The Impact of COVID-19 on the Gig Economy

The rapid advancement of technology and internet penetration has seen regular independent contract work evolve to produce some of the biggest technology companies of our era, making up what is known as the gig economy. The gig economy is described as a free and global market system where organisations and independent workers engage in short-term and on-demand work arrangements that are both flexible and skill-based. There are, however, different schools of thought around what truly defines the gig economy. Some definitions focus on the nature of the work, others on the work arrangement while others centre on legal classification.

Often, the gig economy is confused with the informal economy in Africa, mainly because it hardly contributes taxes. There are also clear distinctions between gig work conducted online. An example would be data entry as online gig work, and offline gig work facilitated by digital means would be drivers and artisans. The latter is more prominent in Africa.

Unpacking the gig economy in Africa

Whenever the gig economy is mentioned seasonal workers, on-call workers and Uber drivers come to mind for most people. In 2019 the online gig economy in Kenya was valued at $109 million and employed about 36,573 workers, while the offline gig economy had 5.1 million workers and was valued at $19.6 billion. In the same year, the global gig economy churned out $204 billion in gross volume and is expected to grow to approximately $455 billion by 2023.

Undoubtedly, the gig economy has created many jobs and income flows for both the employed and unemployed because of the flexible nature of the jobs or ‘gigs’. However, researchers lament that the true size of the gig economy in its present state is difficult to quantify. This data paucity is not only peculiar to Africa, but we can extrapolate from available data to get a picture of what could be. 

A recent study established that an estimated 4.8 million workers gained some income from gig work in seven of the eight countries under study. A report by the International Labor Organization (ILO) stated that 86% of total employment in Africa is in informal employment. It is not clear, however, what proportion of this figure can be accounted to the gig economy. 

Strikingly, there is a job deficit in Africa of between 6.3 to 8.3 million each year that needs to be filled, and the gig economy exhibits potential to cover a substantial amount of this job deficit. More work will need to be done on both the policy and entrepreneurial sides to realise this milestone.

Like many other sectors of the economy, the current COVID-19 pandemic has affected the gig economy too. What we know now is that there has been a surge in the demand of some services such as the supply and delivery of essential items, and a total disruption of others such as shared rides and shared accommodation. 

Often, gig work is bundled with informal work. This lack of policy clarity presents three challenges in the COVID-19 context: how to differentiate and select recipients of government released safety nets, how to distribute these and how to have this critical data available and in a usable format. 

This illustrates the need to redefine what gig work means in the African context. However, the gig economy has its own shortcomings that makes it easier to baulk under pandemics.

Ramez Wagih, an accountant in the morning and Uber driver in the afternoon, poses in his car in the Egyptian capital Cairo, on April 19, 2018. New legislation regulating ride hailing services in Egypt may have been welcomed by Uber and competitor Careem, but some behind the wheel fear they could be driven out of business. Photo by MOHAMED EL-SHAHED/AFP via Getty Images

Challenges faced in the gig economy

Despite gig work being spread across the globe and operating under different socio-economic and political contexts, the challenges and opportunities faced only vary slightly. Gig work is precarious and workers lack access to benefits such as medical insurance, established minimum wages and access to collective bargaining. Due to erratic schedules and income, they end up working very long hours to make more money. Sadly, this income is quickly eroded by operational and other unexpected costs which they self-finance. 

The nature of most gig work puts workers at high risks of contracting contagions. Gig workers are also vulnerable to algorithmic exploitation and abuse. When they miss work, they lose income and their ratings get distorted on the algorithm-based platforms. Gig workers have to make uncomfortable trade-offs between flexibility and job security.

African gig workers have additional issues to contend with. They also face discrimination on racial lines on global platforms and often have to go through an intermediary to get ‘gigs’ which, again, offsets their level of income. The gig economy which is driven by digital technologies secludes those without internet access; hence, it is more concentrated in cities than in rural areas.

