Informal economy

A job in the informal sector reduces poverty about as much as a job in the formal sector

Paul Cichello, Boston College on 30 May 2017
Reads 1,213

In the aggregate, earnings from jobs in the informal sector play a small role in reducing national poverty rates, especially because there are relatively few informal-sector jobs. However, if we compare on a per-job basis, the poverty reduction associated with one informal-sector job is generally between 50 to 100% of the poverty reduction associated with one formal-sector job. Growth in the number of jobs in the informal sector would be a sensible component of any plan to reduce poverty.

Could informal enterprises stimulate township economies? A study of two Midrand townships

Eddie Rakabe, Financial and Fiscal Commission on 28 February 2017
Reads 1,494

Informal enterprises are perceived to lack the necessary business and economic fundamentals to stimulate their local economies. However, informal enterprises are not homogenous. In a study of non-retail informal enterprises, we distinguish between Traditional Informal Enterprises (TIEs) and Modernising Informal Enterprises (MIEs) and assess whether Ivory Park and Kaalfontein townships have MIEs to catalyse the local economies. We find that 40% of the non-retail enterprises have a modernising orientation, but that the majority are predominantly traditional.

Factors contributing to the demise of informal enterprises: evidence from a Cape township

Andrew Hartnack, Sustainable Livelihoods Foundation on 16 January 2017
Reads 2,052

The reasons for the closure of fairly well-established informal enterprises are varied. Between 2010 and 2015, in the Cape Flats township of Delft South, a key factor was the failure to respond adequately to the more entrepreneurial business model of foreign traders and the strict enforcement of unfavourable liquor trading policies. Still, household misfortunes and broader socio-cultural dynamics also played crucial roles. A richer understanding of why enterprises shut down should inform policy to foster the sustainability of informal enterprises.

The nuts and bolts of micro-manufacturing in the township - a Cape Town case study

Leif Petersen, Sustainable Livelihoods Foundation on 6 September 2016
Reads 1,553

The informal sector is frequently viewed as comprising only street traders. However, micro-manufacturing of various types constitutes a small but significant component. A Cape Town case study of informal metalwork manufacturers, retailers, suppliers and customers shows that township metalworker enterprises and supply chains bring about important opportunities for promoting value adding, skills development and employment. Policy interventions that would help them grow include the provision of more suitable manufacturing and trading spaces as well as services such as electricity.

Day labourers and the role of foreign migrants: for better or for worse?

Derick Blaauw, North-West University on 17 May 2016
Reads 2,355

Foreign migrants often enter informal employment as day labourers. They compete with South Africans for jobs in this curb-side labour market. Three surveys of day labourers working in Tshwane between 2004 and 2015 reveal two important tendencies. First, the foreign-migrant component has increased from 12% to just over 55% in 11 years. Secondly, the wages and the level of poverty of both foreign and South African day labourers have worsened in the same period.

A growing informal sector: evidence from an enterprise survey in Delft

Andrew Charman, Sustainable Livelihoods Foundation on 1 March 2016
Reads 4,119

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

Andrew Charman, Sustainable Livelihoods Foundation on 2 March 2015
Reads 8,272

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.

How inclusive is economic growth in South Africa?

Frederick C.v.N Fourie, University of the Free State on 9 September 2014
Reads 8,647

While everybody seems to favour the pursuit of inclusive growth, this concept is rarely clearly defined in the policy debate. Inclusive growth is often confused or conflated with pro-poor growth or broad-based growth. A recent definition from researchers at the UNDP integrates the latter two concepts to include employment, poverty and inequality. A derivative Inclusiveness Index shows that South Africa has a very low degree of inclusiveness compared to other developing countries and that its growth since 1996 has not been inclusive.

Enforcement and compliance: the case of minimum wages and mandatory contracts for domestic workers

Taryn Dinkelman, Dartmouth College on 14 April 2014
Reads 8,631

What happens when a previously unregulated labour market is regulated? After the introduction of minimum wages and mandatory employment contracts for domestic workers, wages increased markedly while neither employment nor hours worked declined; some formalisation of working conditions also occurred. All these occurred despite a lack of monitoring and enforcement, suggesting that such actions (often costly) are not essential for regulation to have a significant impact on informal employment conditions, at least in the short run.

Cape Town’s trade in wild medicines: ecological threat or essential livelihood resource?

Leif Petersen, Sustainable Livelihoods Foundation on 29 January 2014
Reads 7,371

Cape Town is the urban centrepiece of a globally unique and highly diverse natural environment which should take priority in conservation management. But these biological assets also directly serve a local market of over 5 100 traditional healers and herbalists. The author discusses this important informal economy, business and cultural activity in the face of the broadening threats to conservation in the region, and the growing potential tension this presents in terms of policy and management.

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