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Informal economies around the world: measures, determinants and consequences

• Original Paper
• Published: 12 May 2018
• Volume 9 , pages 221–237, ( 2019 )

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• Ceyhun Elgin 1 &
• Ferda Erturk 2  

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This paper aims to present a comprehensive survey of the literature on the economics of informality. First, we focus on studies that aim to provide measures of informality using different methodologies. Next, we review empirical and theoretical studies focusing on the determinants as well as effects of informality. Finally, we conclude by summarizing the main findings of the literature, evaluate several policy recommendations based on our review as well as suggest some future research directions. Even though the literature on informality is growing at an increasing rate, future research efforts are very much needed, both on the theoretical and empirical side. Efforts have to be made to improve measurement of informal sector size as well as developing theoretical mechanisms for determinants and effects of informality that can be supported by empirical analysis.

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Informal Sector

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Elgin, C., Erturk, F. Informal economies around the world: measures, determinants and consequences. Eurasian Econ Rev 9 , 221–237 (2019). https://doi.org/10.1007/s40822-018-0105-5

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Received : 27 December 2017

Revised : 24 April 2018

Accepted : 27 April 2018

Published : 12 May 2018

Issue Date : 01 June 2019

DOI : https://doi.org/10.1007/s40822-018-0105-5

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The Role of the Informal Sector in the Economic Development of Local Areas in South Africa

• May 21, 2023

The informal sector plays a crucial role in the economic development of local areas in South Africa. It encompasses a wide range of economic activities that are not regulated by the government or formalized through official channels. This sector is characterized by its flexibility, low entry barriers, and ability to provide employment opportunities for a significant portion of the population. We will explore the various ways in which the informal sector contributes to the economic development of local areas in South Africa, focusing on the municipalities and their specific challenges and opportunities.

Employment Generation and Poverty Alleviation

The informal sector is a significant source of employment in South Africa, particularly in local areas and municipalities. It provides income-generating opportunities for individuals who are unable to secure formal employment due to various factors such as limited education, lack of skills, or a weak job market. The informal sector helps to alleviate poverty by offering self-employment opportunities and creating jobs for a substantial number of people.

Contribution to GDP and Economic Growth

The informal sector makes a substantial contribution to the Gross Domestic Product (GDP) of South Africa. Although accurate data on the sector’s size and contribution is challenging to obtain due to its informal nature, estimates suggest that it accounts for a significant share of the country’s economic output. In local areas and municipalities, where formal employment opportunities may be limited, the informal sector becomes a vital driver of economic growth and development.

Entrepreneurship and Innovation

The informal sector fosters entrepreneurship and serves as a breeding ground for innovation in local areas of South Africa. Many individuals start small businesses in this sector, utilizing their skills and creativity to identify niche markets and meet local demands. The sector’s flexible nature allows for experimentation and adaptation, leading to the development of new products, services, and business models. These entrepreneurial activities contribute to economic diversification and the overall vibrancy of local economies.

Integration of Marginalized Groups

The informal sector often provides a means for marginalized groups, such as women, youth, and individuals from disadvantaged backgrounds, to participate in economic activities. In South Africa, where historical inequalities persist, the informal sector offers a pathway for these groups to enter the economy and improve their livelihoods. By providing opportunities for economic empowerment, the informal sector helps in reducing social disparities and promoting inclusive growth in local areas and municipalities.

Local Trade and Supply Chains

The informal sector plays a vital role in local trade and supply chains, particularly in rural areas and townships. Informal markets, street vendors, and small-scale enterprises form the backbone of local economies, providing goods and services to the surrounding communities. These businesses create a multiplier effect by supporting upstream and downstream activities, such as sourcing raw materials, transportation, packaging, and distribution. Thus, the informal sector contributes to the overall economic vitality and resilience of local areas.

Tourism and Cultural Heritage

South Africa is known for its rich cultural heritage and diverse tourist attractions. The informal sector plays a crucial role in supporting tourism activities in local areas and municipalities. Informal traders, crafters, and tour guides offer unique experiences to tourists, showcasing local traditions, arts, and crafts. The sector’s contribution to tourism not only generates income but also preserves and promotes cultural heritage, fostering a sense of pride and identity within the local communities.

Challenges and Opportunities for the Informal Sector

While the informal sector presents numerous opportunities for economic development, it also faces significant challenges. Limited access to finance, lack of formal recognition, inadequate infrastructure, and regulatory constraints are some of the key hurdles that informal businesses encounter. Addressing these challenges requires a multi-dimensional approach that involves collaboration between local governments, private sector organizations, and civil society. By recognizing the potential of the informal sector and addressing its challenges, local areas and municipalities in South Africa can harness its full potential for economic development.

To support the growth and development of the informal sector, local governments can implement policies and regulations that facilitate formalization and provide support services tailored to the needs of informal businesses. This includes simplifying registration processes, offering financial assistance and training programs, improving access to markets, and creating a conducive business environment. Collaboration with microfinance institutions and development organizations can also help in providing access to capital and financial services for informal entrepreneurs.

Investments in infrastructure development are crucial for the informal sector to thrive. Improving transportation networks, marketplaces, and basic amenities such as water and sanitation facilities can enhance the productivity and competitiveness of informal businesses. Local governments should also consider spatial planning that integrates the needs of informal activities, creating designated areas or zones where informal businesses can operate without hindrances.

Furthermore, fostering partnerships between formal and informal sectors can unlock synergies and create mutually beneficial relationships. For instance, formal businesses can collaborate with informal suppliers or subcontractors, providing them with access to larger markets and enhancing their capacity. Similarly, formal businesses can benefit from the flexibility, agility, and local knowledge of informal enterprises. These partnerships can contribute to the formalization and upgrading of informal businesses, leading to increased productivity and competitiveness.

Local areas and municipalities can also leverage the potential of the informal sector by promoting entrepreneurship education and skills development programs. By equipping individuals with the necessary knowledge and skills, they can enhance their chances of success in the informal sector. This can be done through vocational training, mentorship programs, and business development initiatives. Additionally, fostering an entrepreneurial culture and mindset within local communities can encourage innovation and self-employment.

In conclusion, the informal sector plays a vital role in the economic development of local areas and municipalities in South Africa. Its contributions range from employment generation and poverty alleviation to entrepreneurship, innovation, and the integration of marginalized groups. By recognizing the potential of the informal sector and addressing its challenges, local areas and municipalities can harness its full potential for economic development. Through supportive policies, infrastructure development, partnerships, and skills development initiatives, the informal sector can thrive, contributing to inclusive growth, poverty reduction, and the overall well-being of local communities in South Africa.

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35 The South African Informal Economy

Michael Rogan is an associate professor in economics and economic history, and an active member of the Neil Aggett Labour Studies Unit (NALSU)—both at Rhodes University. Since 2011, he has been a research associate in the Urban Policies Programme of the global research-policy-action network Women in Informal Employment: Globalizing and Organizing (WIEGO). He holds a PhD and an MA in development studies (social policy) and a BA in international studies (development). His research and publications over the past five years have focused largely on informal employment, gender, poverty, food security, education and skills development, and survey design.

Caroline Skinner is a senior researcher at the African Centre for Cities at the University of Cape Town and urban research director for the global policy research network Women in Informal Employment: Globalizing and Organizing. For over two decades her work has interrogated the informal economy and processes of informality. She has published widely on the topic. She has a long track record of policy and advocacy work at a local, provincial, national, and international level and provides technical support for worker-based movements.

• Published: 08 December 2021
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The literature and key policy debates on the South African informal economy are reviewed through the lens of Chen’s taxonomy of informal economy debates into legalist, dualist, voluntarist, and structuralist schools of thought. Previous insights are supplemented with an empirical analysis of the South African informal economy, using Statistics South Africa’s Quarterly Labour Force Surveys. Together these analyses suggest that the post-apartheid informal economy is characterized by a large degree of heterogeneity by status in employment and sectoral distribution and is highly gendered in its segmentation. Further, earnings are low for all but a few groups of informal workers. Much of the existing evidence also suggests that, somewhat in contrast to conventional economic theory, the South African informal economy does not absorb newcomers easily, and particularly not in times of crisis. The chapter concludes by reflecting on the primary thrust of post-apartheid policy and by examining South Africa’s response to the global call to promote the formalization of the informal economy.

35.1 Introduction

Since Keith Hart first coined the term ‘informal sector’ to describe the multiple economic activities of the urban poor in Accra, Ghana, in the late 1960s, the phenomenon it seeks to describe, and the role it plays in development, have been contested. Those on the right of the ideological spectrum often see the informal sector in celebratory terms as a commendable manifestation of untrammelled entrepreneurship or as the source of unfair competition. Those on the left, in contrast, view, what they refer to as the informal economy , as a manifestation of systemic exploitation, often reinforced, facilitated, or created by the state. At the heart of these disagreements are different stances on the (existing and desired) economic system and relationship between the economy and the state, as well as between the formal and informal sectors.

The chapter begins with a review of the literature and key policy debates on the South African informal economy through the lens of Chen’s ( 2012 , 2018 ) taxonomy of informal economy debates into legalist, dualist, voluntarist, and structuralist schools of thought. Attention is then turned to an empirical analysis of this segment of the labour force using Statistics South Africa’s Quarterly Labour Force Surveys (QLFSs). The analysis picks up from previous studies by identifying key trends in informal employment since 2008. Key features of the informal economy are outlined through the lens of gender and status in employment. The chapter concludes by reflecting on the dominant policy issues in the post-apartheid period, and on whether and how such policy choices align with existing evidence on the nature of the South African informal economy.

It was only in 2003 that the International Conference of Labour Statisticians (ICLS) endorsed definitional norms. These outline that the ‘ informal sector ’ refers to employment and production that takes place in unincorporated, small, or unregistered enterprises while ‘ informal employment ’ refers to employment without social protection through work both inside and outside the informal sector. The ‘ informal economy ’ refers to all units, activities, and workers so defined and the output from them ( Hussmanns 2004 ). Statistics South Africa (StatsSA) has adopted these norms and includes them with the public releases of the QLFS micro-data. This chapter makes use of the ICLS/StatsSA operational definitions. 1

35.2 Informal Sector/Economy Debates and Contestations

Hart’s detailed analysis of the multiple economic activities of the urban poor in Accra, challenged the predominant view among development economists that ‘traditional’ activities had little capacity for autonomous growth and would disappear with ‘development’. The ILO quickly adopted the notion of the informal sector, instituting a range of support programmes first in Africa and then elsewhere. The concept itself, however, was treated with some suspicion by those on the left. Bromley (1978) for example, argued that the idea offered ‘the possibility of helping the poor without any major threat to the rich’ (1978: 1036). Central tensions about the transformative potential of the informal sector remain to this day. In capturing the source of these tensions, Chen (2018) synthesizes nearly half a century of debates by identifying four schools of thought—the legalists, dualists, voluntarists, and structuralists, each with differing views on the causes and composition of the informal sector/economy. Each school of thought is reviewed in turn and used as a lens through which to view the South African policy and academic debates.

