Enhancing the governance of urban informal trade

Local governments face a difficult task in integrating informal traders into urban food systems strategies. Danielle Resnick, Senior Research Fellow at IFPRI, explains why and provides practical guidance on how governments can establish good governance that prioritizes fairness and accountability, and ultimately fosters greater resilience.

Despite the expansion of supermarkets in developing countries, informal food trade—both by vendors in wet markets and by street hawkers—is a major source of employment for the urban poor, enhances access to affordable food, and facilitates linkages between producers, processors, and consumers. Given that urban areas are expected to balloon by 2.5 billion people by 2050, led by urban population growth in Africa and Asia, informal food trade will retain a critical role in many cities for the foreseeable future.  As such, urban food systems in much of the developing world will need to mobilize traders’ expertise, connections, and entrepreneurship in order to become healthier and more resilient.

Managing informal food trade is, however, complex, and involves tackling multiple governance issues. Four governance issues are discussed here and are complemented by lessons from cities in Africa and Asia about how such issues could be tackled.

Improving revenue mobilisation to invest in market infrastructure

Markets are often a major source of funding for local governments, and vendors typically must pay taxes in the form of daily, or weekly operating licenses based on stall size, product and location. While their compliance is essential for financing services, including market infrastructure, collection can be complicated by the lack of accountability from revenue collectors for how vendors’ money is used. This can engender mistrust among vendors and reduce tax compliance.

Some countries in East Africa, such as Rwanda and Uganda, have piloted revenue collection via mobile phone technology. This can increase accountability by providing receipts for transactions, and it can be more feasible for municipal governments who have low levels of manpower to collect payments. For example, in Zambia, the national revenue authority has worked with local telecommunications partners, and a local vendors’ association, to launch a mobile tax payment platform to collect taxes from vendors and small-scale traders.

Vendors’ compliance can be helped by a better understanding on their part of the rationale for paying taxes, and their experience of the benefits in doing so. In Zambia’s capital of Lusaka, research suggests that vendors’ compliance with taxation is higher where market services, including toilets, drainage, and garbage collection, are better. Another approach is to build civic awareness through public advertising campaigns that show the link between taxation and particular goods or services benefiting the vendors. 

Reviewing the regulations for street hawkers

Street hawkers are a distinct category of informal food traders who often occupy a more vulnerable position. They are often visible in public spaces and central business districts, and they may worsen pedestrian and vehicular traffic, as well as undermine efforts by municipal authorities to create “modern cities” and better organised markets.  Nyemb and Marchiori (2019) highlight the wide range of regulations there are against hawking and buying from street traders in African cities. However, they also emphasize the need to make such laws more transparent and accessible to traders so that they know the law, their rights and encourage compliance.

Some city governments have identified compromise options with street traders. In Liberia in 2018,  street traders negotiated a Memorandum of Understanding with the Mayor of the capital city, Monrovia, which regulates street vending and allows traders to operate in certain parts of the city without harassment, if the traders agree to adhere to a set of stipulations. There are strict penalties if either side reneges on their agreement, and both the traders and the Mayor are required to meet monthly to ensure an open dialogue about any challenges or unforeseen issues. A more dramatic approach is India’s passing of the Protection of Livelihood and Regulation of Street Vending Act (2014), which specifies the roles and responsibilities of vendors and municipal authorities.

Strategic planning for market upgrades

Poor land use planning and the lack of updated records of land ownership means that markets can develop haphazardly in unsafe locations, or in areas not zoned for commercial activities. This is especially the case in larger, older cities. Market upgrading and relocation may be the only solution, especially when maintaining the existing market has implications for the health and safety of the vendors and the public.  When considering these changes, policymakers need to review existing and potential population density and foot traffic patterns, to ensure that they meet the needs of the existing urban population and are resilient for potential growth.

As a recent study of a secondary city, Mumbwa, Zambia argues, policy makers need to analyse where vendors obtain their produce, how consumers sourced their food, as well as their commuting and buying patterns, before planning market upgrading initiatives. Such strategic planning, which admittedly is easier in newly emerging secondary cities, is key to ensure that such upgrading efforts do not result in new markets with empty stalls, or undermine residents’ access to affordable food.  The 2014 Act in India aims to recognize “natural” markets where consumers and retailers traditionally interact, and prohibits relocating vendors to inaccessible locations or ones with low foot traffic. In the Indian city of Bhubaneshwar, authorities worked with street vendors’ organizations to create dedicated vending zones and kiosks from which they can operate.

The financing structure of new markets or upgrading initiatives needs to be affordable for vendors and financially viable for city governments. On the one hand, if costs for newer markets are recouped by charging vendors higher stall fees, then this could lead many to choose to sell on the pavements and streets instead, negating one of the main reasons for establishing the new markets. On the other hand, if finance is needed to upgrade or relocate a market, then stall fees must be set at a level that allows for realistic repayment. Examples from markets in Cape Coast, Ghana, highlight that involving both municipal bureaucrats, who consider financial costs, as well as city politicians who may be more sympathetic to vendors’ concerns about rising stall fees, is important for ensuring that both of these viewpoints are taken into account.

Identifying and engaging credible representatives of informal traders

Markets often contain a wide variety of governance structures that sometimes meet, and other times bypass, formal city institutions. Vendors may be part of trade associations, cooperatives, market committees, and unions. Each of these typically have their own hierarchies of relationships, modes of operating, and objectives. For instance, in Lagos, many market leaders are elected and oversee fee collection and service provision. However in markets throughout southern Ghana, vendors may turn to appointed traditional leaders, particularly commodity queens, to help regulate trade, prices, and offer support.[1] There are also many organizations that claim to represent markets and/or street hawkers but who may be viewed as biased or have non-representative policy preferences.

Therefore, it is essential for city leaders to understand the micro-dynamics of these market structures and the degree to which leaders and organizations speak authoritatively on behalf of other vendors on key issues. Partnering with credible and legitimate representatives ensures that discussions on taxation, regulations, market infrastructure and upgrading are informed by those who are likely to be most affected by them. 

Conclusion

Integrating informal traders into urban food system strategies is complex, with many different priorities and needs, for traders, local authorities, and growing urban populations. Establishing elements of good governance that prioritize fairness and accountability will vary across cities of differing sizes and capacities, but ultimately is essential to foster more resilient urban food systems.

[1] In many Ghanaian markets, there are female market leaders, known as commodity or market ‘queens,’ who control the distribution and trade of specific products, such as tomatoes or yams.