The digital economy and the gig economy are on a collision course in Africa, as we explain in a new CGD note. For decades, the informal sector has been the engine of employment growth across the continent, with gig work a big part of that. People do a few weeks of casual labor on a neighbor’s farm or at a small business, or spend a few days selling sweets during a festival. They’ll try to run a tiny business. They will take in laundry in the evening after their main job is over.
Incomes in the informal sector are low, yet work hours are long. Income is volatile, typically lurching up or down by about 50 percent from month to month. A casual or gig worker might earn US$750 in June, US$250 in July, and US$500 in August. They usually work without health insurance, pensions, and labor protections.
This picture has barely changed for decades. Formal employment has represented only 17 percent of all jobs in Kenya, for example, every year since 2012. The International Labour Organization reports that more than 80 percent of youth in their eight African school-to-work transition surveys were engaged in the informal sector.
And to be realistic, despite the onrush of digital platforms and new technologies, the future of work will continue to be people having multiple gigs with employers that are “somewhat formal.” Accordingly, the focus should be on improving the working conditions of independent workers amid the growth of the digital economy, rather than continuing to pretend that regular, formal, contracted employment is the way that people—particularly youth—want (or even should want) to earn a living.
African governments face dual challenges in helping shape Africa’s gig economy to absorb and gain strength from the arrival of digital platforms and other technologies: find creative ways for gig workers to gain from the improvements in efficiency and productivity that digital platforms create; and accommodate the progressive inclusion of informal enterprise in the formal economy to generate value for all.
In the short-term, it looks like technology is going to create a set of new opportunities in the gig economy: shared-ride drivers, homestay hosts, e-commerce logistics, e-commerce sellers, and small-scale e-commerce producers. These will be supplemented by an army of “digital translators.” For instance, the e-commerce platform Jumia employs 3,000 people across Africa, but has signed up 100,000 commission-based affiliates who help customers make orders through the platform.
Even where it doesn’t create new industries, technology offers expanded opportunities for traditional gig industries, opening up new markets to artisans (e.g., Lynk in Kenya) and domestic workers (such as Domestly in South Africa). This shift offers sufficient scale for artisanal producers of food, cosmetics and clothing; and accelerating regional and international informal trade.
One way to make gig work better would be to recognize it for what it is: neither formal employment nor self-employment and not one job but a portfolio of different gigs. In African countries, it’s probably realistic to ask governments to recognize that gig work is the main source of livelihoods for most and then mandate that platform providers open their systems to allow workers to register for government benefits and private services rather than creating an entire range of poorly-enforced regulations.
Another important area where gig work could be improved is the frequency and reliability of payment, including for e-commerce sellers. Most African e-commerce is still on a cash-on-delivery basis due to a trust deficit in these new industries. Meanwhile, gig services vary from regular weekly payments, in some cases, to unsupervised payments from buyers that may come late or not at all. Since mobile money is widely available in many African countries, governments and the private sector could prioritize improving payments in the gig economy.
Solving the problem of how to push more of the profit to the gig workers seems more challenging. Technology creates efficiencies and these generate the opportunities for profit, but most of the profit seems to go to the platforms, with only a few others getting a share.
Taxing the gig economy and then returning the profits in government services might be feasible, but most African governments don’t have a good track record in this regard. Nonetheless, if African countries could capture a fair share of taxes from international platforms, that could be an important way for them to fund the measures they will need to take to meet this challenge.
At present we don’t have a good answer to how governments should ensure that gig workers get a fair share of platforms’ profits, which today seem to go toward capital and intellectual property. But perhaps African governments will be able to lead the way in policy, starting with a realistic recognition of where the workers are and will be: in the gig economy.
This blog post is part of special series authored by members of CGD’s Study Group on Technology, Comparative Advantage, and Development Prospects.Learn more at cgdev.org/future-of-work.