35.2.1 The Legalist School—Deregulation and Property Rights

The legalist position, exemplified by the work of De Soto, promotes the view that informal entrepreneurs exist because they are excluded from the formal sector due to cumbersome government regulations (1989). De Soto’s think tank—the Institute for Liberty and Democracy—has worked with numerous governments across the Global South to reduce bureaucratic burdens and to design programmes of deregulation. The key goal is to release informal enterprises from government regulation. Since 2000, De Soto has drawn attention to the extension of property rights, so that informal entrepreneurs can convert their informal assets into real capital assets ( De Soto 2000 ), a position that has been critiqued. Porter (2011) for example, argues that legal title deeds can have the effect of raising land and housing prices to the point that the poor are priced out.

Given that the apartheid state fashioned and refined a multifaceted system of legal and other restrictions on black South Africans’ economic activities ( Southall 1980 ), a focus on bureaucratic burdens has resonance in South Africa. During the post-apartheid period, reducing the bureaucratic burdens on small enterprises has been a significant focus, as evidenced particularly in small business development policy (see, for example, the Department of Small Business Development 2020). The celebratory tone of this literature is echoed in the work of the Sustainable Livelihoods Foundation. Their informal enterprise area census data in multiple townships across South Africa demonstrate the diversity within, and spatial spread of, township informal enterprises. A resounding theme is the call for deregulation at national but also local levels ( Charman 2017 ; Charman et al. 2020 ).

35.2.2 The Dualist School—‘Survivalists’, Enterprises, and Entrepreneurs

Dualists subscribe to the notion that informal units and activities have few (if any) linkages to the formal economy but, rather, operate as a distinct, separate sector of the economy and that the informal workforce—assumed to be largely self-employed—comprises the less advantaged sector of a dualistic or segmented labour market ( Chen 2018 : 30). These views were particularly prevalent in the early years of theorizing the informal sector both in Africa ( Hart 1973 ; ILO 1972) and Latin America ( Tokman 1989 ) but continue to be implicit in more recent economic analyses of the informal sector (see, for example, Fourie 2018 ; Grimm et al. 2012 ; Grabrucker et al. 2018 ). Dualists pay little attention to the link between informal enterprises and government regulations and focus on the state providing a series of supply-side measures such as training, access to credit, and infrastructure.

In the South African economics debates, a prominent iteration of the dualist position is the analysis of who, in the informal sector, survives and/or ‘does better’ and why. Makaluza and Burger’s (2018) analysis, for example, finds a lower tier of survivalist-oriented operators and an upper tier of more growth-oriented entrepreneurs. They find that the survivalists are in the majority and are predominantly black South Africans and women. Similarly, Lloyd and Leibbrandt (2018) use the panel component of the QLFS to measure transitions into and out of informal-sector self-employment. Their work showed the significance of prior work or employment experience to the survival of informal enterprises.

Over much of the post-apartheid period, access to training (both business skills and industry specific) and credit have been a focus of informal-sector policy ( Rogerson 2008 ; Skinner 2018 ). The first national policy initiative dedicated to the informal sector—the 2014 National Informal Business Upliftment Strategy (NIBUS)—identified three groups of informal operators: survivalists, emerging informal enterprises, and micro-entrepreneurs. Through credit and training support, combined with regulatory reforms, the policy aims to graduate informal businesses from these three ‘pre-formal’ categories into formal small businesses. This suggests that the Department of Small Business Development’s approach has been underpinned by a dualist and legalist conception of the informal sector.

35.2.3 The Voluntarist School—Regulation Evasion and the ‘Shadow Economy’

What Chen describes as the voluntarist position, popular among neoclassical economists, is exemplified in the work of Maloney (2004) and his colleagues at the World Bank ( Perry et al. 2007 ). Drawing on surveys conducted in Latin America, they argue that the informal sector is comprised of informal entrepreneurs who choose—or volunteer—to work informally. Informal entrepreneurs do so to avoid taxation, commercial regulations, electricity, and other costs of operating formally. In line with standard neoclassical economics, they argue that the state should remedy market failures, coordinate the provision of public goods, and maintain level playing fields, including reforming labour markets to reduce labour costs ( Perry et al. 2007 : 1, 14).

While many South African analysts have argued for labour market reforms, including opposing wage minima (Centre for Development Enterprise 2019; Bhorat et al. 2016a ), when it comes to their analyses of the informal sector they tend to adhere to more legalist and dualist conceptions of the informal sector (Centre for Development Enterprise 2020; Bhorat et al. 2016b ; and Cassim et al. 2016 ). In fact, analyses of informal employment transitions have tended to provide evidence which challenges the voluntarist approach. Valodia and Devey (2012) , using the panel component of the labour force survey, show considerable churning between formal and informal employment. Most importantly, they find that the movements occur in both directions—not just formal to informal—and demonstrate few, if any, income benefits for those moving from formal to informal employment (2012). 2 These findings suggest that, in the South African case, those in informal employment are not likely to be opting out of the formal economy to avoid regulation as the voluntarist view suggests.

A variant of the voluntarist approach is the notion of the ‘shadow economy’ ( Schneider and Enste 2000 ; Schneider et al. 2010 ). In this conceptualization, informal activities are placed alongside illegal activities in painstaking calculations of all economic activities that would be taxable if they were reported to the tax authorities. These estimates are made by calculating the discrepancy between income and expenditure statistics in national accounts ( Medina and Schneider 2018 ) but also through analyses of electricity usage 3 ( Medina et al. 2017 ). These results are used to argue for decreased tax rates, simplified taxation systems, and a deregulation of labour markets. The International Monetary Fund’s (IMF) analysis of South Africa’s informal sector is informed by this approach ( Medina et al. 2017 ; IMF 2017). They argue for improved tax compliance (for bigger operators); access to finance but also electricity as well as decreasing the costs of exporting and enforcing contracts (IMF 2017: 60).

35.2.4 The Structuralist School—Formal- and Informal-sector Linkages

The perspectives reviewed so far pay little or no attention to informal wage workers nor to the linkages between the formal and informal sectors. The structuralist framework, in contrast, sees the informal and formal economies as intrinsically linked and characterized by unequal power relations in market and employment relations. They see both informal enterprises and informal wage workers as subordinated to the interests of capitalist development while providing cheap goods and services. This view was first expounded by Moser (1978) and developed and nuanced by Portes, Castells, and Benton (1989) . Meagher, drawing on this tradition but focusing on Africa (1995: 277) outlines her position on the relationship between the state and the informal sector:

Ambiguous or inconsistent policy and policy that is difficult to enforce, represent an implicit encouragement of informalisation. It creates a climate suitable for the expansion of exploitative structures of informality, since it fails to provide active protection and support for informal actors and provides gaps in the legal structure permitting stronger economic players to make use of informal labour.

Recent analyses of African informal economies outline the multiple ways in which corporations make use of the informal economy by, inter alia , strategizing ways to tap into the ‘fortune’ at the base of the income pyramid ( Prahalad 2004 ). Three special issues on the topic— Meagher and Lindell (2013) ; Meagher, Mann, and Bolt (2016) , and Leliveld and Knorringa (2018) —detail the multiple ways in which multinational firms draw on informal workers’ energy and ideas. Much of this literature uses the notion of ‘adverse incorporation’ and draws attention to the largely unfavourable terms of inclusion into various value chains.

There is a rich tradition of research in South Africa that is informed by a structuralist position in understanding labour market dynamics in general ( Wolpe 1972 ), and the informal economy in particular ( Preston-Whyte and Rogerson 1991 ). In the immediate post-apartheid period, labour sociologists and lawyers pointed to the growth of casualization and subcontracting of work ( Kenny and Webster 1998 ; Theron and Godfrey 2000 ). In time this was supplemented with detailed studies of the changing nature of work in different sectors ( Mosoetsa 2001 ; Kenny 2004). Webster et al. (2008) showed multiple interconnections between formal and informal activities in small-scale clothing manufacturing, mining, waste and metal recycling, and shebeens (informal alcohol retail). They show how the interactions between the formal and informal sectors were characterized by unequal power relations and asymmetrical interdependence. Similarly, Du Toit and Neves have outlined the nature of adverse incorporation of informal operators in agricultural value chains (2007, 2018).

In analysing the informal economy overall, one of the enduring puzzles has been the relatively small size of the South African informal sector amidst some of the highest levels of open unemployment in the world ( Kingdon and Knight 2004 ). Structuralist analysts have explained this puzzle by showing how the uneven nature of the relationship between the informal and the formal sectors limits activities in the informal sector. Philip (2018) , for example, shows how economic concentration in the formal sector constrains sales and output growth, as well as employment creation in the informal sector.

Similarly, the inability of the South African informal economy to absorb the impact of crises has suggested that there are structural constraints or barriers to informal employment. For example, there is a widely held expectation that, particularly in developing-country contexts, the informal economy will absorb job losses from the formal sector during economic crises or downturns. However, evidence from the South African labour market during the 2008/09 global economic crisis revealed that the informal sector was affected disproportionately by the crisis, relative to the formal sector. The informal sector contracted, in both relative and absolute terms, during the crisis ( Verick 2010 ; Rogan and Skinner 2018 ). Similarly, Essers’ (2014) analysis of pre- and post-crisis employment transitions revealed very little movement into informal self-employment, either from other types of employment or from the unemployed.

Each of the perspectives outlined in this section hold very different assumptions about the agency of those working in the informal economy. We are called to see survivalists attempting to put food on the table by the dualists, entrepreneurs navigating labyrinthine bureaucracies by the legalists, savvy evaders of taxation and regulation by the voluntarists, and exploited workers by the structuralists. Each approach places varying amounts of attention on the role of the state and has different implications for policy. As Chen notes, each of these perspectives in any given country or region will contain elements of truth and reflect different ideologies at play (2018: 31). The rich literature on the South African informal sector and economy, viewed through the lens of these schools of thought, sheds light on different aspects of this segment of the labour market in the South African case. Against this backdrop, the chapter turns now to an overview and empirical analysis of the size and shape of the post-apartheid South African informal economy.

