkina Faso, according to the Maison de l'entreprise du Burkina Faso (MEBF). Formalization offers the company official recognition with the related rights and privileges, access to public procurement, financing, tax benefits from the law on the promotion of SMEs and the SME charter. In the event of unfortunate events (disaster, floods in 2009, demonstrations in 2011, COVID-19), keeping accounts makes it possible to take stock of the damage suffered for possible repairs or compensation. Formalization allows the State to have reliable data for development planning and tax revenue forecasting. It is a source of expanding tax revenue and increasing public resources.

To promote the establishment of formal economic units, the authority has reduced the procedures and timeframes for setting up businesses, which have gone from several weeks to 24 hours in Ouagadougou and Bobo-Dioulasso and 72 hours in the regions. Since March 2020, the MEBF has set up an online formal business creation platform ( https://www.creerentreprise.me.bf/ ).

MS

Source: MEBF

60% of the informal sector unfavorable to tax

According to an INSD survey on employment and the informal sector in 2018, there are 2.2 million non-agricultural informal production units in Burkina Faso. 96% are not registered in any administrative register. 60% of them say they are unwilling to pay the tax.

According to the Directorate General of Taxes (DGI), at the end of October 2020, microenterprises or the informal sector represented 71% of taxpayers. It is made up of economic units whose turnover (CA) is less than 15 million CFA francs. The synthetic flat-rate tax applied to this sector varies between 2,000 CFA francs and 200,000 CFA francs. The contribution of the informal sector to tax revenue, which has become the contribution of microenterprises since 2015, is 2 billion CFA francs on average, or 0.28% of total tax revenue. In 2019, out of the CFAF 844 billion in tax revenue, microenterprises contributed CFAF 2 billion against CFAF 78 billion for medium-sized enterprises and CFAF 715 billion for large enterprises. A contribution deemed low by the tax authorities in view of the existing potential. A performance underperformance partly linked to the “mobile and elusive nature” of agents in the informal economy. With a view to improving this contribution to the mobilization of domestic resources, the DGI says it is increasing awareness and reforms to promote tax compliance and formalization. In the 2021 finance law, a major innovation is introduced: the declaration system for natural persons with 5 to 15 million turnover and legal persons with a turnover of less than 15 million. In the digitalization process, a digital platform for the registration of taxpayers in the informal sector is planned on tablets with geolocated data. With these reforms, the tax administration intends to increase the contribution of microenterprises to 6 billion FCFA in 2021.

MS

Sources: DGI, INSD

The Informal: Expert Perspectives

Through their own magnifying glasses, savvy people give their reading of the informal economy and outline solutions for a successful transition to formality.

Studies have consistently shown the weight of the informal sector in African economies. “In Burkina Faso, the informal sector is the main employer. It occupies more than 80% of the active population, even if the jobs there are precarious”, underlined the director of the Center of approved management (CGA), Dr Boukary Sawadogo, specialist in strategic management of SMEs.

Beyond its importance, the informal economy remains a complex phenomenon that requires a broad reading grid to better understand it. According to the director of the informal economy, at the ministry in charge of employment, Mahamadou Cissé, informality is a result of the structure of the national economy. “The informal does not come from nothing. It is due to the inability of the economy to absorb newcomers to the labor market in formal settings such as the Civil Service or formal private companies,” he analyzed.

For him, the transition to formality is hampered by a set of structural factors, namely the inability to access modern production equipment, substantial funding, appropriate infrastructure, outlets, etc. Informality can also be analyzed as a phenomenon dictated by the weak power of the population. “Suppose the municipality decides to replace the capital's aging taxi fleet with new, modern vehicles. Does the financial capacity of the population allow today to go from 300F to 1000F the race, “asked Mr. Cissé.

Faced with this complexity, successfully transitioning from the informal to the formal economy requires a holistic response. According to Dr. Sawadogo, it is imperative to have an integrated national support strategy that allows sectoral departments and support structures to play their part in synergy. This strategy could be broken down into projects dedicated to the informal sector and segmented by type of activity, with substantial funding, as recommended by the director of the informal economy.

