The Integration of Youth into the Informal Sector: The Kenyan Experience

Round Table on The integration of youth into working life,
Second International Vocational and Technical Education Congress, Seoul, Korea April 26 to 30 1999

Ahmed K. Ferej
Moi University, Eldoret, Kenya

 

This paper discusses the transition of young people to work, particularly into the informal sector of the economy in Kenya. The informal sector in Kenya is now responsible for absorbing the larger proportion of new entrants into the job market. To understand this process this paper examines the development of the informal sector in Kenya and recent trends in its evolvement; entry into the informal sector and the characteristics of young people entering the sector; the training process in the sector; and the implications for education and training.

A 1972 landmark ILO study in Kenya confirmed the existence of a parallel economy dominated by small businesses that absorbed a large number of persons that would otherwise be recorded as unemployed by economic surveys. This sector that has been referred to as the informal sector to distinguish it from the modern sector is described as consisting of "... all small-scale activities that are normally semi-organised and unregulated, and use simple labour-intensive technology... undertaken by artisans, traders and operators in work-sites such as open yards, market stalls, undeveloped plots, residential houses and street pavements... not registered with the Register of Companies, they may or may not have licences from local authorities for carrying out a variety of businesses." The informal sector has been efficient at utilizing waste materials such as old tires, scrap metal, etc. to produce goods and provide services that otherwise would have been imported or would be too expensive for low income sectors. These small businesses are often started by individuals with little capital and with virtually no support from the government or Non Governmental Organizations. A government report attributes the notable growth of the informal sector to "... ease of entry into and exit from the sector and little capital investment... abscence of registration and other legal formalities, and gradual shift of labour from subsistence farming to informal sector as the economy increasingly becomes market oriented". Unemployment and underemployment is another particularly strong reason to go into self-employment in the informal sector.

While the government and the NGOs have been satisfied at the ability of the informal sector to absorb excess labour force in the country, there has been concern regarding how most of these enterprises stagnate at the bottom and do not show signs of growing into medium and large scale enterprises. Some of the difficulties that small and informal businesses face are caused by the legal structure, others are due to unavailability of capital to develop businesses, while others are related to the lack of appropriate skills to operate a business. In Sessional Paper No. 2 of 1992, the government has indicated that its role in the development of the sector will be one of facilitator rather than that of interventionist. This is due to the fact that there has been concern that in attempting to intervene to help it ‘grow’ its dynamism, ruggedness and innovativeness may be affected. The enabling environment the government has already established or proposes to establish includes investment allowances for starting new factories outside the major cities of Nairobi and Mombasa, certain duty exemptions for the purchase of capital machinery for small enterprises located in rural areas, support for technological assessment of innovation, developing market incentives to encourage subcontracting to small enterprises and reducing the harrassment of the entrepreneurs operating on public land or sites. These measures are not exactly new, however whether they will benefit starting entrepreneurs without any credit worthiness is doubtful. Several NGOs and local banks have attempted to assist small sector entrepreneurs to access credit for start ups, and expansion of their businesses.

The population of Kenya was projected at 27.5 million in 1995 at an annual growth rate of 2.7%. It is estimated that about 60% of the population of Kenya is under the age of twenty. The total number of employees in the modern formal sector grew by only 3.1% only in 1967 while the informal sector expanded by 18% in 1966 and 13% in 1998, namely 2,986,900 persons. Thus more and more school leavers now join the informal sector which is rapidly growing and accounts for over 63.6% of the labour force. The other ones who enter at the higher-tier level of the informal sector include retired workers (retirement age in Kenya is 55 years) and retrenched workers.

Statistics show that the largest number of youth from each level of the educational system will not find a place in the next higher level and will not find a job in the formal sector. Knowing this, the educational system in Kenya was redesigned in 1985 with the objective of providing young persons exiting at each of the three levels with sufficient knowledge and skills to enter self-employment. The educational system does not have provision for each child exiting from the lower level to continue to the next, therefore there is a fierce competition to perform well in national examinations that are offered at the end of each cycle to ensure eligibility for the next cycle. The pressure to perform well in examinable subjects has also forced schools to concentrate on only those subjects that are valued for progression to the next level. For example English, Mathematics, and the Sciences rather than the vocationally oriented subjects that were introduced to offer students skills to enter into the work world. An added problem faced by the schools has been the difficulty to build appropriate workshops and equip them with adequate tools as well as procuring materials needed for practical exercises. Because most development and recurrent costs are borne by parents, disparity was soon evident between different regions of the country and even within the same region.