35.3 The Size and Nature of the Post-Apartheid Informal Economy

Research and data on the size of the South African informal economy can be broken into roughly three different phases. First, the early post-apartheid studies suggest that there was a sharp increase in informal employment following the relaxation of apartheid-era controls on movement and economic activities. Both Muller (2003) and Devey et al. (2006) , using StatsSA’s October Household Surveys (OHS), found that the size of the informal economy roughly doubled between 1995 and 2000. These authors, however, note that at least part of this increase was due to improvements in data collection. Casale and Posel (2002) , also using OHS data and reflecting on the same period, show a feminization of the labour force and attribute this, in part, to the growing concentration of women in low-paid and informal employment.

Second, in 2000 StatsSA introduced the bi-annual labour force survey (LFS), allowing for further improvements in the measurement of the informal economy. Heintz and Posel (2008) , generating estimates for the 2001–04 period, showed that, likely due to improvements in labour legislation, the share of informal employment in total employment had in fact contracted (2008). Wills (2009) , assessing the 2005–07 period found the share of informal employment in total employment stabilized with about 4 million informal workers accounting for between 30 and 34 per cent of employment in 2005 and 2007, respectively. Both analyses found that while there were roughly equal numbers of women and men in informal employment, a larger share of women’s employment was informal. Moreover, both studies found women had significantly lower earnings than men ( Heintz and Posel 2008 : 37; Wills 2009 : 31–2).

Third, in 2008, and coinciding with a growing consensus on the adoption of ICLS definitions, StatsSA introduced the QLFS. Budlender (2011) using 2010 (Q2) data found, similar to Wills, that roughly a third of the South African workforce was informal and that the share of women’s employment (39 per cent) in the informal economy was higher than men’s (29 per cent). Since then, men’s share has increased such that, by 2019, Rogan and Alfers (2019) found there was gender parity in urban areas with about 30 per cent of both women’s and men’s work being informal. This can be attributed, in part, to a growing share of men in informal sector employment from 2010 onwards ( Rogan and Skinner 2018 ; Statistics South Africa 2015 ). Notwithstanding these gendered shifts, there remains considerable gender inequality within the informal economy with women being over-represented in the lowest-earning types of informal employment but also experiencing an earnings gap within informal occupations (see Magidimisha and Gordon 2015 ; Rogan and Alfers 2019 ).

During the onset of the COVID-19 pandemic in early 2020, the vulnerability of women informal workers was compounded significantly (see Casale et al., Chapter 34 in this volume). Early assessments found, over the period of the initial government lockdown, women in informal employment reported a 49 per cent decrease in their typical working hours compared with a 25 per cent reduction reported by men. Women in self-employment within the informal sector experienced a nearly 70 per cent reduction in typical earnings (conditional on retaining their livelihoods) while men reported a 60 per cent reduction in earnings ( Rogan and Skinner 2020 : 1). Therefore, women in informal employment experienced a larger negative impact from the COVID-19 crisis, relative to men, while also starting from a lower level of earnings.

Before turning to an empirical analysis of national micro-data, it is important to outline several additional characteristics of informal employment in South Africa. As previously noted, a well-documented feature is the small size of the South African informal economy, in comparison to other middle-income countries and the rest of the continent. Globally, 61 per cent of all employment is informal, while in Africa as a whole, nearly 86 per cent of all employment is informal (ILO 2018: 13). In terms of its socio-demographic attributes, with respect to race, black South Africans predominate—in 2019, for example, they constituted 89 per cent of the informal economy despite accounting for only 75 per cent of total non-agricultural employment (own calculations from the QLFSs). Further, informal employment is more prevalent in rural areas than formal employment. Just under 30 per cent of informal workers live in the traditional authority (rural) areas compared with only 15 per cent of formal workers (own calculations from the 2019 QLFS: Q3).

Informal employment is also characterized by significantly lower levels of education compared with formal employment. Informal workers are more likely to have had no schooling and are less likely than formal workers to have completed secondary school and to have attained any level of tertiary education. Not surprisingly, earnings are far lower in the informal economy with informal-sector earnings accounting for less than half of mean and median earnings in the formal sector ( Rogan and Skinner 2018 ; but see also Makaluza and Burger 2018 ). Finally, it should be noted that immigrants are not well captured in labour force surveys. Nonetheless, in South Africa there are persistent claims of large numbers of immigrant informal workers and policy tends to have a strong, and often punitive, focus on foreign participation.

35.3.1 Recent Trends in Informal Employment

Extending the earlier empirical work described in the previous section, Figure 35.1 offers the most up-to-date estimates of informal employment in South Africa and shows that, consistent with earlier figures, the informal economy has included a workforce of between 4 and 5 million over the past decade. Following a short, but sharp, decrease in the period following the global economic crisis, where roughly 350,000 informal-sector jobs were ‘lost’ between 2008 and 2009, the informal economy has been a constant feature of the South African labour market. After 2014, there was a steady increase in the size of the informal economy, particularly driven by increases in the number of men in informal employment. By the third quarter of 2019, the South African informal economy was comprised of about 4.8 million workers.

Total non-agricultural employment in the South African informal economy, by gender (2008–19)

Figure 35.2 illustrates the share of total non-agricultural employment, which is informal, by gender, and shows a shift in gendered shares in informal employment over time. In 2008, and as documented in much of the post-apartheid literature, informal employment was a greater share of women’s employment (35 per cent) relative to men (28 per cent). While the overall share of employment which is informal was relatively constant over the period (at about 30 per cent), the share of female employment which is informal decreased between 2008 and 2014. By 2019, about 30 per cent of both male and female non-agricultural employment in South Africa was informal. Figure 35.2 , therefore, shows that informal employment has consistently accounted for just under a third of total employment while moving towards gender parity in employment shares.

Percentage of non-agricultural employment in informal employment, by gender (2008–19)

Percentage of non-agricultural informal employment in the informal sector, by gender (2008–19)

35.3.2 The Contribution of Informal-sector Employment to the Informal Economy

One aspect of these gendered changes in the composition of the informal economy can be seen in the contribution of informal-sector employment to total informal employment. Figure 35.3 shows that an increasing share of informal employment in South Africa is in the informal sector. In 2008, just over half (54 per cent) of informal employment was in the informal sector and, by 2019, this had increased to 64 per cent. A part of the increase in total informal employment is, therefore, likely to have been driven by the informal sector. Much of this increase is in male informal-sector employment (an increase from about 1.3 million in 2008 to about 1.9 million in 2019). The percentage of women in informal-sector employment increased from only 49 per cent to 55 per cent between 2008 and 2019. Among men, however, the increase was from 58 per cent to 72 per cent. Therefore, over the same period that the informal economy expanded (by more than 400,000 workers), the share in the informal sector also increased substantially and significantly. 4

Percentage of total non-agricultural employment in the informal sector, by gender (2008–19)

Perhaps a clearer way to view the expansion of the informal sector, as well as the gendered trends in informal-sector employment, is to consider the share of total (non-agricultural) employment in the informal sector (Figure 35.4 ). In 2008, about 17 per cent of both men and women’s total non-agricultural employment was in the informal sector. Following the decrease in informal-sector employment during the global financial crisis, there is evidence of a steady increase in informal-sector employment among men. At the same time, the share of female employment in the informal sector has remained fairly constant over the same period. From 2016 onwards, the share of women’s informal employment and total employment in the informal sector began to increase again. However, the long-held perception of the informal sector as a ‘feminized’ sector has, to a large extent, been reversed over the past decade.

35.3.3 Status in Employment within the Informal Economy

One way of identifying heterogeneity in informal employment as well as gender segmentation is through the analysis of status in employment. Figure 35.5 below identifies changes in the percentage of women and men in informal employment who are own-account workers, employees, employers, and contributing family workers. Between 2008 and 2019, women have been significantly more likely than men to be self-employed own-account workers in the informal sector. Over half of all women working in the informal economy were in this category for the period under review while a smaller and relatively constant share of men (about 40 per cent) were own-account workers during the same period. Men were consistently more likely to be informal employees (both inside and outside of the informal sector) with just over 40 per cent being identified in this group. Perhaps the largest (relative) gender difference in status in informal employment, however, is in the share of women and men who are self-employed employers (i.e. they hire other informal workers). These are typically the highest earners in the informal economy (see Rogan and Alfers 2019 ) and in each of the three years depicted in the graph below, men are between two and three times more likely to be employers than women (e.g. 6.5 per cent of women compared with 15.4 per cent of men in 2019). Thus, the gender differences in status employment appear to be an ongoing feature of the South African informal economy, with women concentrated in the types of employment associated with lower earnings ( Rogan and Alfers 2019 ).

Status in employment within the informal economy, by gender (2008–19)

35.3.4 Informal Employment by Industry Sector

Another persistent feature of the South African informal economy is the difference in the distribution of women and men across industry sectors. As outlined in Figure 35.6 while roughly equal shares of women and men are employed informally in wholesale and retail trade (about 30 per cent) and manufacturing (about 7 per cent), there are large differences in the other key sectors. Most notably, the single largest group of women (37 per cent) in informal employment is employed in private households (largely as domestic workers). In contrast, only 9 per cent of men in informal employment work in private households. The modal group for men (29 per cent) is wholesale and retail trade but nearly a quarter (24 per cent) are employed in construction (compared with only about 1 per cent of women). Two other significant gender differences are the much larger shares of women in the community and social sector and the greater percentage of men in transport (e.g. in the taxi industry). Within the community, social, and personal services sector (where the vast majority of informal work is within the informal sector), some of the key informal activities are child-care, hairdressing, cooking, traditional healing, cleaning, and different categories of labourers.

The industry shares of men’s informal employment have remained largely constant over time while women’s shares have changed in several ways. The two notable changes over the decade are women’s decreasing share in trade and a corresponding increase in community and social services (own calculations, not shown in the graph). In contrast, while the percentage of women’s overall employment in domestic work has decreased since 1994 (see Casale et al., Chapter 34 in this volume) the percentage of women’s informal employment in domestic work only decreased slightly (and not significantly) from 38 per cent in 2008 to 37 per cent in 2019 (own calculations from the QLFSs).

