Africa’s traditional economy vs. gig economy: Which way forward?

In today’s vertiginous economic landscape, Africa is plagued with a massive exodus from its longstanding formal traditional work economy to the informal gig economy. While the traditional economy has been the backbone of the continent’s livelihood for centuries, in recent years, the gig economy has created new opportunities and challenges.

Let’s face it: the future of work is changing, and the change didn’t begin during the pandemic. The roots can be traced as far back as when informal work arrangements were seen as precursors to gig work. At the time, people engaged in informal and flexible work arrangements, like artisanal skills, small-scale farming, and local trading, to earn a living. These activities were often characterised by short-term engagements and were driven by immediate needs and opportunities.

The traditional work economy in Africa has been the backbone of employment for generations. It is characterised by regular hours (9–5), regular pay, various legal protections, registered income taxes, employment contracts, and well-established labour regulations. This sector has been the primary source of employment for many and is often associated with benefits such as job security, health insurance, and retirement plans. The formal sector includes various industries like government, banking, manufacturing, and multinational corporations.

The big question is: If the traditional work style has this much security and benefits, why are we even having this debate? As evidence of massive migration to “gig work” continues to be more glaring, there has to be an explanation for this economic exodus in almost every part of the continent’s workforce.

Like every sector in a typical economic setting, none is without its challenges, for instance, the unemployment epidemic. Africa has a significant youth population, and many of its young people of eligible working age face challenges in finding traditional employment opportunities.

As of 2023, the unemployment rate in Africa is 7.7%. To put this in perspective, the total population in Africa is over 1.4 Billion, and seven per cent of that figure is a staggering 112 million Africans who are either out of jobs, unemployed, or ineligible to work. If that’s not a recipe for an epidemic, what is?

In light of these challenges, “gig work” comes into play because it offers and still offers alternatives for young talents to use their skills and expertise to secure work and generate income. The gig economy has been providing the freedom to work and live more efficiently.

One MasterCard Foundation survey revealed that the gig economy in Africa is growing at an average rate of 20% per year and is expected to reach a staggering 80 million gig workers by 2030.

It’s important to assert here that the phrase “gig economy” is a catch-all term that describes people who are not salaried workers but work independently and get paid for each transaction or “gig” they complete. Experts have often referred to this system as a disruptor in a well-established system.

Growth of the gig economy in Africa

The growth of Africa’s gig economy is often linked to the advancement of technology and the decline of traditional manufacturing and agricultural jobs, which has forced people to seek new sources of income.

The global financial crisis of 2008 also played a role in the growth of the gig economy in Africa. The crisis led to a decline in traditional employment opportunities, forcing people to turn to informal work.

However, there is no doubt that 2020 was a defining year for the global economy. Its effects have reshaped our lives for decades on a physical, economic, and behavioural level.

Pre-COVID, the biggest change to society resulted from technology. Digitalisation offers better flexibility, freedom, and choice. Although the pandemic forced major changes in how we live, at the time, it ushered in total reliance on technology.

Particularly, these changes hit the hardest on the gig economy. It also opened up a lucrative portal for the revenue stream, as millions of people could apply and work as they deem fit.

Digital advancements in technology, deeper internet penetration, and the rise of e-commerce spiked demand for freelancers in various fields like web development, graphic design, content creation, and digital marketing. This increased demand has attracted African freelancers to join online platforms like Upwork and Fiverr. In this dispensation of work, freelancers and gig workers can tap into the global marketplace to offer their skills and services to clients beyond their borders.

“I know the market is hot and the world needs programmers, so for now, this is the best way for me to be creative and earn good money,” says Sheikh Sarr, a 19-year-old university graduate from The Gambia.

Sheikh Sarr took charge of his future by enrolling in a computer programming course at Banjul’s Indian Institute of Hardware Technology. After mastering five programming languages in under 10 months, Sarr has joined Africa’s booming gig economy. Setting up profiles on Fiverr and Upwork, he is leveraging his skills and creativity for lucrative freelance work. With access to affordable broadband, Sarr dedicated nighttime hours to learning and coding. Confident in the demand for programmers, he sees freelancing as a pathway to financial success while fueling Africa’s thriving tech market.

According to research by KEPSA (Kenya Private Sector Alliance), over 1.2 million people, which is 5% of Kenya’s adult population, now perform one form of gig work or the other.

“The shift towards remote work during the pandemic has led to an increase in demand for certain types of online work, particularly in the tech industry,” says Fabian Stephany, a research lecturer in AI & Work at the Oxford Internet Institute.

