Corruption and the informal sector in Sub-Saharan Africa

In Sub-Saharan Africa (SSA) the informal sector is a major engine for employment, entrepreneurship and growth. The high incidence of corruption is another distinctive feature of SSA. According to the last Transparency International Corruption Perception Index almost 70% of SSA countries ranked register score below 3, indicating that corruption is perceived as rampant. However, to the best of our knowledge the corruption and informality nexus has never been explored in comprehensive empirical fashion in this area of the world. It had been extensively analysed in Eastern Europe and the former Soviet Union countries, but with a particular objective: explaining the rise of unofficial activities that had coincided with the transition process. The SSA context is completely different: operating in the informal sector is rather the rule than the exception and no recent systemic change may explain this fact. Thus, concepts used to analyze the informal sector elsewhere are not necessarily applicable to SSA, or at least, their focus may be less relevant in this context. This paper makes use of a unique data set, called 1-2-3 surveys, so as to analyse the links between corruption and the informal sector in seven major Western African Economic and Monetary Union (WAEMU) cities. More precisely, we use the phase 2 of these surveys which interviews heads of informal production units (IUP) and aims at assessing their principal economic and productive characteristics (production, value added, investment, financing), their difficulties and their demands for public support. A detailed analysis of these data leads to three conclusions. The informal economy is rather an issue of weak law enforcement than of corruption, or in other words of a will to avoid the predatory behaviour by government officials seeking bribes from anyone with officially registered activities. As a consequence, only a minority of IPUs (4.2%) declare they had to pay bribes the year before the survey. However, our studies reveals that experience of corruption reduces drastically firms willingness to register their activities.