Sectoral distribution of informal employment, by gender (2019)

Sectoral distribution of informal employment within the formal sector, by gender (2019)

35.3.5 Informal Employment outside of the Informal Sector

Research and policy interest often focuses on the informal sector (DSDB 2020; Fourie 2018 ; Charman et al. 2020 ). However, a picture of informal employment within formal-sector firms, is an important feature of the post-apartheid informal economy. While often excluded from policy discussions, this type of work has some parallels with terms such as ‘precarious’ and ‘non-standard’ employment or the ‘gig economy’ in the broader literature ( Standing 2011 ). In the third quarter of 2019 there were about 670,000 informal workers employed in the formal sector. Not surprisingly, there are also gender differences in the sectoral distributions of informal employment among this group (Figure 35.7 ). Women in informal employment in the formal sector (excluding private households) are concentrated in the community and social services sector (36 per cent), wholesale and retail trade (31 per cent), and, to a lesser extent, manufacturing (20 per cent). Examples of the types of occupations that women report within the social and personal services sector include child-carers, hairdressers and beauticians, and various types of cleaners and helpers. As with employment within the informal sector, men tend to dominate in the construction and transport sectors.

35.4 Conclusion

This overview of the South African informal economy has shown that informal employment over the post-apartheid period has formed a large share of the workforce—about 30 per cent. While the contribution to total employment has not changed appreciably, dynamics in the informal economy, more broadly, and within the informal sector, in particular, have often run counter to expectations. The evidence shows that the smaller size in comparison to developing-country counterparts, and the sclerotic nature of the informal sector alongside high and increasing levels of unemployment, have been due, in part, to the limited absorption of newcomers. This suggests that the South African informal economy is not a ‘free-entry’ sector. This characterization of the informal economy has been most pronounced during times of economic crisis. During the 2008–09 global economic crisis, for example, in contrast to expectations of conventional theory, the informal sector actually contracted. In addition, the informal economy is segmented and exhibits a high degree of heterogeneity in terms of status in employment, industry sector, and in earnings and vulnerability to shocks. Overlaid onto this heterogeneity are stark differences in the types of informal work in which women and men are engaged. At the same time, the past decade coincided with the reversal of the hitherto well-documented finding of a larger share of women’s employment in the informal economy.

Against this backdrop, there has been increased international attention on the South African informal economy. At the 2015 International Labour Conference, United Nations member states and their organized business and labour counterparts agreed on the first international labour standard specifically on the informal economy—Recommendation 204 (R204). Significantly, South Africa was identified as one of the ILO’s target countries for R204 implementation from the outset and set up an R204 task team. R204, entitled ‘Transition from the Informal to the Formal Economy’, represents a significant shift in discourse away from dualist and legalist conceptions of the informal sector as small entrepreneurs who evade taxes and regulations, towards vulnerable workers and economic units (including own-account workers) who need protection and incentives to formalize (ILO 2015). So how does the shift in international discourse combined with the dominant characteristics of the South African informal economy align with the South African government’s policy approach?

The National Development Plan (NDP) assigns a large role to the informal sector as an employment generator, projecting that the informal-sector and domestic work will create between 1.2 million to 2.1 million jobs by 2030 ( National Planning Commission 2012 : 121). The NDP chapter on the economy, however, says nothing about how existing operators in the informal sector will be supported, nor how barriers to entry will be addressed to help generate new jobs. As noted in section 35.2 , the Department of Trade and Industry’s, and, since its establishment in 2014, the Department of Small Business Development’s, policy response to the informal sector has concentrated largely on access to finance, training, and regulatory issues. Assessments suggest that state and other service providers have struggled to extend these services to all but the larger and better-resourced informal-sector enterprise owners and/or have been unable to reach scale ( Skinner 2018 ; Rogerson 2008 , 2016 ). Given the gendered segmentation of the informal economy, this support has, thus, been biased to men.

With respect to regulatory issues, but also enterprise support, a key driver in the South African government’s approach, since 2010, has been the exclusion of immigrants. This is despite research showing the multiple contributions that immigrants working in the informal sector make to local economies ( Crush et al. 2015 ; Zack 2017 ). NIBUS, for example, highlights the lack of ‘regulatory restrictions’ to control ‘the influx of foreigners’ as a key issue and cites, as good practice, Ghanaian legislation that restricts business ownership, in a range of sectors, to citizens (2014: 22). National government’s 2013 attempt to implement similar legislation failed but provinces are now seeking to institute their own legislation along these lines. The focus on curtailing immigrants drives a more punitive approach to the informal sector in general and diverts attention from the real, urgent need to support and enhance opportunities for all those working in the informal sector.

The raft of laws introduced in the post-apartheid period to protect workers—the Labour Relations Act of 1995, the Basic Conditions of Employment Act of 1997, and the Unemployment Insurance Act 2011, among others—in theory should apply to formal and informal workers alike. In addition, since 1999 the Employment Conditions Commission has set minimum wages in sectors known to have high levels of precarious work, including domestic work, agriculture, security, the taxi industry, and retail. This was supplemented with the introduction of a national minimum wage in 2018. Compliance levels with both minimum wages and labour protections have been shown to be low ( Bhorat, Kanbur, and Mayet 2011 ; Bhorat et al. 2020 ). Consider, for example, domestic workers, where 44 per cent were paid below national minimum wages, 73 per cent had no paid leave and 87 per cent no maternity leave ( Bhorat et al. 2020 : 8). Up until a 2019 court challenge, domestic workers were not considered ‘employees’ under the Compensation for Occupational Injuries and Diseases Act, demonstrating significant gaps in legislation. The government’s R204 Task Team has been tasked with looking at these and other legislative gaps.

The structuralists’ provocations are an important reminder that dynamics within the informal economy (between employers and employees, for example) and between large corporations (as suppliers but also competitors for land) and the informal economy often have an exploitative dimension that warrants protection measures. The R204 Task Team is a positive first step in tackling decent work deficits for informal wage workers. Policy measures, however, need to be nuanced in order to address the differing constraints which affect a diverse workforce. For those in the informal sector, economic concentration in the formal sector acts as a structural barrier, often overshadowing supply-side constraints, such as a lack of finance or skills (and efforts to overcome them). The state would do well to pay more attention to sectoral segmentation within the informal sector in general, and how dynamics in the formal sector shape opportunities. This suggests the ambit of policy analysis and intervention should be extended—trade, industrial, competition, and land use policy, among others, all have implications for those working in the informal economy. Finally, if the developmental impacts of policy are to be maximized, segments of the informal economy where women dominate need to be prioritized.

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Employment in the informal sector is measured as consisting of both employees and the self-employed. Employees are identified as being in the informal sector if they work in establishments that employ less than five people and do not report income tax being deducted from their salaries. The self-employed includes employers, own-account workers, and persons helping unpaid in their household business who are not registered for either income tax or value-added tax. Informal employment includes all persons in the informal sector (as above) as well as employees in the formal sector and in private households who do not have a written contract of employment and are not entitled to a pension or medical aid.

StatsSA has changed the way it classifies workers in private households, largely domestic workers, over time. Earlier rounds of the QLFS (2008–11) defined all domestic workers as ‘informal’ but, from 2012 onwards, the criteria of access to a written contract and basic benefits were also applied to employees in private households. In this chapter, the latter approach is adopted across the QLFS series.

  Lloyd and Leibbrandt’s (2018) analysis of transitions between different work status using recent data (but different categories) confirm Valodia and Devey’s findings of significant mobility of individuals between different statuses. They find that informal-sector wage employment is the most unstable working status.

The electricity consumption growth rate, assumed as a good indicator of overall economic activity, is subtracted from the GDP growth rates.

The other reason for the expanding share of informal-sector employment in the informal economy is the decrease in informal employment in the formal sector over the period. Between 2008 and 2019 there was a 34 per cent decrease in the number of women working informally in the formal sector and a 27 per cent decrease in the number of men (own calculations from the QLFSs). This finding is consistent with earlier work ( Heintz and Posel 2008 ) which suggested that compliance with protective labour legislation may explain decreases in informal employment in registered firms.

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Journal of Energy in Southern Africa

On-line version  issn 2413-3051 print version  issn 1021-447x, j. energy south. afr. vol.32 n.2 cape town may. 2021, http://dx.doi.org/10.17159/2413-3051/2021/v32i2a5856 .

The South African informal sector's socio-economic exclusion from basic service provisions: A critique of Buffalo City Metropolitan Municipality's approach to the informal sector

B. Masuku; O. Nzewi

Department of Development Studies, University of Fort Hare, Alice, South Africa

This study explores the exclusion of informal micro-enterprises from the provision of basic urban infrastructure services in Duncan Village in East London, South Africa. It focuses on the informal food sector, which is dominated by women who are often held back from participating in economic activities that are more productive, as well as from social and political functions. Basic urban infrastructures, such as trading shelters with water and electricity connections provided by municipalities, are often expensive and most informal street traders find it difficult to access them. This study examines the energy struggles of the informal street food sector and its engagement with local government on issues ofinclusivity on policies regulating the sector. In-depth, semi-structured interviews and focus groups were conducted with 40 participants in the informal street food sector in Duncan Village. The findings reveal the lack of energy transition in the informal street food sector, because of its heavy reliance on low-quality fuels. Unreliable and expensive energy services force informal street food enterprises into using a limited range of energy sources. The findings also reveal that the relationship between the municipality and the informal street traders is one of exclusion and negligence. It is therefore suggested that government needs to recognise and value the informal sector and livelihoods of those involved in this sector, to take into account their needs, and engage with them when designing and implementing policies that regulate the sector.

Keywords : Energy needs; basic urban infrastructure services; informal sector; informal food sector; street traders; exclusion; service provision; women; energy services; local government; livelihoods

1. Introduction and study objectives

The informal sector is a major part of the global economy. Globally, about two billion people make their living from the informal economy and over 85% of people in Africa are employed within it. Furthermore, the informal sector contributes about 55% of Sub-Saharan Africa's gross domestic product (ILO, 2017; Ruzek, 2015:2). In South Africa, the informal sector has a smaller, but still significant, total share of employment, with over 2.5 million people, making up 20% of total employment in the country. It contributes about 5.1% of the country's GDP (StatsSA, 2019, Rogan & Skinner, 2017:9). The informal sector has always been considered as a temporary shelter for the poor (Mahlokoana et al., 2019). In South Africa, the formal economy is not inclusive of all; instead, it has huge disparities of inequality, and excludes the majority of the black population who are affected by high levels of poverty and unemployment (Ndulo, 2013). This has pushed most poor people into marginal conditions and forced them to forge survivalist strategies, which include joining the informal sector as traders (Skinner, 2016; Hamadziripi, 2009). This sector has proved to be everywhere persistent and permanent, and continues to grow around the world.

