Document: The importance of the Informal Economy for Local Economic Development (LED) in Africa

While the informal sector in Africa is often blamed for everything ranging from tax evasion to witchcraft, it makes a huge contribution to Sub Saharan African economies. Studies suggest that the sector contributes nearly 55% of the sub continent's GDP and a staggering 77% of non agricultural employment.

Given that the aim of LED is usually increased economic growth and employment opportunities at the local level, positive LED outcomes are unlikely to be achieved unless the potential and needs of the informal sector are adequately considered. This short paper argues that there is a two way relationship, where focusing on the informal sector is crucial for the success of LED strategies and initiatives, while the LED process provides a major opportunity for improving the performance of the informal sector in Africa. As a result, it is imperative that LED strategies and local economy assessments consider the needs and potential of the informal sector as a matter of priority. Bottlenecks facing its performance can then be identified and addressed, towards improving its ability to generate revenue and employment for poor localities and poor people.