Sundaymail Editor
Africa Business Insights
Stephene Chikozho
IS it possible to formalise and scale up street vending, artisanry and micro-businesses?
Africa’s informal economy is massive — accounting for over 80 percent of employment and contributing up to 60 percent of gross domestic product (GDP) in some countries.
From street vendors in Lagos to artisans in Nairobi and market traders in Harare, millions of Africans rely on informal businesses to make a living.
Yet, despite its size, this sector remains largely overlooked in economic planning and investment.
The challenge?
Most informal businesses struggle to scale up due to lack of financing, regulatory barriers and limited access to broader markets.
As Africa pushes for industrialisation and economic growth, a key question emerges: How do we integrate and formalise this trillion-dollar sector while preserving its flexibility and job-creating potential?
The reality of the informal sector
Unlike large corporations, street vendors and micro-business owners operate outside government regulations.
Many do not pay taxes, lack business licences and have no access to banking or social security.
However, their contributions are undeniable:
Employment creation: The informal economy absorbs millions of people who cannot find formal jobs, especially the youth and women.
Consumer access: Vendors and micro-businesses provide affordable goods and services to low-income populations.
Endurance: During economic crises, informal traders keep commerce alive when formal businesses struggle.
Yet challenges remain.
Many operate under uncertainty, constantly facing eviction, harassment from the authorities and market volatility.
Without proper structures, scaling up a small enterprise into a sustainable business is nearly impossible.
How to formalise and scale up the informal economy
- Simplified business registration and regulation
One major barrier to formalisation is bureaucracy. Lengthy, expensive and complex registration processes discourage micro-businesses from obtaining licences.
Solution:
The Governments should introduce one-stop business registration centres to help vendors and artisans register quickly and affordably.
Examples like Rwanda’s online business registration system, which takes less than 24 hours, should be replicated across Africa.
- Access to finance and credit
Most informal businesses cannot access bank loans due to a lack of credit history, collateral or formal records. Without capital, scaling up remains a dream.
Solution:
Mobile banking innovations like M-Pesa in Kenya allow small traders to access microloans via their phones.
Governments and private lenders should create tailored financial products that consider cash-based business models.
- Infrastructure and trading spaces
Many street vendors face eviction because they operate in undesignated areas. Without stable locations, business continuity suffers.
Solution:
City councils should designate formal trading spaces for street vendors, with access to water, sanitation and security.
In Ghana, the government has developed market complexes where informal traders operate under regulated conditions while contributing taxes.
4.Digital transformation for growth
The world is moving digital, and informal businesses should not be left behind.
Many micro-businesses rely on foot traffic, limiting their reach.
Solution:
Digital payment systems like Flutterwave and Paga are enabling informal traders to transact without cash.
E-commerce platforms such as Jumia and Kilimall allow artisans to sell goods beyond their local markets.
Training programmes should teach informal business owners basic digital skills for financial literacy and marketing.
- Policy support and inclusion
Policymakers often overlook the informal sector when making economic decisions. Yet, engaging with these entrepreneurs is crucial for inclusive growth.
Solution:
Governments should involve informal business associations in policy discussions.
Tax incentives can encourage micro-businesses to formalise. For instance, South Africa’s small business tax amnesty helped informal enterprises transition into the formal economy.
Success stories: Informal to formal business growth
Case study: From street vendor to CEO
In Nigeria, Adepeju Jaiyeoba started as a street vendor selling health kits.
Through mentorship and microfinance, she formalised her business, became an award-winning entrepreneur and now exports medical products across Africa.
Case study: Kigali’s market model
Rwanda successfully integrated street vendors by allocating specific zones with affordable stalls and digital payment options.
The move boosted tax revenues while securing livelihoods.
The way forward
Africa’s informal economy is not a burden — it is a goldmine of untapped potential.
Through simplifying regulations, expanding financial access, leveraging digital tools and engaging policymakers, small vendors can transition to thriving enterprises.
Instead of displacing informal traders, we must empower them.
Formalising Africa’s informal sector is not about forcing compliance — it is about creating an inclusive economic system where every entrepreneur, regardless of size, has a chance to grow.
What is your take?
How can Africa better integrate the informal economy into mainstream development? Share your thoughts. Stephene Chikozho is the chief executive officer of Africa Business Inc. He writes in his personal capacity. You can follow him on social media (Instagram, Facebook, X, LinkedIn, Threads) WhatsApp +263772409651 or email [email protected]
Tinaye Agere
Online Reporter