Informal economy

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

Andrew Charman, Sustainable Livelihoods Foundation on 1 March 2016
Reads 18,177

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 20,503

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 18,153

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 13,392

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 12,051

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.

Why are foreign-run spaza shops more successful? The rapidly changing spaza sector in South Africa

Rory Liedeman, Sustainable Livelihoods Foundation on 13 November 2013
Reads 69,132

This article examines the contrasting business models in the spaza shop sector, and compares foreign-run businesses with South African businesses. We argue that foreign shop keepers are more successful than South Africans because of the strength of their social networks, which provide them with access to labour and capital and enable collective purchasing and market domination. The article argues for a two-pronged policy that would formalise larger shops whilst permitting and encouraging informal micro and survivalist businesses.

Unlocking the growth and employment potential of business in the margins

Eddie Rakabe, Financial and Fiscal Commission on 13 August 2013
Reads 9,154

Marginalised businesses provide livelihood and income opportunities for a large section of the population. However, these businesses are not able to capture growth opportunities because of several constraints; they continue to operate on the periphery of the mainstream economy. Yet they could become a major source of employment growth. Efforts to unlock this potential must concentrate on exploiting value chains and making government policy more responsive to the unique needs and challenges of marginalised businesses.

Reducing unemployment: Waiting for high growth? Waiting for Godot?

Frederick C.v.N Fourie, University of the Free State on 12 March 2013
Reads 40,994

In trying to reduce unemployment in South Africa, the pursuit of higher economic growth is the single most agreed-upon policy strategy. The consensus on this ‘obvious solution’ may blind us to the fact that economic growth, though important, may only be half of the solution. Attempts to fine-tune and turbo-boost the formal-economy ‘engine of growth’ to absorb more labour are fundamentally constrained. Economic policy makers must look at other options for generating employment and self-employment for unemployed people.

The unemployment debate is too fragmented to address the problem

Frederick C.v.N Fourie, University of the Free State on 18 November 2012
Reads 11,993

The debate on unemployment is fragmented into at least three sub-discourses, i.e. those of macroeconomists, labour economists and poverty analysts. This results in inconclusive analyses and narrow, flawed proposals to address the problem. This fragmentation feeds into the policy field. Sustainable and consistent remedies for unemployment and poverty will require an integrated analysis that covers the formal sector, the informal economy and survivalist activities – and especially linkages and barriers between these segments.

How structural inequality limits employment and self-employment in poor areas (or: Why South Africa’s informal sector is so small)

Kate Philip, Advisor to the Presidency on Short-term Strategies for Employment Creation on 16 November 2012
Reads 16,690

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.