About three billion people across the globe are affected by energy poverty, defined by the International Energy Agency (2014) as 'lack of access to electricity and reliance on traditional biomass fuels for cooking'. They rely on traditional energy sources such as wood, biomass and dung for cooking and heating, and this affects health, education and gender equality. In Sub-Saharan Africa, more than 600 million people have no access to electricity (ILO 2018, IEA, 2014). For many economies in Sub-Sahara Africa, the informal economy has emerged as a significant socio-economic entity that provides a means of family subsistence income and sustainable employment (Chen, 2012). The informal sector 1 is one of the mechanisms used by the poor in developing countries to create income-generating opportunities (De Groota, et al., 2017; Skinner & Haysom, 2016). Furthermore, scholars like Rogerson (2016) and Skinner (2019) posit that the informal sector has become a major engine for employment, entrepreneurship and economic growth, especially in developing economies. The provision of basic urban services like energy remains a huge challenge in sub-Saharan Africa (Bailis 2015; Mtero, 2007). Over the past decades there has been a lack of focus and prioritisation of energy and energy access in international development agencies and national political decision-makers in Sub-Saharan Africa (Bailis, 2015). This is despite energy sufficiency and security being an essential prerequisite for sustainable development and a key to the provision of socio-economic development at regional, national and sub-national levels (Amigun et al., 2011).

The research study that this paper reports on emphasises the need to explore development alternatives that will lead to greater inclusivity of economic development and economic growth, and it suggests that one way to do that is to invest more in the informal sector, which has often been overlooked in economic policy analyses. The study focuses on the survivalist micro informal enterprises 2 that are heavily dominated by women traders who are self-employed and sometimes have to rely on a handful of employees, hired without social protection, most of whom do not pay any form of tax to the local authorities, lack union membership or written contracts, and do not have a fixed monthly income. It demonstrates the crucial role which basic municipal service provision, such as the Free Basic Alternative Energy policy (FBAE), plays in the informal food sector in ensuring access to food for the urban poor.

To understand the struggles of exclusion from the provision of basic urban infrastructure faced by informal street traders, this research used Duncan Village as a case study. Duncan Village is a black township in the Buffalo City Metropolitan Municipality (BCMM) in the Eastern Cape province of South Africa. It was established in 1941 and named after the then Governor-General of South Africa, Patrick Duncan, who oversaw the opening of what was called a 'leasehold tenure area' on the East Bank of East London (The Mdantsane Way, March 2013). The township is about five kilometres from the East London city business district, and it is estimated that it has between 80 000 and 100 000 residents (Maliti, 2020). This location was chosen for this research study primarily because, firstly, Duncan Village has a long history of poor service delivery, struggles of poverty and socio-economic inequalities which have sparked violent protests particularly about poor service delivery of electricity and housing (Ndlovu, 2015); and, secondly, it is a township containing a wide range of small informal businesses (Ndlovu, 2015). It has a high unemployment rate, exceeding 50%, especially among the youth, and most people there depend on odd jobs and government social grants for survival (Ndlovu, 2015;). The history and the background of Duncan Village is crucial for understanding livelihoods and struggles of its ordinary people, who make a living through their engagement in informal sector businesses. Furthermore, the study endeavors to reflect the historical and present realities of South African black townships.

This study focuses particularly on the busiest areas, mainly the Esigingqini taxi rank. As a result of the large number of commuters, this taxi rank has attracted a number of informal traders, notably informal street food operators selling prepared and cooked food including pap (porridge) and chicken stew, beef stew, barbequed meat, amagwinya (vetkoek), boerewors (sausage) rolls, kota (bunny chow), inhloko (cow heads), amasondo (cow heels), amongst many others. The taxi rank was serves well as a case study because of its lucrative and increasing market opportunities and customer base for informal street trading.

The study finds that struggles faced by the people of Duncan Village, informal business operators included, have been understood as a struggle to meeting basic needs - such as having access to Free Basic Alternative Energy services (FBAE), which is part of the fulfillment of the promises of democracy in relation to socio-economic rights. The provision and accessibility of energy service are often determined by three factors: (i) a connection to the grid or (ii) an alternative off-grid solar system; and (iii) the affordability of that energy service. Poor households who are engaged in an informal sector business are often faced with challenges of energy poverty due being unable to afford clean energy, although the government has made an effort to implement poverty energy subsidies, such as FBAE, to support indigent households by providing them with fuels such as paraffin, liquefied petroleum gas (LPG), and, in some areas, a solar power system. However, to date, only a very small number of households receiving FBAE, and this mostly in rural areas, while urban informal settlements remain largely excluded from this programme.

The study shows that 17% of the respondents in the informal food sector in Duncan Village relied on traditional energy sources, such as wood and charcoal, to cook their meals for selling, while 83% relied on a mix, using electricity and LPGs simultaneously. Those who relied on the coal and wood were faced with some difficulties in storing and preserving perishable products such as meat, fish, polony, cheese, fresh milk and soft drinks, as this requires refrigeration. Lack of electricity deprived them of cooling storage facilities, which led to spoilage and increased chances of food poisoning, loss of customers and low incomes to sustain livelihoods (Matinga et al. 2015). Most of the participants indicated that they relied on their neighbours and friends who had access to electricity to store their perishable products.

Lack of access to modern and efficient energy sources impacts negatively on the user's health, respiratory diseases can be induced from using wood and charcoal (Matinga, 2010; IEA, 2010). This study is, however, cognizant of the fact that informal food enterprises sometimes use traditional sources of energy such as wood and charcoal, not because they do not have access to electricity, but because of the type of product they are preparing.

To critique BCMM's approach to the informal sector, this paper used the FBAE framework. The FBAE was promulgated in 2007 by the Department of Energy. Its main objective was to provide alternative energy services - LPG, bio-ethanol gel-fuel, paraffin, solar home systems and coal (DME, 2007) - to households not connected to the national electricity grid, to address the socio-economic issues that arise from inadequate provision of energy to households. The study is fully aware that the FBAE policy objectives are aimed at providing alternative energy sources to indigent households not connected to the grid and not specifically to the informal sector business. However, this article uses the FBAE strategy to demonstrate how the BCMM at local government level together with the aid of provincial and national government structures could invest more in alternative energy sources, such as renewable energy, that could be directed towards assisting the informal sector enterprises that struggle with energy access in conducting their business. It was chosen as the most suitable framework approach which could be used by the government to support the informal sector and bridge the energy gap it faces, particularly the street food sector which heavily relies on energy. This study focuses on the lives of informal traders, their struggles, their fears and their hopes.

The study shows that only 14% of participants running informal food business in Duncan Village are benefiting from municipal services such as Free Basic Electricity (FBE) at a household level. It should be taken into account that municipal free basic energy services such as FBE are not provided for business purposes, but to indigent households for basic energy use. Those running spaza business within their homes are using the FBE service for business activities such as cooking fast foods (fish, chips, sausages, kota, magwinya, etc), for cooling soft drinks, and for lighting, among others. However, the general concern raised by households receiving FBE is that it is inadequate to cover both households and business energy needs; as a result this has forced them to resort to alternative sources of energy, such as generators and illegal power connections. The study shows that none of the participants at this stage is benefiting from either the FBE or FBAE services in their households.

This study argues that modern energy sources, such as electricity and renewable energy, play an important role in providing sustainable energy to increase supply security through diversification (energy mix), which is much needed by the informal sector. The conclusion drawn, based on these findings, is that alternative energy is even more vital than electricity for small businesses such as the informal food sector. This means the government needs to invest more in alternative energies and support the informal sector with clean energy which is convenient and affordable to low-income households. For this reason, there is a huge need for government to strengthen and diversify the FBAE framework for a sustainable energy 3 development path that is socio-economically viable for the informal sector.

1.1 The informal sector problem Government policies and plans, not only in South Africa, but across Sub-Saharan Africa, still view the informal economy as a welfare problem (Stephan et al., 2015). This perspective, neglecting the informal economy and millions of people living therein, has led to a significantly underdeveloped informal sector across the continent (Shabalala, 2014). The repercussions of this approach are that governments face a huge social problem which cannot be solved by social grants alone. In South Africa, local government strategies, such as the Local Economic Development framework, meant to support local businesses and stimulate economic growth, do not directly support the survivalist informal traders, especially the informal street traders selling cooked food in public open spaces and from temporary or mobile shelters within and outside urban areas. Moreover, there is no energy transition in the informal street food sector, because of its heavy reliance on low quality energy sources like wood and charcoal in the face of a lack of an affordable and reliable energy supply. In addition to this, the informal street food sector is dominated by women who are often excluded from equal access to education and employment as well as to ownership and control over resources, due to the patriarchal structure of the society. Local government often sees informal street traders as law-breakers dealing in illicit goods, who need to be stopped and controlled through harsh methods such as confiscation of goods or paying hefty fines (Skinner 2016; Rog-erson 2004). The basic urban infrastructures, such as trading shelters installed with water and electricity connections provided by municipalities, are often expensive and most informal street traders find it difficult to access such facilities as they are unable to afford them.

1.2 Study objectives

The main objective of this article is to critically analyse the role of BCMM in the informal economy, particularly in the provision of basic energy services to the informal sector. Within this objective, the study aims to:

• find out the extent to which local government interpretation of the FBAE, as implemented

through municipal indigent policies, addresses local economic development, notably the support of informal businesses;

• investigate the extent to which the informal food sector contributes to the socio-economic improvement of livelihoods of the poor;

• make recommendations on how the findings can address challenges in this area.

1.3 Significance of the study

Previous studies indicate that, despite the importance of energy in the informal food sector, little is known about the dynamics of energy use by informal food enterprises (Groot et al., 2017). This paper has used the following literature as its yardstick for its arguments: Mahlokoana et al. (2019); Matinga (2015); Matinga and Annegarn (2013); Skinner (2008; 2016). These studies speak to the informal food sector using energy in order to survive, but are silent about the role of local governance in driving and formulating policies and strategies that favour the growth and development of the informal business sector, especially the informal food enterprises that rely on different energy sources.

The current research study is significant in that it endeavours to bridge the relationship gap between local government and the informal sector, particularly the survivalist informal traders who have no safety nets and are often excluded from any form of government assistance directed at small businesses. It argues that the choice of type of energy used is determined by several factors which include, but are not limited to, the type of product sold, geographic location, customer taste preferences and the spatial planning rules within a city. The study aims to assist in policy formulation and debates that advocate for the informal sector business, and also to regard the FBAE as a strategy which can be used to provide a wide variety of energy sources as safety nets for the informal food sector.