African governments are proactively developing initiatives to capitalise on the potential of the expanding gig economy in Africa. In Kenya, for instance, the Ajira Digital Clubs initiative equips young people with digital skills to compete in the global marketplace.

More so, policymakers are poised to mitigate the challenges plaguing the vast informal sector by promoting upskilling through gig work to enhance the workforce’s overall skill set and employability.

Do African women stand a chance in a male-dominated gig economy?

According to the African Development Bank, the male employment-population ratio was estimated at 69.2%, compared to a female employment-to-population ratio of only 39.2%.

Olayinka David-West, a professor of information systems at the Lagos Business School, says, “The gig economy in Africa has provided a lifeline to many African women, offering opportunities for financial autonomy and empowerment.“

Working on online gig platforms enables women to earn higher incomes, especially if they collaborate with foreign clients and receive payment in foreign currencies. This is particularly advantageous in countries with unstable economies or high living costs. The gig economy offers an alternative path to financial independence for women facing limitations in traditional jobs, where earning potential may be restricted.

Anastasia Onyekaba is a chemical engineering graduate from Lagos, Nigeria, who discovered her passion for graphic design while creating digital birthday cards. Facing a depressed job market in Nigeria, she ventured into Upwork as a UI/UX designer and front-end developer during the COVID lockdowns.

Overcoming challenges, including low pay and clients exploiting her inexperience, she gained confidence and attracted higher-paying clients, including one from Japan who praised her work. Due to Nigeria’s problems with infrastructure, she moved to Dubai for a more conducive freelance environment. Now charging $50 per hour, Onyekaba enjoys financial freedom and plans to invest for a promising future.

“There’s no end to the learning and research. But right now, I am young and have the energy to save up and dabble into investments from the money I earn from Upwork, which can propel me to even greater financial freedom in the long run,” says Onyekaba.

Despite the challenges…

The African gig economy continues to thrive. In a twist of events, Africa’s working-age population remains a prime target for globalised digital talent as Europe and America struggle with an ageing workforce and high labour costs. This outcome has positioned Africa’s digital talent economy for further growth and development.

The sooner we embrace gig work, the better

The success of gig work in Africa’s foreseeable future depends on embracing and enhancing the working conditions of independent workers. Although the informal sector has driven employment growth, it lacks the productivity and employee protections offered by the “stable” traditional formal economy. Consequently, gig work presents increasing challenges for Africa’s youth bulge population seeking better livelihoods.

While we face challenges like limited access to resources and biases towards African gig workers internationally, we must also address challenges like financial exclusivity from our local financial institutions. If we’re being honest, if our aim is for a progressive Africa, we must first internally address the issues plaguing gig workers. As they say, charity begins at home.

With a mission to bridge the existing financial inclusion gap for the gig economy, Imalipay, a Kenyan–Nigerian fintech startup, took a proactive step to offer all financial inclusivity. Imalipay is strategically tackling financial exclusion plaguing gig workers in Africa by their existing traditional financial institutions.

“Gig workers are typically deemed high risk, and as a result, have little to no access to financial services. As we build Imalipay in our markets, we understand that our customers are often neglected and underserved by traditional financial institutions,” Sanmi Akinmusire, co-founder of Imalipay, said in an interview with The Papers Magazine. We’re breaking the barrier to access by rolling out multiple products that meet the needs of various gig workers and providing inclusivity, affordability, and availability to our customer segment. We have personalised access to financial services, turning their pain points into products. We offer these services to gig workers directly or via their platforms through one API, which opens them up to all our services.”

He further stated that the ultimate goal is to improve the financial well-being of gig workers by introducing access to finance, democratised payment regimes, and insurance. “We’re offering more accessible and affordable financial services as a one-stop-shop catered to the nature of their work. Our savings and insurance services are aimed to buffer our customers from income shocks, providing them with a financial safety net,” says Sanmi Akinmusire.

Which way forward for Africa?

Despite how far we’ve come, there are still so many grounds to cover. For instance, policymakers and digital platforms should strive to provide protections and benefits to gig workers resembling those employees enjoy in the traditional job economy. Also, there’s a lot we can learn from the experiences of Europe and America of how they embraced inclusive solutions for their prosperity.

If we can achieve this, a new portal will be opened for a prosperous future for Africans in the Fourth Industrial Revolution.

Finally, can we say that the benefits of gig work outweigh the drawbacks? Is gig work the antidote to Africa’s struggling economy? Who is coming to save us? And if no one is, what other initiatives can we adopt so that gig work can lead to Africa’s economic transformation?

Marvin Uzor is a tech enthusiast with 10 years of experience in copywriting. He has worked with hundreds of businesses by helping them convert visitors to paying customers with his copies.