Does formalisation improve women's work conditions?: A review of the regulatory regime for contract farming and domestic trade in Ghana

Dzodzi Tsikata and Promise Eweh

I Introduction1

Based on his research in Ghana, Keith Hart, who is credited with coining the term “informal sector,” observed in the 1970s that contrary to predictions, the informal sector, a set of complex arrangements for making a living in developing economies, was not going to shrink and disappear with economic growth and modernisation (Hart, 1973). Five decades later at lower middle-income status, Ghana’s economy continues to be dominated by informal work and enterprises, with a diminishing proportion of the workforce engaged in formal work.

The informal economy is both rural and urban. The rural informal economy has a substantial proportion of Ghana’s self-employed workers, mainly in (1) agriculture, (2) fishing and fish processing and (3) rural agro-based processing activities and forest products work. The urban informal economy is made up of (1) services, (2) construction and (3) industry, which consists of manufacturing and extractive industries. Work in the informal economy is generally gender segmented both in rural and urban areas. In rural areas, agriculture involves both men and women, albeit in different activities and spheres, while fishing is male dominated and fish processing is mostly done by women. Agro-processing work is dominated by women, while forest products workers are mostly male. In urban areas, sendees are dominated by women, and construction, manufacturing and extractive industries by men. In addition, the labour forms identified in the informal economy, that is, wage work (casual, permanent), self-employment, communal labour, family and child labour, and apprenticeships are also gender segmented. Gender segmentation is important because of specificities in the experiences of policies and livelihood outcomes among the different segments.

The structure of the economy and its labour relations have been reinforced by economic liberalisation policies since the 1980s that have sought to limit the role of government in the economy, to promote the private sector, to loosen the regulation of economic activities and labour relations and to promote free markets in goods and sendees. Well-known policies in this regard included the privatisation of state-owned mines, commercial enterprises and manufacturing industries accompanied by massive labour retrenchments that also affected civil service employment. These policies affected general confidence in the ability of the formal economy to absorb the growing labour force.

From the mid-1990s, the post-colonial state’s hostility and ambivalence toward the informal economy was tempered with a new pragmatism about realising its potential for tax revenue and job creation through a myriad of measures broadly labelled as formalisation. The Ghanaian state’s current position on the formalisation of the informal economy is contained in a new national development policy titled “An Agenda for Jobs: Creating Prosperity and Equal Opportunity for All.” The policy aims amongst other things to “facilitate the transition of the informal economy to formality as a means of removing decent work deficits. Over the medium term, the policy objectives are to: improve human capital development and management and create decent jobs” (National Development Planning Commission, 2017, 75). The proposals set forth in the policy for achieving formalisation include identification of persons, properties and increasing access to financial institutions. These provisions are concerned with the regulation and taxation of economic activities and transactions, as well as improving the ability of businesses to access certain services. On the contrary, another set of interventions, proposed to achieve human capital development and create decent jobs, includes measures such as: “strengthening the linkages between social protection and employment sendees,” “strengthening measures to prevent informalisation/ca- sualisation of jobs in the formal economy” and “enforcing laws regarding social security” among others (National Development Planning Commission, 2017, 75). Thus, the policy has two sets of measures for formalisation, one focusing on the identification of enterprises and persons, and the other, concerned with creating the appropriate conditions for decent work. The outcomes of formalisation will depend on which of these two approaches are prioritised, and the amount of time and resources that will be dedicated to policy implementation. This policy and past efforts to formalise the informal economy through regulation have not received sufficient attention in the literature. In this chapter, we contribute to addressing this gap by exploring the implications of “regulation” of different aspects of informality, particularly the quality of employment and to what extent such regulation creates formal employment. In other words, does regulation lead to the formalisation of employment? This focus is important because “regulation” remains so central to definition of the informal economy. Yet, it has not been examined in its own right and it is often assumed that it will automatically be associated with formalisation of employment.

This chapter examines efforts to regulate the informal economy and how they have been experienced by enterprises and workers in Ghana, with particular reference to two sub-sectors that are an important source of women’s work, contract farming and domestic trading. The study is guided by three broad areas of inquiry: (1) the context of formalisation, which consists of the labour market situation, the gendered patterns of employment and work and government policies towards the informal economy; (2) policies specifically directed towards reducing informality, of either enterprises or workers and 3) the nature of regulation in the two sectors. The two sectors have been selected for their importance for women’s employment in rural and urban Ghana. As well, they have been indirectly targeted by formalisation drives. In the case of contract farmers, it is through donor project conditionalities, while for traders, it has been through longstanding efforts to register them for market tolls and taxation.

This chapter is mostly based on secondary data (e.g. existing large sample surveys, enterprise and economic census data, national income and labour force and employment data) to the extent available. Official data on policies and regulator}' changes have also been used. The examination of contract fanning is based largely on material from four recent studies on contract farming. The chapter is divided into five sections. This introduction is followed by a discussion of Ghana’s economy, highlighting how both internal and external factors have contributed to economic growth and/or stagnation in different periods. The section shows that Ghana’s labour force has expanded rapidly with very high levels of participation in economic activities, with almost equal rates for males and females, especially in recent decades. However, the majority of employed persons are engaged in the informal economy, and the gender analysis of this pattern indicates that women are more likely, than men, to be involved in the informal economy. In Sections three and four, we analyse the relationship between regulation and formalisation of employment by examining contract fanning and domestic trading on questions such as (1) the nature of employment and enterprises in Ghana, (2) approaches to, sources, forms and mechanisms of regulation and (3) implications for formalisation, conditions of work and the quality of livelihoods. Section five concludes the chapter.

Our findings show that non-state actors with links to the Ghanaian state are heavily involved in regulating these two sectors. However, regulation has very little impact on the formalisation of employment. In the case of contract farming, regulation involves agro-processing companies which supply farmers with inputs in return for agricultural produce at the end of the farming season. The presence of these companies in rural communities may generate employment; however, the majority of employed persons (particularly women) are engaged as casual labour. Furthermore, agro-processing companies fail to pay attention to the labour conditions of household members and hired labour, who perform majority of the tasks on farms. The only practice with some semblance of formalisation relates to restrictions on the use of children and pregnant women as labour. However, these practices were primarily driven by global certification initiatives and were only prominent among firms which were export oriented. In contrast, regulation of trade is primarily undertaken by local governments. However, these institutions prioritise the regulation of economic activities over labour conditions and employment relationships. While a large share of local government revenue is generated from taxes on trading activities, traders often complained about the poor quality of market and related infrastructure. Critically, due to current approaches and poor implementation of social policy by the state, many traders, as well as farmers, are left without benefits such as medical care and social security.

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