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.
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.”
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.