Safaa’ is a middle-aged housekeeper from the working-class Cairo neighborhood of El Marg. She is what is categorized as an informal laborer and daily wage earner in that her line of work does not entail a contractual and legally recognized agreement with an employer. She does not earn a monthly salary, is not given formal paid holidays or paid sick leave and earns her income in cash from clients who employ her casually to clean their houses.
Due to the very nature of her work, Safaa’ cannot work remotely and does not have the social protections that ensure financial compensation for any days of work missed thanks to circumstances beyond her control. If she cannot reach a client’s house for any given reason, be it sickness, weather conditions, or even if a client cancels an appointment, Safaa’ will lose out on the payment she would have otherwise received.
This is the economic precarity that people who are self-employed, work informally and earn their wages on a daily basis like Safaa’ live in.
Additionally, legally recognized enterprises in the formal private sector also employ many on an informal basis, without contracts and not providing social protections and insurances such as pensions.
As Coronavirus Disease 2019 (COVID-19) cases have risen in Egypt, several measures have been taken to slow the spread of SARS-CoV-2, the virus which causes the disease. These measures have included the shutting down of the country’s airspace, the closure of schools, universities and non-essential businesses such as cinemas, casinos and hotels. An 11-hour overnight curfew from 7 pm to 6 am was initially imposed which was then reduced by one hour to 8 pm. It was further reduced to start at 9 pm for the month of Ramadan.
While many businesses in the formal private sector have been able to switch to remote working or give their employees paid leave or reduced salaries, such protections and luxuries are not guaranteed or even possible in the informal sector.
As Egypt’s measures have restricted movement and economic activity, they have had significant impacts on informal workers.
The informal sector – some key stats
According to the Egyptian Center for Economic Studies (ECES), it is estimated that the informal sector contributes between 30 to 40 percent of the country’s Gross Domestic Product (GDP) and accounts for 63 percent of total employment when informal activities in the agricultural sector are included. Take away agricultural activities and the informal sector employs around 50 percent of Egypt’s working population.
In a webinar hosted by the American University in Cairo’s (AUC) John D. Gerhart Center on the informal sector, Abla Abdel Latif, PhD, executive director and director of research at the ECES, said that 90 percent of micro and small enterprises in the country are informal, comprising of industrial workshops, agricultural activities and trade, adding that 60 percent of people who work in the informal sector are self-employed, with the remaining 40 percent working for others.
How is COVID-19 affecting the informal sector?
“I have personally been affected,” Safaa’ says. “I could not pay my monthly debts or the instalments on a fridge I bought.” She has had to impose on herself a strict regime of austerity. “I keep every piastre for food. I have foregone a lot of things, even some things which might be a little urgent. I now put all my finances towards food, drink and my children’s education.”
“Informal workers in the daily wage category are no longer able to secure daily work in the manufacturing and service sectors. They have become disconnected from the networks which provide them with daily job opportunities,” Laila Iskandar tells Business Forward, a founding member of CID Consulting, and Egypt’s former Minister of Urban Renewal and Informal Settlements. “Curfews limit their mobility and limited transport further complicates this,” she adds.
Iskandar says that the informal sector provides products that are affordable to people on limited incomes. The decline of both incomes and informal manufacturing are compounding factors which will increase vulnerabilities for poor consumers and poor manufacturers. “This is estimated to impact 2 million families.”
Safaa’ echoes this when she discusses how the curfew has severely limited trade and business to take place in her home district. “The curfew might be during the night, but a lot of things are scheduled during this time. All the shops that open in the morning get their supplies during the night. Some shopkeepers get their supplies at 1 am, others get them around Fajr. The curfew has stopped all that, and that has effectively stopped other related activities.”
Mohamed, a driver of a Suzuki bus, a very small kind of bus that offers quick and affordable transport to Egyptians commuting over distances shorter than the more ubiquitous microbus, tells Business Forward that his income has almost all but dried up since COVID-19 hit the country.
“The work has almost completely stopped,” he says. “Instead of the average three passengers, I hardly get any passengers now. I came here with only one passenger.”
In the John D. Gerhart Center’s webinar on the informal sector, Abdel Latif claimed that the sector was hit by the COVID-19 crisis in the same way as the formal sector but will not be able to absorb the shock in the same capacity as former crises, such as the 2008 global financial crisis and the political instability Egypt faced from 2011 to 2013.
Speaking to Business Forward, Mohamed Abu Basha, head of macroeconomic analysis research at EFG Hermes, also believes there will be few differences in how COVID-19 will affect the formal and informal sectors. “The impact of this particular crisis” on the informal sector “will not differ much from the formal sector,” he says. “The curfew affects everyone in the same way. The informal restaurant is suffering just as much as the formal restaurant.”
Instead, Abu Basha says there will be differences between different industries, rather than between the formal and informal sectors as a whole. “If you own a factory, the factory can operate at night. With the curfew, it can sort out work shifts.” Due to a formal factory being legally recognized, it can obtain the necessary legal permissions to operate during the curfew.
“The informal sector might not have the same flexibility because it will not be able to get the legal permissions because it is not officially recognized.”
Abu Basha believes the main difference will be the respective sectors’ capacity to absorb COVID-19’s economic shocks. “The informal sector’s capacity will be weaker because it does not have any social protections,” which the formal sector has.
“For people who work in a [formal] company, their salaries might get reduced, but for people who work in the informal sector, their markets have closed, restaurants and cafes have closed, so their sources of incomes have vanished,” he says. “They do not have any alternatives.”
