Economist and Chairman of the National Development Planning Commission, Dr. Nii Moi Thompson, has stressed the need for policies aimed at formalizing Ghana’s informal sector to enhance productivity and drive economic transformation.
Speaking on the Citi Breakfast Show on Thursday, March 6, 2025, Dr. Thompson pointed out that discussions about the informal sector often focus too narrowly on taxation, overlooking the more pressing issue of low productivity.
He explained that Ghana’s low productivity levels are largely due to the dominance of the informal sector, emphasizing that formalization should be a key pillar of any economic transformation strategy.
“Every time we talk about the informal sector, the first thing that comes to mind is taxes. There is a segment that should be paying taxes but is not paying. However, a vast majority of them are below the threshold for paying taxes.
“Precisely because skills are low, capital per worker is low; all these combined means that the value added per worker there is very low. That is what actually brings down the overall productivity for Ghana, which is around $5 or $6 per hour worked.
“Part of the reason why it is so low for Ghana is the dominance of the informal sector. So, formalization should actually be an explicit objective of policy for any transformation agenda. But unfortunately, as you rightly said, we often think of it only in tax terms. If you work them to improve productivity, it goes up, right away the taxes will also go up,”* he stated.
Dr. Thompson further identified Ghana’s educational gap as a major hindrance to economic growth, citing a report that reveals 20% of the labor force has no formal education, while another 54% have only up to junior high school (JHS) education.
“I was reading a report that stated that 20% of our labour force has no formal education and another 54% have up to JHS education. So, we are looking at 2/3 of the labour force, for all intended purposes, is not suitable for our modern economy,” he added.
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