In Africa, the informal economy largely arises from exclusion from the formal and modern sectors. This means that the primary drivers of informality stem more from a lack of alternatives for entering the formal sector than from a deliberate choice to evade taxation (ILO, 2018). The macroeconomic root cause of the informal economy is primarily the mismatch between the surplus of low-skilled urban labour—prompted by natural population growth and rural-urban migration—and the limited growth of job opportunities in the modern sector. This situation is exacerbated by significant public and private sector retrenchment, the active downsizing of formal employment due to economic restructuring, and the resulting unemployment and declining real wages.
In light of the above, GGA-HoA engaged in public dialogues to illuminate the overall state, characteristics, and governance practices that influence the informal economy in Ethiopia. Focusing on Addis Ababa, the dialogue contextualises governance experiences at the subnational level. To facilitate this, three discussion papers were prepared by researchers and experts in the field and presented at a public dialogue organised in collaboration with the Addis Ababa City Trade Bureau. These papers were revised based on feedback from reviewers and on inputs gathered during the dialogue, which brought together governmental and non-governmental organisations, opposition political parties, informal trade operators, and researchers. The focus and key findings of each paper are summarised in this report.