The failures of the new education system in preparing students for the work world makes the system of apprenticeships, where young people learn skills to develop different trades, a crucial item for their employment possibilities. Two systems of apprenticeships were developed in Kenya as a result of the presence of the British and the Indian craftsmen. The British attempted to use the school system to create skilled workers while the Indians inadvertently and informally created skilled workers through on-the-job training. An important contribution of the informal apprenticeship system is the opportunity for large numbers of youth to obtain skill training with little cost to both the learner and employer, and at no cost to the tax payer. It would be impossible for the current training capacity to absorb all the youth who are now obtaining their training from the informal apprenticeship system.

In 1973 the government enacted legislations to formalise the apprenticeship training system through a comprehensive National Industrial Training Scheme for the training of craft apprentices. This apprenticeship program of three to four years of duration had on the-job-training and theoretical training at government Institutes or Industrial Vocational Training Centers. The act also provided wage guidelines for apprentices while on training. The entry point was stipulated as a minimum of two years of secondary education. The trainees would be tested in practical and theoretical aspects of the trade. To encourage industries to train their workers, those who provided training for them would be entitled to a reimbursement from the fund at the end of the year and would have no obligation to retain them at the end of the four years of apprenticeship. Presently a very small number of youth obtain training through this system and many of them nevertheless find themselves in the informal sector because the industries are not obligated to keep them at the end of the training.

The formal apprenticeship training system has been critized because the contents offered by technical institutions are often transplanted from abroad without being adapted to local needs and conditions. Therefore the graduates tend to be versed in operations and processes that are non-existent in many small enterprises less so in the informal sector or self-employment. Most of the learning in apprenticeship training takes place on the job. That is why the Industrial Training Act mandates vocational college attendance for about six months in each year. The learning process for the apprentice involves observing or actually working on tasks. The breadth and depth of the Craft Master´s knowledge and skills as well as those of the other journeymen will, to a large extent, determine the knowledge and skills the apprentices acquire. Those who are trained in a small enterprise may be more able to handle a wide range of jobs as these organizations have to undertake many different job activities to survive. Since the lack of a large capital makes former apprentices who start their own business begin with a simple environment with small tools and equipment, those who acquired their skills in an informal training system will be favoured. Although learning how to run a business is usually outside the immediate requirement for most of the training of the apprentices, simply observing what is going on in the work environment can teach many of them some of the skills required to attain entrepreneurial knowledge. This possibility is easier for those who work in a small business since they are closer to business activities and have more possibilities of observing them and even may have the opportunity to conduct work negotiations on behalf of the owners.

The importance of the entrepreneurial knowledge has also been accounted in the formal training system. The Entrepreneurship Education (EE) project was established in 1989 and has been responsible of organizing the training of high level human resources in entrepreneurship education and the development of curriculum material. In addition, the EE project has been responsible for holding numerous workshops and seminars in the country to orient various educational leaders on the role of entrepreneurship education. Small Business Centers have been established in all Vocational Training Institutes to guide those wishing to start their own businesses and to guide those in existing businesses in developing growth strategies.

The Ministry of Research Technical Training and Applied Technology (MRTT&AT) is responsible for the development of both the informal sector and the technical training in general. Although to date little contact exists between the Vocational Training Institutes (VTI) and the informal sector, there is evidence that there are great opportunities for mutual gain for the two sectors. By providing flexible training programs in its Vocational Training Institutes, the MRTT&AT can have a multiplying training effect on the quality of training in the informal sector with the introduction of flexibility in scheduling, course offerings, credit accumulations and testing that can make the program attractive to the trainees of this sector. Another incentive could be making it easier for informal sector operators and apprentices who have been trained to obtain development loans. Also students of the VTIs can seek internships in the informal sector and be provided of live and active business environment to acquire both technical and entrepreneurial skills while offering at the same time a new source of income as well as recognition to the informal sector.

The current initiative of the government to articulate official policy related to this matter is one where it is collaborating with the World Bank to implement the Micro and Small Enterprise Training and Technology Project (MSETTP). The agreement was signed in 1994 and it is financed with U$S 24 million credit provided by the World Bank. The objective of the project include: providing skill upgrading for about 60,000 enterprises, increase access of small scale entrepreneurs to technology, marketing information, and attendant infrastructure, and improve the policy and institutional environment. The Voucher Training Program was initiated in 1997, and by mid 1998 about four thousand vouchers had been issued on various types of training that ranged from technical skills to managerial skills acquisition. The World Bank project is expected to attempt to bridge the gap between informal sector training and formal training systems. Already a large number of youth in the informal sector have obtained training through the Bank financed voucher system. It should be noted that most of the technical training that has been conducted to date has been by Master Craftsmen or private training providers rather than the VTIs. As more youth with an ever increasing level of formal education enter the informal sector so will it be easier to integrate training within the sector with the formal training providers such as the VTIs.

 

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