All of these measures must be accompanied by incentive mechanisms that push people out of informality. "We must work to ensure that the gain from formalization is greater than that of informality," suggested the expert in the management of small and medium-sized enterprises. In any case, the informal economy must be at the center of the priorities of the public authorities. This starts with revising the tax regulations in order to adapt them to the specificity of the informal sector, to simplify the procedures, to demystify the tax thing

MS

The Informal: Expert Perspectives

Through their own magnifying glasses, savvy people give their reading of the informal economy and outline solutions for a successful transition to formality.

Studies have consistently shown the weight of the informal sector in African economies. “In Burkina Faso, the informal sector is the main employer. It occupies more than 80% of the active population, even if the jobs there are precarious”, underlined the director of the Center of approved management (CGA), Dr Boukary Sawadogo, specialist in strategic management of SMEs.

Beyond its importance, the informal economy remains a complex phenomenon that requires a broad reading grid to better understand it. According to the director of the informal economy, at the ministry in charge of employment, Mahamadou Cissé, informality is a result of the structure of the national economy. “The informal does not come from nothing. It is due to the inability of the economy to absorb newcomers to the labor market in formal settings such as the Civil Service or formal private companies,” he analyzed.

For him, the transition to formality is hampered by a set of structural factors, namely the inability to access modern production equipment, substantial funding, appropriate infrastructure, outlets, etc. Informality can also be analyzed as a phenomenon dictated by the weak power of the population. “Suppose the municipality decides to replace the capital's aging taxi fleet with new, modern vehicles. Does the financial capacity of the population allow today to go from 300F to 1000F the race, “asked Mr. Cissé.

Faced with this complexity, successfully transitioning from the informal to the formal economy requires a holistic response. According to Dr. Sawadogo, it is imperative to have an integrated national support strategy that allows sectoral departments and support structures to play their part in synergy. This strategy could be broken down into projects dedicated to the informal sector and segmented by type of activity, with substantial funding, as recommended by the director of the informal economy.

All of these measures must be accompanied by incentive mechanisms that push people out of informality. "We must work to ensure that the gain from formalization is greater than that of informality," suggested the expert in the management of small and medium-sized enterprises. In any case, the informal economy must be at the center of the priorities of the public authorities. This starts with revising the tax regulations in order to adapt them to the specificity of the informal sector, to simplify the procedures, to demystify the tax thing

MS

"Personally, I do not subscribe to the idea of formalizing the informal sector", Pr Idrissa Mohamed Ouédraogo

“In Burkina Faso, the sector represents more than 70% of the working population in urban areas. It contributes nearly 30% to the GDP against 23% for the modern secondary sector and 37% for agriculture. The informal sector contributes 63% to the formation of added value in the secondary sector and 55% in the tertiary sector.

Informal actors are producers who have a good knowledge of their customers, their needs and their financial capacities. Goods and services are produced and calibrated according to customer demand.

Personally, I do not subscribe to the idea of formalizing the informal sector. I have the firm conviction that this sector has an internal logic which respects the principles of the market and certainly better than the so-called formal sector. I wonder if it is not the latter who should rather draw inspiration from the economic practices that prevail in the informal sector.

The functioning of our economies and the policies implemented to regulate the economic system are very off-putting to the majority of agents in the informal sector. Among the reasons why economic agents prefer to work in the informal sector, taxation and administrative hassles are at the forefront of things. The persistence of these causes certainly explains the reluctance of many actors to comply with formalization.

Despite the primordial role of the informal economy in our countries, the prevailing attitude is to consider the informal sector as a sector which has adverse effects on the process of economic development, and therefore must be reduced to a minimum. This sector has often been considered as one of poverty and marginality. The facts, however, seem to indicate otherwise. It is no longer rare, in fact, to find entrepreneurs in the informal sector who have a higher income than certain agents in the formal sector. Even if it should be noted that the proportion of poor employees is much higher in this sector, because the wages applied in the informal sector are generally lower than those in the formal sector. However, this does not allow us to equate the informal sector with poverty and marginality.

