In Summary
  • The informal economy evolved in its own dynamics and created its own institutions to survive in the racialised and elitist economy.
  • Jua Kali could very well pay taxes — just as they do tithe and other obligations — had the government been fair and just in its policies.

The government has seen it fit to widen the tax bracket to include Jua Kali, a sector comprising self-reliant individuals who create jobs for themselves with limited resources to help them and their families.

But how did we arrive at the fact that small and medium enterprises (SMEs) do not pay tax, hence the Turnover Tax (TOT)? This has deep historical roots of racialised and elitist economies in the colonial and postcolonial policies.

In 1928, the first bylaw that classified businesses in Nairobi labelled all African businesses as hawkers while European and Asian counterparts were the normal and proper ones to be given space to work in.

Africans were to walk with their business or given temporary places for occupations. The bylaw has since been revised but the spirit has not changed.

The underlying fact was that the Africans belonged to the rural areas (where they would eventually return).

Their form of economy was only to allow them to get by; not the mainstream businesses to generate revenue and employment.


This created the base for a dual economy in the city: formal and informal and temporary. Efforts in the 1950s to accommodate Africans in the formal businesses did not integrate the two models of business.

The postcolonial State was eager to modernise. But it did not look into the informal businesses as a solution for economic development; it created parastatals and invited foreign investors to engage in import substitution business.

Parastatal and foreign investors became the mainstream businesses, which were supposed to create revenue and jobs.

The informal economy was a stopgap measure where the reserve army of workers could subsist before the benefits of modernisation could be realised.

With the structural adjustments in the second phase of the postcolonial State in the 1980s and ‘90s began the downfall of import substituting industries and parastatals. Their products could not survive the competition from imports.

The informal economy, however, got an impetus; the UN viewed it as the safety net for the workers who were being retrenched and suffering communities.


Prof Macharia Kinuthia observes that the new arrivals found a home in the informal economy, which had also entrenched itself in the city.

The ideological position of the informal sector as a community economy where individuals help themselves did not, however, change.

The government never considered it as mainstream; it hoped that the formal economy would recover and continue to generate revenue. Hence, the informal economy continued to entrench itself in the city.

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