2. Literature review and methodology

2.1 Literature review

The study used the statist approach 4 as its framework to argue the role of the state in service delivery, in order to understand the struggles faced by informal businesses on issues surrounding the access and provision of energy in South Africa. The adopted theoretical frameworks provide a basis for understanding and analysing the livelihoods of urban informal workers involved in the informal food sector activities in Duncan Village. This approach was chosen to demonstrate the pivotal role played by the state in acting as custodian of legal and regulatory frameworks to govern the informal economy (Mkandawire, 2001). A welfare state is understood as a state whose interference in the economy is to protect and promote the material well-being of individuals, against the operation of market forces (Monyai, 2011). The statist approach was used to argue the role of local government, particularly with regard to municipal by-laws, in regulating and controlling informal trade, with the aim of promoting local economic development. The statist framework has been useful in coming to understand how structures and institutions, such as local government support programmes and by-laws, affect informal businesses. Existing literature on informal trade indicates that there is a lack of support offered by government structures in assisting survivalist informal businesses in South Africa (Pavlovic, 2016; Tshuma and Jari, 2013; Sello, 2012).

3. Research methodology

This study used a qualitative research approach to collect the relevant data. This enabled the researchers to describe, interpret and better understand the challenges of exclusion faced by informal business -in particular, survivalist informal street food operators. Data was gathered through a combination of in-depth and semi-structured interviews and focus group discussions. The use of interviews also enabled the researchers to probe, observe, and explore the answers given by respondents, as well as to allow them to narrate their struggles concerning energy access. The study also used secondary documents such as policy documents, books, journals, newspapers and articles. Policy documents in relation to municipal regulations affecting the informal sector were requested from the BCMM archives. The researchers were obliged to abide by the ethical standards of the University of Fort Hare. The researchers adhered to ethical procedures of the BCMM and gained permission to conduct a study within Duncan Village. The researchers obtained written consent from respondents to take part in the research.

3.1 Population and study sample

The population 5 in the context of this study were informal street food traders operating in the Esigxingini taxi rank in Duncan Village. The study applied a purposive sampling method to collect data. This enabled researchers to identify relevant and key participants - the informal food operators indicated above. A snowball sampling technique 6 was also adopted. This study focused on a sample of 40 participants comprised of seven groups. The researchers considered this sample size adequate for a qualitative study to make and appropriate analysis of the collected data. Six groups each had six members from informal street food enterprises in the following groups: those run by local citizens (South African citizens); those run by foreign nationals; those using municipal trading sites and infrastructure; those conducting business in public open spaces; those operated by women; and those run by men. The seventh group comprised four participants from BCMM: two municipal administrators, and two ward councilors from Duncan Village who work closely with the informal sector businesses. The study would have liked to interview a representative from an association of informal trader businesses in Duncan Village, but there was no such functional association. The selected participants were considered to be helpful to ascertain if the claim, made by some researchers, that government turns a blind to the informal sector are true or not, considering that municipalities play a crucial role in service. The BCMM administrators were selected through referrals and identification by the relevant office i.e. the office of the municipal manager, while ward councilors were accessed through door-to-door visits to relevant offices where they conduct their daily operations.

3.2 Field work experiences and challenges faced

Prior to undertaking the interviews, the researchers gathered relevant information on the study topic by utilising previous literature relevant to the topic. It was crucial for researchers to have a better understanding of the study by knowing the background information so as to contextualize and develop an interview schedule (see Annexure A in the supplementary material) that guided the interviews. A consent form for all participants (see An-nexure B) was also developed. Participants were informed that their participation in the study was voluntary and that they had a right to privacy, confidentiality and anonymity. Respondents were also fully aware that they would be no personal benefit to them from participating; and they were at liberty to withdraw from the study at any time if ever they felt uncomfortable.

During the field work of data collection, some significant general observations were made. Firstly, gender dynamics were evident throughout the data collection. Females were dominant in the informal sector businesses as compared to their male counterparts. Secondly, it was noted that most of the people in Duncan Village, in particular households and those running both formal and informal business are now research-fatigued, as many students conducting research had visited the area (although none of these studies had investigated the impact of FBAE in the survival of informal sector businesses). The researchers also noted that a number of local informal business operators - in particular, unregistered ones - were hesitant to be interviewed, mainly through lack of trust and fear of harassment by the authorities.

Despite following all the ethical measures undertaken, some challenges were encountered in the research. The researchers faced some difficulty in setting up appointments with BCM officials. Among those identified from the senior executive office, only the senior clerk from the department of local economic development could be interviewed. Efforts to interview the municipal manager were not successful, despite being identified as a main informant by the research office. Last but not least, some potential participants, particularly informal operators conducting their business from the streets were not willing to participate, as they thought the researchers were government agents. In order to minimize these concerns, the researchers had to explain to the respondents that the study was solely for academic purposes and that the information they provided with as well as their privacy would be protected and not be disclosed to anyone without their acknowledgement and permission

4. Study findings

This study adopted a thematic analysis, a descriptive presentation of data which is widely used in qualitative data (Tracy, 2013). Thematic analysis is a qualitative research approach based on participants' conceptions and perceptions, and focuses on examining themes within data (Babbie, 2010). This allowed for discussion of common themes and statements from the data collected. In qualitative data analysis, collected data is transformed into relevant and meaningful research findings (Tracy, 2013). The process of data analysis is an intensive process that requires careful planning and coordination of information to give comprehensive findings (Babbie, 2010). The findings of the study were presented using the demographical profile of the participants, through discussion of findings and graphical format by using themes and sub-themes. Literature was also used to support and validate the study findings and interpretations of results.

4.1 Energy struggles faced by informal businesses in Duncan Village

According to the 2012 study survey conducted by the Department of Eenergy, 47% of South Africans are energy-poor, and spend more than 10% of their income on energy services (DOE, 2012). Table 1 shows energy sources used by informal businesses in Duncan Village.

Informal business operators, in particular street food vendors, stated that they had no access to grid electricity, as they use temporary structures and operate in an open space with no electricity connection; so they heavily relied on LPG, generators, and sometimes coal and wood when they have no money to buy gas. Participants also indicated that

electricity usage limited them to do business else where where there is no grid connection. Thus, access to alternative energy sources, such as gas, provided them with mobility to cook and sell their fast food products in busy functions such as sports fields, show grounds, parks and roadsides.

The informal food operators indicated that their business has a wide range of clients, including office workers, travellers, schoolchildren and households. They also indicated that many local people preferred to eat their food rather than eating at restaurants because theirs was affordable. However, they also said that when food and cooking fuel costs increase they increase the price - e.g., a plate of pap and beef stew increased from R20 to R30.

Table 2 shows that only 42% of informal food sector businesses in the study provide employment opportunities to the local community, the majority of them those food vendor business operated which are registered and which are owned by foreign nationals (Somalians). Thus, 58% of the participants were sole-trader businesses, run with the assistance of family members and were unable to hire additional staff due to the low income generated by the business.

Reasons for participating in informal business generally include pure survival mechanisms to cope with unemployment, and a desire for independence, flexibility of work arrangements and freedom of total control and ownership of business without government intervention and control (Chen, 2012). However, this study shows that the involvement of the majority low income households in the informal business sector in Duncan Village is solely a survival strategy, to earn a living. Despite that, 75% of the respondents demonstrated a positive initiative, in that they were willing to contribute positively to job creation if only the government could support them with the necessary resources and infrastructure to grow their business.

4.2 Constraints to growth of the informal business sector

The study findings below indicate the constraints faced by the informal business sector in Duncan Village. Paramount to the constraints raised by the participants was a lack of financial support services and a lack of access to basic urban infrastructure. These findings confirm what has been already discussed by other supporting literature used in this study (see above).

4.2.1. Access to financial support services

Participants indicated that they fund their business from their personal incomes. None of the respondents indicated getting funding from local government structures or any non-governmental organisation. Most of the participants indicated that they have no bank accounts for their businesses as their enterprises were not formally registered. Some respondents stated that sometimes they were forced to take out credit from an informal credit scheme commonly known as (stokvel) to buy stock and cushion their businesses. This indicates difficulties faced by informal businesses, in particular survivalist enterprises without access to financial support, and this constrains the operation of their business. The results are compatible with the literature review, which revealed that informal businesses struggle to get necessary support from government structures (Skinner, 2006). Table 3 shows the sources of start-up capital and finance for informal businesses in Duncan Village. It indicates that 56% of informal business relied on their own savings to start a business and sustain it, while 13% got some start-up capital from family and sometimes close friends, and 31% relied on stokvels. None of the small informal businesses in Duncan Village receive any financial assistance from commercial banks or government funding sectors. Most of the respondents expressed that they did not bother to approach banks for funding because of tough lending regulations imposed by banks. Since most of the informal businesses in Duncan Village are not licensed and operate outside government regulations, they do not have collateral to qualify for any form of bank or government funding. This means they must rely on family borrowings and stokvels where the interest rate charged is exorbitant and often keeps borrowers indebted.

4.2.2. Lack of access to basic urban infrastructure

The study also found that informal businesses in Duncan Village, especially those operating along roadsides and in open spaces, struggle to conduct business in harsh weather conditions (scotching sun, rain, wind and cold) due to lack of urban infrastructure. 83% indicated that they have no access to basic services such as clean water, electricity or clean energy sources to conduct business. None of the respondents indicated that they used designated municipal trading stalls. Respondents expressed their worries that the areas in which they operate their businesses are not safe and the environment is not conducive to run a business. This is consistent with the G12 study of Small Towns Business Development Initiative (2011) which found that infrastructure and services are amongst the biggest constraints affecting the informal sector.

4.3 Engagement between the local government and the informal sector

Findings in this section are drawn from informal business owners and BCMM administrator participants, and thus show different perspectives. There is dissatisfaction from the informal business owners with regards to their neglect by the municipality from inclusive economic development, while, on the other hand, the BCMM administrators claim to be playing a positive role in promoting local economic development and providing necessary support to small businesses.

4.3.1 Views from the informal sector

The findings show that the BCMM does not recognise survivalist enterprises as businesses that can be supported by any of the local government structures, due to their lack of registration, as these businesses operate outside the local government regulation structures. These findings are consistent with studies by Chen (2012) and Skinner (2016) who argue that many informal businesses believe that they are excluded from accessing basic urban infrastructure and from integrated development processes on decision-making affecting them, and as a result this makes informal businesses vulnerable to negative forces, such as exploitation by local government officials.

Participants were asked if they get any form of support in their business from any government structures or whether their businesses had been affected by any state regulations. Notably, all 36 participants within the informal sector indicated that they have never had any form of assistance from the municipality or local government structures. Moreover, they were asked about any state enforcement affecting their businesses and stated that they were very aware of law enforcement, as they often encountered metro police, municipal agents and in specting officers from the Department of Health and the Fire Department who, from time to time, would visit small businesses in Duncan Village to inspect whether the businesses were complying with local government regulations.

