Why Are 97% of Businesses in Senegal Illegal?
Hint: It's Not Because They're Harmful
Of all the companies in Senegal, maybe 3 percent operate legally.
You heard me right. According to studies conducted by the National Agency of Statistics and Demography of Senegal (ANSD), “the proportion of informal economic units is close to 97%,” and “96.4% of the active population is in the informal sector, including the rural world."
In other words, nearly 97 percent of companies operate without formal business status.
It’s not because they’re sketchy. Or dangerous. Or harmful. It’s because it’s next to impossible to start a formal business in Senegal, much less keep up with all the paperwork, taxes, and requirements that follow.
My company in Senegal has a formal status, but after going through the hell of obtaining that status, I have much more sympathy for the 97 percent.
In 2004, I founded my first Senegalese company: Adina, a beverage brand focused on bissap, a traditional Senegalese hibiscus drink. My goal was to promote our indigenous heritage, and in doing so, protect the livelihood of the people (mostly women) who sold hibiscus.
Simple, right?
WRONG.
I had no idea how many challenges I would face. And I especially had no idea that my basic goal of creating jobs was one of the biggest battles for African entrepreneurs.
Let me explain. As I mentioned, only 3 percent of companies operate in the formal sector in Senegal. The rest—the 97 percent of companies that operate informally—can only get so big before the government notices and starts creeping in with threats.
That means that many of the legally legitimate companies are French multinationals, which have close ties to those in political office.
“Why’s that a problem, Magatte?” you may be wondering.
Well, Senegal has some of the most protective laws for employees of any country in the world—on paper. But despite those endless reams of words, the employees are treated like crap.
And they’re treated like crap because they can be. “Oh, you have a complaint?,” bosses say. “There’s the door. There are a hundred people waiting to grab your job.” And it’s true.
Some of these employees haven’t been paid for four months, eight months, even a year. They’re verbally abused and work in conditions you can’t even imagine. But they’re still there, and they’re still complaining. They go to their union and they complain. Nothing ever changes, but, at the end of the day, no one will quit!
That might sound perplexing to someone in the West, but consider it from the employee’s perspective. Where else would they go? With so few opportunities and with terrible treatment running rampant, what hope do they have of finding a better situation?
They’d rather suffer for a “good” job than go back into that vast state of uncertainty where 97 percent of Senegalese businesses exist. For many, security overrides dignity.
Now, let’s say that you see all this mistreatment and want to make it better. What’s your first reaction? Most people would say, “The government has to crack down even more! More laws!”
Nope. Asking the government to step in will only make the problem worse. Excessive regulations are the #1 reason why so few companies are willing to open up for business in Senegal—meaning that overregulation is the reason why there aren’t enough jobs in the first place.
Adding more regulations on top of that? You’re only going to make it harder for legitimate entrepreneurs to get their businesses off the ground.
Inflexibility erases possibilities.
Your everyday African entrepreneur (and frankly, most entrepreneurs everywhere) doesn’t have the time, money, or resources to navigate the labyrinth of regulations.
Who does? You guessed it! Powerful multinationals with armies of lawyers.
Adding layers of bureaucracy to an already complicated system doesn’t protect anyone. It further limits Africans’ power to create companies, jobs, and opportunities for fellow Africans.
—Magatte Wade
Of course, the real tragedy in all of this—as if this weren’t tragedy enough—is that people, seeing White French multinationals controlling the economy, come to the conclusion that “capitalism” is the problem.
Noooooo!!!!! Capitalism isn’t the reason we Africans suffer.
We Africans are poor because we have not been allowed to create companies—precisely because of endless layers of government bureaucracy.
Starting Adina gave me a graduate-level education in the problems African entrepreneurs face. And my story only begins to scratch the surface. Is it any wonder that Africa is poor when it's nearly impossible for passionate African entrepreneurs to create jobs?
The system is broken. And as long as these creaky, excessive, oppressive regulations continue to exist, Africans will not prosper.
But here’s the good news: we can change things.
We can overhaul the system and make it easier for African entrepreneurs to do business by creating Startup Cities that allow entrepreneurs to create jobs, innovate, and thrive. Instead of adding more complications and more red tape, we must set our sights on Africa’s Bright Future—a future filled with jobs, opportunities, and prosperity for all.
Magatte, you are saying we can overhaul the system to make things better for businesses and employees. Do you have a plan for that? Forgive me. You have probably written about this elsewhere. Would you direct me? Or could you name a couple of steps that are foremost? Thank you.
What’s perplexing is that there is talk coming from Africans that the west should be doing business investment on the continent. So many great opportunities are being missed to profit allegedly and to some extent even an implication of a moral obligation to help with economic devpt, via business instead of aid. But this is the reality, so why would anyone do that