Informality matters: unveiling the unseen drivers of sustainable food systems

On October 12th, 2023, attention will turn to the indispensable role the informal private sector plays in creating sustainable and inclusive food systems. This year, SNV is poised to illuminate this discourse, hosting a compelling 90-minute session titled ‘Informality matters: the vital role of the biggest private sector in creating sustainable food systems’ during the Netherlands Food Partnership (NFP) World Food Day Event in Amersfoort, the Netherlands. 

In anticipation of this insightful session, we engaged in a dialogue with one of our speakers, Milka ‘Shitandi’ Omukuba. With over a decade of international experience, Shitandi navigates through roles in developing and managing projects dedicated to enhancing lives globally. Currently at the helm as Project Manager for the 2SCALE program, she champions the marketing and distribution of nutritious food to low-income markets in ten African countries.

Four pillars of informality in food systems

Shitandi’s journey began in sales, imbuing her with unique insights into the intricate dance of the global and local marketplaces. During our conversation, she illuminated the often-overlooked facets of food systems, distilling her insights into four key points.

1. Innovating through informality

Shitandi highlighted a crucial reflection on the back of the SNV-IIED paper titled ‘Working with informality: constructive ways to transform food systems’; the role of informal markets in driving innovation. In these markets, new products emerge in response to the needs of the community. For instance, she cited the example of milk and cooking oil dispensers, which allow customers to purchase products in smaller quantities based on what they can afford and bring their own containers, making food more accessible. This not only reduces waste but also fosters product development and packaging innovations. Moreover, informal markets often pioneer solutions for plastic waste and renewable materials, with positive impact on sustainability. By showcasing these innovations, Shitandi emphasised the need to recognise the informal sector’s role in driving progress.

2. Understanding the scale of the informal sector

To grasp the true significance of informality within our food systems, Shitandi emphasised the need to understand the global scale and worth of this market and use concrete statistics. ‘We should determine the value and turnover of the informal sector and quantify the number of people it employs’, Omukuba says. These figures would underscore the vast scale of the informal sector and its indispensable role in the broader economy.

3. Symbiotic relationships

Informal markets and and the formal private sector or SMEs share a mutually beneficial relationship. Omukuba argued that SMEs cannot survive without serving informal markets. They thrive because they interact with both formal and informal actors, allowing for a diversified income stream. This blend of higher formal margins and immediate cash flow from informal markets contributes significantly to SMEs' sustainability. ‘It's not merely a matter of altruism; it's a business necessity for formal companies to tap into the potential of the informal sector’, said Omukuba.

4. Rethinking impact measurement

Discussing impact measurement, Omukuba argued that a paradigm shift is needed in impact measurement—moving from outreach-focused metrics to those highlighting revenue and new markets served. These metrics provide a more tangible and realistic view of the private sector's impact on informal markets. She illustrated this concept with the example of a multinational company that provided short-term loans to informal vegetable vendors through the mobile money platform M-pesa. The success story demonstrated how private sector companies could, to their own surprise, harness entrepreneurial spirit and take calculated risks to drive innovation in the informal sector. ‘Identifying areas where interventions can make the most significant impact is crucial to catalysing positive change within informal markets’, she added.

She also stressed the importance of adaptive management and timely data in development organisations working with informal markets. ‘Effective navigation of dynamic informal markets demands adaptive management and immediate access to current data’, she said. For example, creating a dashboard to track changes quickly can empower decision-makers to respond swiftly to emerging trends and challenges.

Informality: a catalyst, not a barrier

Omukuba’s insights are a clarion call: the informal sector's role is not to be underestimated or underinvested in. It's a powerful engine for transformation, indispensable in ensuring food and nutrition security, particularly for the most vulnerable groups. Thus, engaging closely with this sector is not just beneficial but imperative for the private sector, underscoring the necessity to acknowledge and leverage informality as a potentally for creating sustainable, equitable food systems.