However, other sectors of informal work have almost been immune to the effects of COVID-19, confirming Abu Basha’s claims that the crisis is realistically going to have more nuanced impacts depending on the type of work.
Ahmed, who sells bananas from his pickup truck on the side of the street, says his income has not changed. “It [COVID-19] has not affected our line of work much. There have been slightly less buyers but that is it. The curfew has not made a difference. The buyers you used to see at night now all just come during the day.”
Government efforts to aid informal workers
According to Iskandar, the central bank has postponed payments of personal loans and mortgages.
The most well-known aid program came in March, however, when the state-owned newspaper Al-Ahram reported that the Ministry of Manpower was going to start handing out EGP 500 in cash to seasonal workers whose livelihoods had been affected by the COVID-19 crisis.
In another news report, Al-Ahram also said the cash handouts will last for three months, providing beneficiaries with a total of EGP 1,500.
However, there has been some ambiguity around the program’s implementation mechanism and its conditions.
The former Al-Ahram article reported the manpower minister, Mohamed Saafan, saying that seasonal workers can apply through the ministry’s website and by calling or sending a message to a number through the smartphone-based internet messaging service, WhatsApp. Saafan also said that applications received in person would not be processed, but workers could also apply in person at a post office.
On April 14, the cabinet announced a fundraising initiative to “support irregular workers affected by restrictive measures to limit the spread of the coronavirus” while also assisting low-income families.
According to the initiative’s official website, it aims to raise EGP 1 billion. As of May 13, EGP 5.9 million have been collected from a total of 55 donors.
In the website’s Frequently Asked Questions (FAQs) section, under the question of how donors can be reassured that their donations will reach “those who deserve them,” the initiative says that they will cross reference an applicant’s information with the manpower ministry. No other details were provided.
“The talk on the television from the manpower ministry is telling us to go on the internet to record our details. Most of these people [informal workers] do not have internet access. Do you think that a simple laborer, who does not even have a smartphone or even knows how to use one, will be able to access the internet and go on the [ministry’s] website?” Safaa’ asks rhetorically. “Of course not.”
Regarding the government’s monthly EGP 500 aid program, Ahmed the banana seller says “I personally did not apply for it. I do not need it as long as I can work. It is better off going to other people who might really need it.”
Amr, another Suzuki bus driver, thinks the government aid program is a good initiative but “I applied and until now, they keep telling me to renew my application. I applied several times and I still did not get my EGP 500. Not even my wife or anyone in my neighborhood.”
He concedes that he did hear of some people receiving the aid but did not understand the criteria of their selection. “Colleagues of mine did in fact get aid but it seems like it is down to luck or something,” he shrugs.
Dina Abdel Fattah, a professor of economics at AUC who specializes in labor economics, says that the government’s aid initiatives are at least a “step towards financial inclusion and formalizing the informal sector.”
However, she concedes that the prospect of workers registering themselves in official databases may bring mixed future consequences. “Officially recording oneself is expected to deprive many of this cash subsidy,” because the government might ponder “weighing the monetary value of the subsidy against the expected costs and benefits of this recording in the post COVID-19 era.”
Abdel Fattah adds that “the situation of these workers (especially the ones whose jobs were really affected by the lockdowns) is very tricky and they are facing major decisions now whether to record oneself and receive cash subsidies not knowing what this means for them going forward, or to just bear the troubles and depend maybe on social safety nets, or informal donations and subsidies [of other kinds].”
Iskandar proposes that the central bank provide interest free loans or even outright grants to the 2 million families she says will be affected by the COVID-19 crisis. She says the cost of this has been estimated to be EGP 5.7 billion, which would “constitute 5.7 percent of the EGP 100 billion aid package the government has announced” as its COVID-19 emergency response package.
“A more long-term policy is to re-classify informal workers who have never been affiliated as employees of any formal enterprise as ‘irregular worker’ (‘amaala gheir montathema) instead of their current status as ‘lacking work’ (bedoun ‘amal). The latter classification on their national identification cards deprives them from social protection in times of crises like these.”
Safaa’ proposes that payments of utility bills be postponed. “The simplest thing that can be done is to not collect utility payments. I am not even suggesting getting exempt from paying them but at least pay them over the following months.”
She also proposes that the government increase support through one of its already-existing social support programs: the monthly subsidy box. “Nothing has been added to it,” Safaa’a says. “It is still the same bottle of cooking oil and kilogram of sugar. The amount can easily be increased so that it can support those who are staying at home for a month or two.”
“Jewel in the rough”
A possible silver lining in the current crisis is the urgency that it has forced on the government to pay attention to the informal sector, according to Abdel Latif.
She believes that the government’s realization of how serious the crisis is may lead them to expedite the process of formalizing the sector, as well as encourage them to improve working conditions in the formal sector to attract more prospective employees, a key issue which discourages Egyptians from seeking formal employment.
Ultimately though, the informal sector could prove to be robust in the long-term. In the webinar, Abdel Latif said “they will survive better than what many people would expect” because their biggest strength is that they are “extremely flexible.” She commended their ingenuity and resourcefulness in the face of difficult circumstances and obstacles. “It is a shame we do not benefit from this intelligence.”
She added that their integral role to the economy is being increasingly recognized by the government, which is why they are making efforts to support the sector during the current crisis.
“They are a jewel in the rough, for sure.”