Contrary to commonly accepted ideas, the informal sector should no longer be considered as a relay, marginalized sector, in which agents seeking employment carry out subsistence activities while waiting for a better job in the formal sector. Nowadays, economic agents settle in this sector in order to carry out their activities there in a sustainable way. The informal sector has thus become a permanent phenomenon whose ability to adapt to economic changes is notable. »

"Well-established social logics make the informal sector resist formalization", says Dr Payaïssédé Salfo Ouédraogo.

The teacher-researcher at Joseph Ki-Zerbo University, Dr. Payaïssédé Salfo Ouédraogo, specialist in sociological studies of economic practices, deciphers the factors that keep actors in the informal sector in informality.

The informal sector, as a socio-professional group, is often analyzed in opposition to the formal sector. It is made up of small informal activities that allow a large number of individuals to meet the daily needs of life in society.

It can be split into two: the informal subsistence sector, made up of all these small survival activities with turnover of 25,000 F CFA, 50,000 F CFA; the informal convenience sector, made up of all those activities and entrepreneurs who like it because they derive a certain number of advantages, not just fiscal ones. They realize important turnovers there which they hide. They feign the appearances of poverty. They win, from a sociological and economic point of view.

The logics of the informal sector are plural. In sociology, the social fact is total and the economy is not an autonomous sphere. Individuals have a plurality of reasons for being in the informal sector. Because of the weight of the social one does not recruit external competences there but a brother, a sister, a cousin. There is a kind of confinement in family, community ghettos. This responds to the functional needs of society where family and community solidarity are significant.

The informal sector also offers the advantage of concealing wealth. We are in a society stiffened in traditions, beliefs in underground, mystical and magical forces. Logic of egalitarianism, leveling of the social statutes which reign there make that nobody wants to be detached from the batch, under penalty of sanctions of the invisible forces. Wealth is always evaluated there with a tendency to underestimate. When we have a hundred animals, we will say that we have fifty. Staying informal therefore constitutes a safety valve that responds to the social logic of a race to the bottom. Unlike homo oeconomicus who seeks to accumulate, to maximize his profit, homo africanus always limits his needs to achieve abundance. Thus, people are happy in their small shops despite the obvious possibilities of expanding it, of earning more.

Contrary to popular opinion, it is not economic but rather sociological reasons that lead to staying in the informal sector. Heavy sociological variables mean that players in the informal sector have an interest in staying there. Beyond egalitarian logic, the informal sector plays a role in safeguarding traditional mechanisms of family and community solidarity.

The tax explanation is not sufficient. It may be one of the reasons, because informality gives a number of tax advantages. We apply a global, synthetic taxation, an annual flat rate. While formalization implies a change in the tax regime where profit, VAT, etc. are taxed. The economic implications of formalization such as banking, keeping accounts, improving the framework of the company, expose the immensity of your income to the general public. Paying tax or more tax is not the problem but rather the risk of exposing one's wealth.

It is not certain that the actors of the informal economy aim to position themselves internationally, to access public markets. They don't trust the state. They have some representation of public procurement. For them, the state is a bad payer. The benefits of formalization are not well received by these actors. They prefer to remain informal, to simulate the appearance of poverty in order to save themselves and their businesses.

Societies do not advance like individuals, but by strong tendencies. They take time to take a step, but when they have taken it, it is a decisive step. Work should be done to restore the confidence of these actors with regard to the services linked to formalization, in particular public procurement, and to inform them sufficiently about the burden of taxes to be faced when they are in the formal sector.

It is also necessary to work to articulate the social constraints with the requirements of formalization to raise awareness, renew mentalities, reassure that formalization does not lead to a rejection of the social, the cultural, but only a reconfiguration. They should really be prepared to face the formal, because deep-rooted social logic makes the informal sector resist formalization.

Tax relief and access to financing could be a palliative but do not solve the whole problem, because resistance is perennial. Access must be given to the sociological obstacles which constitute an obstacle to formalization. Acting only on economic and financial levers would not solve the whole problem.

AllAfrica, Inc.

Document AFNWSF0020210103eh13000e1