Most of the informal businesses interviewed in this study are unregistered and are run by people that joined the informal sector to earn a living. The participants indicated that they were very disappointed with how their local government treated informal businesses.The participants suggested that their relationship with the local government is hostile and stated that the government did not care about the struggles they face in accessing basic needs and the efforts they were making to improve their livelihoods by engaging in the informal business sector.

4.3.2 Views from BCM administrators

This section provides an overview of the interview sessions with BCMM administrators. The findings indicate that the municipality is far from reaching its intended objectives of providing infrastructural support service to small informal businesses in order to promote economic development. The administrators who were interviewed admit that there is no direct assistance from the municipality given to survivalist enterprises with regards to provision of infrastructure and supportive services such as finance, trading sites, or storage facilities. The BCM at this time only provides assistance and support to registered small business, in particular, SMMEs who are said to comply with municipal laws and regulations.

One of the objectives of the Integrated Development Plan of the BCMM is to provide electrification, via new extensions and FBE, as well as alternative renewable energies such as FBAE, in the form of paraffin for wards without electricity. Electricity supply remains a huge challenge in the BCMM, due to budget constraints and a shortage of skilled labour such as engineers. For instance, the electricity network in Buffalo City is currently in a poor condition, which has led to power outages and a poor-quality supply of electricity to consumers (BCMM IDP, 2017/18).

The BCMM administrators indicated that the municipality provides information sessions and training on business/entrepreneurship skills to local informal business operators in Duncan Village. The municipality also continuously encourages the informal business operators to comply with local municipal regulations and register their businesses with cooperatives. The BCM also reported that they were much concerned with the resistance of survivalist operators who did not want to register their business, as they could only work with those informal businesses that are cooperating and complying with the municipal regulations, while those who choose not to comply will be dealt with harshly and forced to comply. On the contrary, the literature cited above, as well as responses obtained from informal business operators in Duncan Village, revealed that the sector is not sufficiently informed about municipal support service structures that stand for the informal sector's needs.

As part of the LED strategy mechanism to promote local economic development, the BCMM embarked on the long-term project known as the Duncan Village Redevelopment Initiative. This project is funded by the Department of Local Government and Traditional Affairs. The project is aimed at promoting the local economy, with the intention of providing valuable services to the community of Duncan Village. The programme comprises five apex projects: building a sports complex, a brickyard, an agri-village, and environmental revitalization (BCMM IDP, 2017/18). Furthermore, the BCMM also indicated that, as part of the IDP, they have made a commitment to building a mini market for street traders in Duncan Village. The BCMM indicated that these projects are underway.

To summarize the themes which emerged from semi-structured interviews with BCMM administrators, this study asserts that little attention is given to survivalist informal businesses, who remain excluded from the BCM IDP, as priority is given to SMMEs. Although the BCMM indicated that they were making efforts to support unregistered informal businesses, evidence shows that the survivalist and small businesses remain neglected, due to their small size and failure to adhere to legal requirements

5. Conclusion and recommendations

The study findings reveal that there is no proper coordination or consultation between the municipality and the informal business operators; the relationship that exists between the two is that of exclusion and negligence. Therefore, there is a need for the BCMM to work closely with the informal business operators and to prioritise issues that promote growth and development. Local government structures need to work collectively and closely with other financial stakeholders, like banks, and to engage them to develop credit systems that will provide financial assistance to informal business operators who are in need of funding to conduct their business.

The study findings reveal that the informal business operators in Duncan Village rely on personal income, borrowings from friends and informal lending schemes (stokvels) to run their businesses. This often constrains the performance and productivity of their businesses - due to the lack of stability of their financial resources. Thus, this study recommends that the government finds ways to bring financial lending schemes, like banks, on board to enable low-income households without collateral to qualify for the bank loans which will boost their businesses and grow the informal business sector.

The study findings show that the BCMM does not see how the FBAE services can feed into economic development; instead, it views these frameworks as safety nets to assist the indigent with access to basic energy to alleviate poverty levels. This study recommends that such services should not be seen as safety nets that only address the social problems of poverty alleviation. The frameworks should also be used to promote the social welfare and economic wellbeing of low-income households. This can only be achieved when free basic services are extended to cover low income households who are engaged in the informal sector as informal business owners.

1 The informal sector is production and employment that takes place in unincorporated small or unregistered enterprises (Chen, 2012:8) 2 Survivalist micro enterprise, also referred to as 'necessity-driven', refers to the marginalised and poor workers, particularly women ,who are the chief operators in this informal sector and usually view their involvement in the informal economy as a temporary survival strategy (Rogerson, 2004; 2016). Survivalist businesses tend to be single-person firms conduct-ing-small scale activities which offer lower wages (Makoma, 2018; Makaluza, 2016) 3 Sustainability refers to something with durability that lasts over time. For energy to be sustainable, it must improve the health of ecological and socio-economic systems and their ability to adapt to change (Winkler 2006). 4 The statist approach promotes a developmental welfare system, which is based on people-centred development, social investments in human capabilities and the building of social capital (Mkandawire, 2001). 5 The study population refers to aggregation of elements from which the sample is derived (Babbie, 2010 cited by Wadi, 2015). 6 Snowballing is a technique often used in field research, where targeted participants to the study may be asked to suggest additional people fitting the same criteria for interviewing (Babbie 2010, cited by Wadi 2015).

Author contributions

B. Masuku conceptualised the study, collected and analysed the data, and wrote the manuscript. O. Nzewi supervised research and assisted with proofreading and editing.

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Contribution of the informal sector towards sustainable livelihoods: evidence from Khayelitsha Township, Cape Town

International Journal of Sociology and Social Policy

ISSN : 0144-333X

Article publication date: 28 April 2023

Issue publication date: 18 December 2023

This study aims to investigates the contribution of the informal sector towards secure livelihoods. Using a case study design, the study focusses on Mandela park, situated in Khayelitsha Township, Cape Town, in the Western Cape province of South Africa. Khayelitsha is predominantly an old township established by the apartheid government using unjust segregation laws to foster spatial planning that isolated people of colour in areas with insufficient infrastructure and informal economic activities. Therefore, informal trading became a survival strategy in Khayelitsha, attracting an increasing number of informal traders in public spaces within the township in pursuit of livelihoods. Informal activities are generally conducted to generate income and secure sustainable livelihoods.

Design/methodology/approach

This study uses a qualitative research design, incorporating structured interviews instrumental in data collection and in-depth thematic analysis.

The study findings reveal that the informal sector positively contributes to the sustainable livelihoods of those involved in the informal sector and the relatives of those through income generation, family support, wealth creation, source of employment, business incubation and innovation and creativity.

Originality/value

The study concludes that given the increasing unemployment rate in South Africa, caused by the stagnant economic growth rate, policymakers should rethink their policies on the informal economy, acknowledge the sector's relevance and support the sector.

• Informal sector
• Informal economy
• Informal activities
• Secure livelihoods
• Khayelitsha
• Informal employment
• South Africa

Thwala, S. , Masiya, T. and Lubinga, S.N. (2023), "Contribution of the informal sector towards sustainable livelihoods: evidence from Khayelitsha Township, Cape Town", International Journal of Sociology and Social Policy , Vol. 43 No. 13/14, pp. 90-105. https://doi.org/10.1108/IJSSP-11-2022-0289

Emerald Publishing Limited

Copyright © 2023, Sinhle Thwala, Tyanai Masiya and Stellah N. Lubinga

Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

Introduction

Although the informal sector is a significant component of the economy that seeks to provide livelihoods to a sizeable number of workers and informal traders, this sector is consistently underestimated. Largely missing from economic policy formulation and analysis ( Fourie, 2018 ), the informal sector is frequently associated with precarious employment, social security, tax evasion and poor governmental support. However, it is also a dynamic industry that fosters job growth. For example, according to the International Monetary Fund (IMF), Sub-Saharan Africa (SSA) continues to have one of the highest percentages of informal economic activity worldwide ( IMF, 2017 ). More than 60% of the world's employed population earns their livelihoods in the informal economy. The vast majority of employment in Africa is at 85.8%, followed by Asia and the Pacific at 68.2% and the Arab States at 68.6% ( International Labour Office [ILO], 2018a , b ).

Hogg (2020) estimates that, in South Africa, the food business in the informal sector is worth R87 billion a year and has existed for 10–20 years. Meanwhile, the backroom rental industry is worth around – just on the residential side – R30bn (US$1,643,556,000) a year in rental income. Supporting the aforementioned view, Rogan and Skinner (2018) posit that over 2.5m people work in the South African informal sector. According to Stats SA (2022) , employment in the informal sector continues to grow. As of 2022, employment increased by 146,000 persons in the second quota compared to the previous years. As a survival strategy to secure livelihoods, informal sector occupation is also considered a significant factor in food security and poverty alleviation ( Skinner and Haysom, 2016 ). Poor people's logical response to the burdensome laws gives the economy a vibrant and entrepreneurial spirit with competition, innovation, efficiency and investment ( Schneider, 2005 ; Misati, 2010 ). Moreover, according to a study commissioned by the Organisation for Economic Co-operation and Development and the International Labour Office [OECD/ILO] (2019a , b) , people in rural areas are nearly twice more likely to be employed in informal jobs than those in urban areas. Additionally, 78.9% of people with formal jobs live in cities, compared to 60.1% with informal jobs. Furthermore, informal sector employment has proven to be a survival strategy in countries that lack social safety nets, such as unemployment insurance, or where wages and pensions are too low to cover the cost of living.

Based on the aforementioned aspects, the context of the existing potential of the informal sector (as evidenced in other countries) helps focus on the opposing narratives, such as the deliberate evasion of regulations and taxation by the informal sector in South Africa. Alternatively, there should be a shift to navigating, appreciating and supporting the essential role played by the informal sector in securing sustainable livelihoods. This study seeks to investigate the informal sector's contribution towards sustainable and secure livelihood. This study uses Khayelitsha Township as a case study because of its historical significance in the context of South Africa. Accordingly, it relies on a qualitative approach and data are collected using unobtrusive research techniques, such as documentary analysis and interviews. We believe this study makes two significant contributions to understanding how the informal sector contributes to the secure livelihood of the poor. It also contributes to the academic understanding of the role played by the informal sector in stimulating the gross domestic product (GDP) of an economy, which subsequently creates an enabling environment for alleviating poverty and unemployment. The study also adds to the understanding of the informal sector's contribution to sustainable livelihoods, emphasising its significant role in reducing vulnerability.