Also, where global companies threaten the existence of local players, gig workers are at risk of losing their properties and worse still, their lives, for example the taxi turf-wars in Johannesburg and Lagos over Uber. There are already raging debates on the continued disenfranchisement of gig workers due to  misclassification and information asymmetries in the economy. 

Challenges faced in the gig economy are not solely due to COVID-19; the pandemic has just amplified them. 

Policy interventions in the aftermath of COVID-19

Many African governments have set aside some form of support for those out of employment, though the support is not specifically targeted at gig workers. For example, the government of South Africa will pay a grant of 350 Rand per month for six months to unemployed individuals and informal sector workers, Malawi is disbursing $40 per month cash transfers and Rwanda is providing essential goods to vulnerable households. 

These were necessary stop-gap measures, but still, how can the gig economy become disaster-proof? Some quarters suggest adapting existing labour and business policies to equally serve both the traditional and gig economy, while others suggest the adoption of the Fairtrade model to the gig economy.

Corporate Interventions 

SweepSouth, a digital platform offering cleaning services from South Africa, pivoted and diversified their business offerings. SweepSouth established a $642,000 fund to incentivize workers under isolation or quarantine to stay at home; the money was raised from impact investors and crowd funding initiatives. Sendy, a logistics start-up with offices in Kenya, Uganda and Tanzania, is offering its workers equipment and safety and health training. Sendy has also partnered with local insurance players to protect its drivers. Vaya Africa, a passenger transport and logistics service company in 14 African countries, launched a relief support arm in Zimbabwe to distribute medical deliveries and essential materials to the vulnerable as a humanitarian act.

The Gig Economy post COVID-19

Whilst the pandemic will eventually pass, the gig economy will remain. The gig economy will probably grow as the fourth industrial revolution sets. Notably, e-commerce and delivery apps thrived against the pandemic tide. Moving forward, an approach that addresses both symptoms, institutional and systematic concerns, will be more desirable. The following recommendations are an excellent starting point.

  1. Recognise gig work by law: It is essential to legally acknowledge that gig work exists and that it is different from formal and informal work and self-employment. What would be the proper legal classification for gig workers in Africa? Legal recognition will avail state protection to African gig workers as the case is with their counterparts from other sectors.
  2. Invest in infrastructure and human capital development: Better connectivity will enable more people to access and take part in gig work. Up-skilling and re-skilling of workers will increase their chances to get quality jobs and better pay. It is vital for African countries to facilitate the move up the human capital value chain from being mere labour providers to business creators.
  3. Support local gig companies: The COVID-19 outbreak provides the thrust for African governments to support locally-grown gig enterprises and stimulate job creation. It is easier to derive revenue from gig platforms that are within local jurisdiction, and also to work collectively with them to find mutually beneficial ways to support workers. Here, it is important to interrogate what a mismatch of priorities and stipulations between global platform companies and local governments would mean for both policy and the workers involved.
  4. Ensure transparency on gig platforms’ algorithms and Terms & Conditions: The terms of engagement and algorithmic ratings on gig platforms need to be looked into. More transparency in the sector will help avoid disenfranchising workers based on race or geographical location and stop the exploitation and abuse of gig workers.
  5. Support and fund research on the state of the gig economy in Africa: As it is, there is data paucity on the state of the gig economy in Africa. This includes the size of the economy, the level of contribution to the overall economy and the total amount of jobs the sector has produced and will produce in the coming years. This calls for the development of robust data-driven knowledge ecosystems equipped with the requisite human capital, and digital tools and equipment within the continent. Strategic foresight will ensure that the continent derives maximum benefits from the gig economy.

It will take political will to change the form and format of gig work. Any significant changes in the gig economy post COVID-19 will largely depend on reforms taken at the policy level. Planning ahead of any future shock will provide more security to gig workers and position Africa for a bigger stake in the projected $455 billion global gig economy by 2023.

Cover photo by MICHAEL TEWELDE/AFP via Getty Images

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