Expert Group Meeting on Statistics for SDGs: Accounting for Informal Sector in National Accounts 11-14 January 2016, Addis Ababa, Ethiopia Measuring informal economy through mixed household-enterprise surveys in Cameroon Erith NGHOGUE VOUFO Head of unit of provisional and quarterly national accounts National Institute of statistics - Cameroon 18/09/2018

Objective of the paper … aims to assess the contribution of the informal economy in terms of employment and value added in Cameroon …through mixed household-enterprise surveys conducted in 2005 and 2010 throughout the national territory. 18/09/2018 Measuring informal economy through mixed household-enterprise surveys in Cameroon

Content Definition and scope of the informal sector Main data sources and their processing Methods of integration in the national accounts Comparison of the results : survey vs national accounts Conclusion, remarks and future initiatives 18/09/2018 Measuring informal economy through mixed household-enterprise surveys in Cameroon

Definition and scope of the informal sector … defined as all production units without taxpayer identification number and/or not taking a formal written accounting under the OHADA* accounting plan Informal jobs are mainly those of the non- agricultural informal sector units and agricultural labor *Organization for the Harmonization of Business Law in Africa Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Main data sources and their processing (1/7) … Survey of Employment and the informal Sector (EESI): two-phase statistical survey conducted in 2005 and 2010 Employment Survey (phase 1) holds as statistical unit the regular household and its individual members aged 10 and over Informal Sector Survey (phase 2) is a type of survey "companies" with informal settlements, called "informal production units" (IPU), since many of them do not have their own premises (workshop, shop, etc…), which is an element usually associated with the concept of establishment in national accounts Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Main data sources and their processing (2/7) … During the survey, the informal production units (IPU) are identified from the following 3 questions : Question Answer What is your socio-professional category ? Non wage earner: 06. Employer/boss 07. Own account worker Is the enterprise in which you exercise your main employment (or which you manage) registered ? 2. No Taxpayer’s number Do you keep accounts? No Not detailed accounts Other Finally, is eligible as IPU if the socio-professional category=06, 07 and (taxpayer number =2 or accounts =1,3,4) Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Main data sources and their processing (3/7) Charateristics of the survey : The two surveys cover the national territory, urban/rural The second phase includes informal production units (IPU) engaged in industry, trade and services. The primary sector activities are excluded with the exception of forestry and logging Year Random sample Number of IPU identified Number of IPU surveyed 2005 8 540 households 5 274 units 4 815 units (91,3%) 2010 8 160 households 4 705 units 4 592 units (97.6%) Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Main data sources and their processing (4/7) The processing of the data (phase 1) provides, for the needs of the national accounts : detailed table of national jobs (main and secondary) by (i) activity, by (ii) institutional sector (public, private formal, non-agricultural informal and agricultural informal) and by (iii) occupational status (employee, employer, own account worker, family aid and apprentice) Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Main data sources and their processing (5/7) For the needs of the national accounts, the processing of the data (phase 2) provides : (i) the output by industry and product, (ii) trade margin by product, (iii) self-consumption by industry and product, (iv) intermediate consumption by industry and product, (v) compensation of employees by industry, (vi) taxes paid by industry and (vii) gross fixed capital formation by industry and product Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Main data sources and their processing (6/7) Graph 1 : Employment by institutional units in 2005 and 2010 The informal sector employs about 90% of the occupied workforce in 2005 and 2010 Informal employment is very low in the formal sectors, less than 0.3 percent within both public administration and private sector Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Main data sources and their processing (7/7) Table : Average monthly output and average monthly value added per IPU (in thousands of CFAF) Sector and industry Monthly output Monthly value added   2005 2010 Industry sector 87.6 260 48.9 100.7 Manufacture of food products 58.7 123.6 21.3 36.5 Clothing 76.8 199.2 44.3 102.5 Construction and civil engineering 152.6 732.3 124.1 267.4 Other industries 157.9 462.6 106.7 202.6 Trade 86.3 133.6 68.3 96.9 Wholesale trade 340.7 475.7 276 344.5 Retail trade 70.6 97.0 55.5 70.5 Services 175.4 200.3 79.8 89.9 Transportation 207.1 238.4 111.5 137 Restaurant and hotel 201.2 244.6 60.6 70.7 Repair of motor vehicles and motorcycles 96.7 119.4 69.6 74.8 Other services 146.3 166.1 100.1 83.5 Total 110.2 198.3 62.4 95.9 … IPU of construction, wholesale trade and clothing have most improved their economic performance between 2005 and 2010 Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Methods of integration in the national accounts (1/3) Step 1 : load in the database, all sources on employment Detailed table of national jobs by industry, by institutional sector (public, private formal, non-agricultural informal and agricultural informal) and occupational status (phase 1) Ministry of Finance, Ministry of Public Service provide the number of civil servants (central administration, etc.) National Social and Insurance Fund and the Business Register or statistical and tax statements give jobs in the private formal sector Step 2 : confrontation of data from survey vs administrative data particularly in the formal sector (private and public administration) Step 3 : Analytical work : elaboration of the production accounts by industry (control the evolution of the economics ratios such as output per capita, productivity per worker, average per worker) Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Methods of integration in the national accounts (2/3) Step 1 : load in the database, all sources by industry and product Detailed table of output, (ii) trade margin, (iii) self-consumption, (iv) intermediate consumption, (v) compensation of employees, (vi) taxes paid and (vii) gross fixed capital formation (phase 2) other data sources on the same operation (administrative data, others surveys …) Step 2 : Analytical work : elaboration of the supply and use balance of products (make consistent informal data with other data sources which give information on the import and export of products, the output of the formal sector, the final consumption of households and public administration, the gross fixed capital formation, the change in inventories, etc.) Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Methods of integration in the national accounts (3/3) Graph 2 : Contribution of the informal sector to the GDP (%) The results show that the contribution of informal sector to GDP is 37.3 percent in 2005 and 38.4 % in 2010 The non-agricultural informal sector accounts for almost 60 % of the jobs and about 30 % of GDP in 2005 as in 2010 Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Comparison of the results : survey vs national accounts (1/2) Table : value added from national accounts work and surveys results (in millions of CFAF) EESI 2005 National accounts 2005 Gap (%) EESI 2010 National accounts 2010 Manufacture of food products 173 868 324 470 86,6 186 060 435 201 133,9 Clothing 67 385 102 278 51,8 155 401 176 663 13,7 Construction 120 564 65 956 -45,3 269 235 76 152 -71,7 Other industries 255 933 384 942 50,4 353 136 546 996 54,9 Trade Wholesale trade 119 096 311 426 161,5 203 866 507 235 148,8 Retail trade 405 580 757 506 86,8 663 171 1 187 376 79,0 Services Transport 121 295 159 188 31,2 243 166 196 218 -19,3 Restaurant and hotel 244 337 191 906 -21,5 214 535 229 434 6,9 Repair of motor vehicles and motorcycles 37 958 38 054 0,3 50 240 42 529 -15,3 Other services 386 607 471 876 22,1 342 023 584 352 70,9 Total 1 932 623 2 807 602 45,3 2 680 833 3 982 156 48,5 Value added obtained from the national accounts analytical work to that of the survey in 2005 and 2010 revealed differences of more than 45% Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Comparison of the results : survey vs national accounts (2/2) These differences could be mainly explained by: The contract work (purchase of raw materials by the customer) is very common in the context of the informal sector. Indeed, in certain activities such as sewing, carpentry, hairdressing and even the construction, it is the customer who buys inputs. The output is underestimated when input costs are not taken into account. The consumption of part of the output of IPU for the satisfaction of his household needs (self- consumption) is often underestimated, because it is generally important in activities such as trade, food service activities and manufacture food products. For informal production units exercising at home, expenses such as electricity, water, rent must be shared between the household and the production unit (indivisible loads). However, this separation is very difficult to perform in the survey. During the survey, several informal production units have not had a regular activity in the 12 months preceding the survey (seasonality of activities). The impact of the seasonality or irregularity of the activity leads to a bias in the measurement of the IPU indicators. Taking into account other data sources in the compilation process of national accounts Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Conclusion, remarks and future initiative (1/4) The results show that : The non-agricultural informal sector contributes at 30% to GDP and concentrate almost two-thirds of jobs. Labor productivity is very low compared to the formal sector, because it is characterized by a multitude of survival activities and essentially with low profitability. Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Conclusion, remarks and future initiative (2/4) …The mixed household-enterprise surveys are carried out at intervals of five years or more, which poses the problem of data for compiling the national accounts for the intervening years between the two surveys: For the years after the benchmark estimates of informal sector, the employment is estimated by using the annual population growth rate. Assuming the constancy of the economic ratios, the output at constant prices by industry is obtained by multiplying the output per capita by industry of the benchmark year by the previous estimated employment. The result of the output at constant prices by industry is multiplied by the price index to obtain the output at current prices by industry These estimations of the output by product are confirmed or modified in the supply and use balance where all resources (production and imports) are faced with the demand (consumption, investment, exports and changes in inventories) Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Conclusion, remarks and future initiative (3/4) …Regarding the GDP exhaustiveness in terms of under reporting of output by formal establishments: A mode of production is usually created in the production account by industry to handle this phenomenon. The correction of the output is often carried out if the technical coefficient of the formal establishment is very high in the current year in comparison to the technical coefficient to the previous year. … However, the correction of the output of the informal production units is made in the context of supply and use balance by product Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Conclusion, remarks and future initiative (4/4) …In terms of illegal activities, such as drugs and prostitution, smuggling, etc.: … Until now, there is no specific method for taking it into account directly. However, adjustments can be made on the level of production, consumption, imports or exports of the products identified in the economy to be the subject of smuggling and cross-border trade within the supply and use balance. … Finally, the international community must handle these issues by defining appropriate methodologies that can help the national statistical offices Measuring informal economy through mixed household-enterprise surveys in Cameroon 18/09/2018

Thank you for your attention! 18/09/2018