Investigating The Characteristics, Challenges And The Management Of Informal Businesses In Informal Settlements And The Central Business District Of Lusaka

This research investigated the characteristics and challenges of the informal business sector, its management and linkages with the formal business sector in Lusaka. The research also investigated why the informal business sector remains unregulated and inhibited from growth and integration into the formal economy.

The research was conducted in five informal settlements in Lusaka and in the Central Business District (CBD). Primary data was collected from 300 informal entrepreneurs while secondary data was collected from the Ministries of Local Government and Housing (MLGH), Ministry of Commerce, Trade and Industry (MCTI), the Central Statistical Office (CSO) and the Ministry of Finance and National Planning (MoFNP). Other secondary sources were the United Nations Development Programme (UNDP), the World Bank, the International Labour Organisation (ILO), the Global Entrepreneurship Monitor (GEM), the Lusaka City Council (LCC) and the Zambia Chamber of Small and Medium Business Associations (ZCSMBA). The data was analysed using Microsoft Excel for data presentation and interpretation. 

The research revealed that the informal business sector is linked to the formal business sector in Zambia. The research also revealed that the informal business sector lacks access to working capital, technical skills, quality control and other business development services. The sector is characterised by weak and unstable links to sustainable value chains and markets, while there are no Government structures to manage and regulate the sector. 

The knowledge gap identified is the lack of systems or models for managing informal businesses in Zambia. The other gap found in literature  the absence of government investments in the informal sector in Zambia. The research found that all sampled informal businesses in Lusaka are not registered as business entities, they do not pay income taxes from their earnings, they evade and avoid paying other fees and levies and operate without any legally established business regulations. The research further revealed that there has never been any national study on the informal business sector in Zambia to appreciate the sector’s size, operations and character and how the sector can be supported to grow and contribute to the national economy given the sector’s business connections with the formal sector. In addition to this, there are no specific laws in Zambia to govern informal businesses. Several laws such as the Nuisance Act, Trades Licensing Act, Public Health Act, Markets Stations Act, are in place but these laws only regulate registered businesses.  The research concluded that the informal business sector is important as it creates employment and contributes approximately 48.9% of Zambia’s GDP. 

The research recommended that, the government conducts a national study on the informal sector in Zambia to establish its size and character and formulate policies to invest financial and technical resources into the sector. The government should develop a bespoke informal sector tax system that would enable informal entrepreneurs to pay tax, which would underpin GDP growth which would be realised through the establishment of informal business sector incubators and business clusters.