Creating jobs, reducing poverty I: Why the informal sector should be taken seriously and enabled properly
In the first extract from a new REDI3x3 book on the role of the informal sector in job creation and poverty reduction, a compact picture of the size, texture and impact of the sector is provided. One in every six South Africans who work, work in the informal sector. Several policy-relevant features are highlighted, such as industry, spatial and gender dimensions. This provides the backdrop for the second extract on the employment-creating performance of the informal sector.
The Wild Coast, in the former Transkei Bantustan, is characterised by natural beauty and great poverty. Since 1994 rural land administration has collapsed, land tenure has not been reformed, a succession of coastal development plans have been proposed but not implemented – and communities have become disillusioned. The few tourist-related developments that have taken root have done so despite the general collapse of rural governance and are due largely to the determination of local developers and their community partners
The REDI3x3 research project has completed most of its research at a time when unemployment, poverty and inequality is intense. With growth at just 0.5%, government needs to become more innovative in fixing the social policies that hamper progress. It should draw on all the research evidence to find ways to transform the structure of the economy without inhibiting growth. Addressing education, low labour intensity, the informal sector and the spatial legacies of apartheid can make a real difference.
Using a small-area census approach, this article reports on changes in informal micro-enterprise activity in the Cape township of Delft between 2010 and 2015. The number of micro-enterprises has doubled (from 879 to 1798) in five years, with growth recorded in almost all sectors (notably take-away food and street trade). The increase in the total is contrary to the official national trend. The prevalence of informal enterprises in residential areas, compared to those in the high street, has not changed.
The layout of the township economy: the surprising spatial distribution of informal township enterprises
A small-area census of micro-enterprises in Cape Town townships reveals that informal enterprises are located throughout the township, including in the residential areas. Three-quarters of the enterprises are located beyond the ‘high-street’. The most common enterprises (liquor and spaza shops) are not situated in what one would expect to be the prime business area with its considerable pedestrian traffic, but are in residential areas. Policies to promote the township economy need to come to terms with this reality.
Former homeland areas continue to have significantly higher levels of deprivation and poverty than the rest of South Africa. Of all the former homeland areas, the erstwhile Transkei in the Eastern Cape has the highest levels of deprivation (measured using the Index of Multiple Deprivation for 2011) as well as income poverty. Indeed, the deprivation gap between former homelands and the rest of South Africa has not declined in the period 2001 to 2011.
How structural inequality limits employment and self-employment in poor areas (or: Why South Africa’s informal sector is so small)
Given South Africa’s high levels of unemployment, the relatively small size of the micro-enterprise sector is a conundrum. This article argues that structural inequality is the reason for this – in particular, inequality in the structure of the economy, the legacies of spatial inequality and the continued inequalities in human development. Their combined effect is to limit the scope for poor people to escape poverty via self-employment. This explains the limited extent and small range of informal employment.
The South African government continues to pursue efforts to 'migrate' informal enterprises to the formal sector. This article examines the impact of regulations and law enforcement on the 'lived' economy of informal micro-entrepreneurs. Spatial analysis shows how the scope and distribution of informal economic activities are directly affected by regulation, land use planning and other controls. Such controls that effectively disallow informality are poor-unfriendly and harm livelihoods, self-employment and employment.