Vi­tal part of SA econ­omy still be­ing ig­nored

Al­though in­for­mal trade con­trib­utes al­most 10% of the coun­try’s GDP, the govern­ment does lit­tle to sup­port the thou­sands of South Africans who make a liv­ing in this sec­tor, even act­ing against them in some cases.

Finweek English Edition - - IN DEPTH - By Natalie Greve

isi t a sight fa­mil­iar to the South African commuter. A woman sits be­hind a sal­vaged plas­tic ta­ble on the pave­ment, sell­ing neatly pre­sented sin­gle cig­a­rettes, loose sweets and small pack­ets of corn chips to passers-by on foot. Or a lively in­ner-city mar­ket, where traders of fruit and veg­eta­bles tout their pro­duce along­side a neigh­bour­ing cob­bler re­pair­ing the worn heels of work­ers’ shoes who spend hours on their feet.

This is South Africa’s of­ten­over­looked in­for­mal sec­tor. And, de­spite it con­tribut­ing 8% of SA’s GDP, sup­port­ing 27% of all work­ing peo­ple and pro­vid­ing goods and ser­vices to mil­lions of peo­ple on a daily ba­sis, the in­for­mal sec­tor con­sis­tently fails to re­ceive the same de­gree of lo­cal govern­ment pro­tec­tion en­joyed by for­mal busi­nesses.

As a re­sult, an as­sump­tion is fre­quently made that the in­for­mal sec­tor is not legally pro­tected, and that in­for­mal traders do not have any rights to trade.

“This is sim­ply not true,” states the So­cio-Eco­nomic Rights In­sti­tute of South Africa (Seri). “In­for­mal work­ers en­joy the same con­sti­tu­tional rights as ev­ery­body liv­ing in South Africa. They have a right to a lo­cal govern­ment that works, which pro­vides ba­sic ser­vices and which pro­motes so­cial and eco­nomic de­vel­op­ment.”

In­for­mal im­por­tance

Seri re­searcher Den­nis Web­ster tells fin­week that def­i­ni­tions of in­for­mal work and the in­for­mal sec­tor in SA re­main vague and con­tested.

“Gen­er­ally speak­ing, how­ever, an in­for­mal street trader is a busi­ness per­son who re­lies on pub­lic space to make their liv­ing, and em­ploys very few, if any, peo­ple at their busi­ness. These busi­nesses, which pro­vide a broad spec­trum of goods and ser­vices, gen­er­ally to poor and work­ing-class pedes­tri­ans, are char­ac­ter­is­ti­cally not as reg­u­lated or pro­tected by the state as ‘for­mal’ busi­nesses,” he ex­plains.

Se­man­tics aside, the in­for­mal econ­omy’s con­tri­bu­tion to the coun­try’s over­all em­ploy­ment fig­ure and top line re­mains sub­stan­tial.

Es­ti­mates by the South African Lo­cal Eco­nomic De­vel­op­ment (LED) Net­work – an online govern­ment plat­form for LED pol­i­cy­mak­ers – value the in­for­mal econ­omy at around 28% of SA’s GDP. In 2015, this trans­lated to around $88bn. Ad­di­tion­ally, the rel­a­tive share of the in­for­mal econ­omy by prov­ince in­di­cates some cor­re­la­tion with the over­all un­em­ploy­ment rate, sup­port­ing the no­tion that the in­for­mal econ­omy of­fers an al­ter­na­tive to un­em­ploy­ment.

“It is ar­gued that with­out the in­for­mal econ­omy, the un­em­ploy­ment rate would rise to around 47.5%. This im­plies that its sig­nif­i­cance in pro-poor eco­nomic de­vel­op­ment pol­icy is more im­por­tant than even its rel­a­tive size sug­gests,” the net­work notes.

Fol­low­ing two suc­ces­sive de­clines in over­all em­ploy­ment in the first and sec­ond quar­ter of 2016, the in­for­mal sec­tors Re­searcher at the So­cio-Eco­nomic Rights In­sti­tute of South Africa

A road­side ven­dor sells fresh pro­duce in the town­ship of Alexan­dra in Jo­han­nes­burg.

Den­nis Web­ster

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