The Implications of COVID-19 on the Shadow Economy

Inevitably, people trading in the informal sector will be one of the hardest hit groups due to COVID-19. Given that businesses in the informal sector tend to be unregistered, many of them do not pay tax and so are generally not eligible for structured economic rescue packages/bail-outs. Despite the fact that informal sector traders operate in the “shadows”, a substantial number of these businesses have affiliations to registered and well-governed associations (for example Co-alition of Informal Economy Associations of Eswatini, Eswatini Women Economic Empowerment Trust, just to name a few) under different product lines, such as domestic workers, garment workers, street vendors, waste pickers, amongst others. Policy makers need to ensure that they make operating in the formal economy an attractive business strategy for every entrepreneur. This will ensure that even though some businesses may continue to start in the informal sector, they will in turn deliberately endeavour to grow out of it and graduate into the formal economy to expand the country’s private sector. Ignoring the informal economy would not be a wise economic policy option for the Kingdom of Eswatini. The informal sector acts as a crucial component of the formal economy, providing income for farmers, food for low-income earners, and cheaper resources for urban dwellers. In fact, ignoring the informal sector will simply grow it even bigger particularly now during and after the COVID-19 pandemic when many people would have lost their jobs or had their livelihoods severed because of the slowdown in economic activities.