South Africa’s informal economy provides almost 1.8 million jobs in the country, but the government’s policy does not recognise its full potential.
There was a need, therefore, for the government to reconsider its stance on the informal economy.
From a man on every township corner selling fruits and vegetables to feed his children, to women selling fat cakes from 5am to commuters and children alike, the informal sector was dynamic and played a huge role in providing employment.
A third of the country’s workforce is found in the informal economy, according to statistics SA. This means that millions provide employment by either selling vegetables or grocery items at a price cheaper than large retail stores. Some of these informal businesses have been around for years, some for decades, in the form of spaza shops and known township traders.
SEDA defines informal businesses as “survivalist enterprises.” This is because they operate very slightly above the poverty line and include hawkers, street vendors and subsistence farmers.
This, however, limits the scope of its capacity, as informal businesses cover every economic sector, from retail trade to service.
According to University of Free State Economics professor Frederick Fourie, in order to see inclusive economic growth, a proper inclusive growth strategy needs to get the poor to actively participate. This can be achieved via employment, in growing economic processes, producing output and earning a decent income. This means that the government must centre policy around job opportunities in the informal sector.
Government must also consider the barriers that informal businesses and their owners face.
Activist, entrepreneur and author of KasiNomics GG Alcock said security of tenure was a barrier to the growth of informal businesses. In other words, if for example a woman sold food at a hospital, she would be afraid of expanding her business because she would not be certain that the hospital would keep her on the premises for long. He also identified a lack of access to finances as a barrier.
Many informal traders’ businesses were not registered, and they did not have financial documents needed by banks to apply for loans. Various factors drove people into the informal sector. The Informal SMME retailers in SA IDLP 2014 report found that these included unemployment, depreciation of capital and lack of formal skills and education, amongst others. There was also a gender discrimination where women earned less than men in the informal sector, yet they form the majority of workers.
For example, Sibongile Nkosi, a spaza shop owner interviewed by Vutivi, said that her business was regularly besieged by criminals. As a result, she sometimes slept in her spaza shop to prevent loss of stock.