The remainder of the study is organised as follows. The next section describes the literature and context of the South African informal sector. The following methodology section presents the findings and discussion. Lastly, based on empirical research, it is concluded that the informal sector positively contributes to sustainable livelihoods.

Informal sector context: South Africa

There are varying definitions of the informal sector ( ILO, 2000 ). With its roots dating back to economic efforts of the 1950 and 1960s, the term was first coined by British anthropologist Keith Hart in 1971 and published two years later in their essay ( Hart, 1973 ) and the ILO's Report on Kenya ( ILO, 1972 ). According to the ILO, the informal sector is not limited to employment outside major cities, specific professions, commercial pursuits or informal activities. Its norms are characterised by the following aspects: (1) low barriers to entry, (2) reliance on local resources, (3) family ownership of businesses, (4) small-scale operation, (5) labour-intensive and adapted technology, (6) skills learnt outside the formal educational system and (7) unregulated and competitive markets ( ILO, 1972 ). In 1980, because of the economic crisis, the definition was broadened to include employment, where the informal sector was seen as a source of employment alongside open unemployment ( Tokman, 1984 ). In 1993, the informal sector was defined by the Fifteenth International Conference of Labour Statisticians (15th ICLS) in terms of the characteristics of the enterprises (production units) to include all individuals working in at least one production unit of the informal sector, regardless of their employment status and whether it was primary or secondary ( ILO, 1993 ). Furthermore, in 2015, the ILO Recommendation (No.204) concerning the transition from the informal to the formal economy was published; it described the “informal economy” as referring to all economic activities by workers and economic units that are, in law or practice, not covered or insufficiently covered by formal arrangements ( OECD, 2019b ). However, according to Small and Medium Enterprises South Africa 2022, the formal sector is primarily composed of one-person companies, small local firms and any unlawful or unregulated commercial endeavours that are considered a part of the informal sector ( SME South Africa, 2022 ).

Despite the aforementioned definitions, the intent of this research is neither to trace the conceptual evolution of the informal economy nor to explore its current state. Therefore, this study adopts the definition given in the 15th ICLS of 1993. It describes the informal sector as businesses owned by individuals or households that are not organised as distinct legal entities separate from their owners, do not have a complete set of accounts, produce some of their goods for sale and have fewer than five employees ( OECD, 2019b ; The Republic of Tanzania, 2019 ).

According to Hovsha and Meyer (2015) , the apartheid legislations and segregation laws were amongst several factors that gave rise to the South African socioeconomic condition, which consequently undermined quality education training and entrepreneurial skills acquisition. Consequently, this led a large segment of the unskilled population to seek refuge in the informal sector to secure livelihood and reduce the level of vulnerability. South African socioeconomic conditions are essential to be understood in this historical context. According to Stats SA (2022) , the informal sector is estimated to contribute to almost a third of the total employment nationally, demonstrating its significance in reducing poverty and unemployment. Furthermore, Delechat and Medina (2020) argue that improving access to and quality of education is the single most powerful way to lower informality. They also acknowledge that the informal sector is currently the only viable income source for billions of individuals globally.

South Africa is the largest country in the Southern African Customs Union, with the highest margin of inequality. It ranks first amongst 164 countries in the World Bank's global poverty database ( World Bank, 2022 ). According to Stats SA's (2022) Quarterly Labour Force Survey (QLFS), South Africa reported a 33.95% unemployment rate in the second quarter of 2022. The government's responsibility to address socioeconomic inequality and poverty must remain focussed on empowering the most vulnerable individuals who find the informal sector as an alternative to employment.

Unemployment and growing inequality are likely to have caused significant developmental challenges in most developing countries, such as South Africa. Despite having an inconsistent policy that is directly responsible for the plight of the informal sector, South Africa's informal sector is smaller than that of other developing countries. Nonetheless, it is considered a significant source of employment and plays a vital role in household income ( Skinner and Haysom, 2016 ). For example, while the other countries in SSA have an informal sector share of 50%, it is estimated to be 17.8% in South Africa ( Grabrucker et al. , 2018 ). Stats SA estimates the informal sector's contribution at 6% of the GDP ( Stats SA, 2014 ). Furthermore, evidence suggests that informal retail is an effective medium for poor and food-insecure households to acquire nutrition ( Skinner and Haysom, 2016 ).

There are many distinct kinds of informal companies throughout South Africa. These can be categorised according to typical instances of illegal trade, including spaza shops, street vendors, hawkers, sellers on the sidewalk and those who operate laundromats and other small businesses from their homes ( SME South Africa, 2022 ). Among these, street vending is generally viewed as an everyday activity in the informal sector, representing a sizeable number of women involved in the informal sector. It is commonly perceived as an essential survival strategy by informal traders for securing livelihoods, reducing vulnerability, increasing the capabilities to generate income and ultimately providing household basic essential needs ( Rugutt, 2017 ).

Various legislations have been enacted over the years to support the informal sector, both at the national and provincial levels in South Africa. At the national level, National Informal Business Upliftment Strategy (NIBUS) was the first national strategy to be implemented after apartheid, aimed explicitly at informal business ( DTI, 2014 ). The Department of Small Business Development is responsible for governing the NIBUS, which focusses on the growth of small, medium and micro Enterprises. It aims to assist informal enterprises, help them grow and aid municipal offices with local economic development ( Ramsuraj, 2020 ).

At the provincial level, several policies pertaining to the informal sector have been implemented. For example, the Gauteng Informal Business Upliftment Strategy (GIBUS) and the township economy are priorities in the province of Gauteng. The provincial government has been able to help the informal economy through financial and non-financial support. For example, in the financial year 2016–17, over 746 township-based informal businesses were supported in various ways ( Gauteng Province, 2017 ).

In 2014, the Informal Sector Framework was launched in Western Cape. The Department of Economic Development and Tourism (DEDT) created the Informal Economy Policy ( DEDT, 2010b ), which governs the informal economy in Kwazulu-Natal ( DEDT, 2010a ). The two primary goals of the strategy are to abolish regulations that impend the government's ability to play a developmental role in the informal economy and establish an environment that promotes a sustainable economic growth path.

Informal economy and sustainable livelihoods

Sustainable livelihood is a concept and approach that interprets socioeconomic interactions based on household income and livelihood formation processes and seeks to elaborate social conditions to understand reality and reduce poverty. The sustainable livelihood approach highlights the theoretical disconnect between economic growth and poverty reduction while acknowledging economic growth as an essential component of poverty reduction. The relationship between the two is not automatic in nature; instead, each depends on the capabilities of vulnerable groups to benefit from opportunities made available by relevant structures or institutions. As an analytical framework and macro and micro-analytical tool, Mensah (2011, p. 12) asserts that “sustainable livelihoods framework posit that households possess different levels of resources endowment and capabilities, endure different scales of exposure to the institutions and policies that conditions the environment in which they operate, and the interaction of these factors determine their livelihood choices and the consequences differences in welfare outcomes”.

Their study further highlights that poverty reduction cannot be achieved through income generation alone and various factors influence sustainable livelihoods, such as health, education and other social services. Thus, it is prudent for the government to consider the sustainable livelihood approach to determine the constraints that impede poor people from securing sustainable livelihood and develop measures to support activities that seek to reduce their vulnerability. Hovsha and Meyer (2015, p. 37) further argue that “income and employment generation become possible when people are encouraged and enabled to participate in a diverse range of livelihood activities”. This argument is also enhanced by Takaza and Chitereka (2022) , who posit that a livelihood is sustainable only when people can cope with and recover from stress and shocks, maintain or enhance their capabilities and assets and provide livelihood opportunities to the next generation. Given the aforementioned agreements, this study concludes that the relationship between the informal economy and sustainable livelihood plays a significant role in poverty reduction and employment. In explaining the relationship between these aspects, it is imperative to understand the heterogeneity of the informal economy regarding the rationalisation of securing sustainable livelihood through the informal sector.

Hovsha and Meyer (2015) assert that the creation of livelihoods within the informal economy presents an integral opportunity to contribute to the overall growth in South Africa. An informal economy tends to be characterised by activities that comprise market value and can add value to the tax-based hub and economic growth if recorded; it is perceived as a globally widespread phenomenon ( Delechat and Medina, 2020 ). Steiler and Nyirenda (2021, p. 3) reveal that, in 2016, the government of Tanzania introduced a framework to incorporate the informal sector into the government's planning; this came after the destruction of a street market in the city of Mwanza and protests by informal traders. The government finally conceded to the argument, emphasising the significance of informal trading in poverty reduction and unemployment. Informal traders were permitted to operate and provided suitable public spaces. Later, in 2018, informal traders were issued IDs and the government began collecting revenues from licensed traders. This added value to the tax revenue base of Tanzania ( Steiler and Nyirenda, 2021 ).

The South African informal economy comprises street vendors, spaza shops in public spaces and other informal activities such as wind-screen washing, car washing and distributing newspapers on public streets. Informal activities are essential for livelihoods in developing countries, especially those confronted with high levels of unemployment and inequality ( Hovsha and Meyer, 2015 ). The vulnerable population tends to find refuge in the informal sector when seeking survival. The informal sector is generally dominated by the uneducated, semi-skilled labour force seeking to secure its livelihood ( Tshuma and Jari, 2013 ).

Research method

This study adopts a qualitative research approach. This approach allows for examining and untangling the in-depth life experiences of those taking part in the study ( Alase, 2017 ). Additionally, Busetto et al. (2020) posit that qualitative methods are predominantly considered with pictures and arguments applied to determine human behaviour and understand common suppositions. The qualitative research method is ideal for this study because it assists with answering research questions where quantification is not possible. It can also help explore the unique complexities of livelihoods. Additionally, adopting the qualitative strategy for this study provides a more in-depth understanding of the phenomenon in question and helps determine the informal sector's contribution to sustainable livelihoods.

A case study design is employed at Mandela Park, Khayelitsha, Cape Town. This township was selected because the population is prone to accommodating many black and previously disadvantaged individuals. According to Stats SA (2011) , 98% of Khayelitsha's population is black, with 4.9% estimated to have obtained higher education. These people include young people, women and men who constantly seek means to secure income for survival and livelihood. Khayelitsha is also characterised by the highest concentration of informal settlements in the Western Cape and the second highest in South Africa, after Soweto. Informal trading is an everyday livelihood practice ( Even-Zahav, 2016 ). For most people living in Mandela Park, informal activities present a legitimate and readily available way of securing a livelihood.

A purposive sampling strategy is applied, leading to fifteen informal sector entrepreneurs being sampled for the study. Representation of sub-sectors within the informal sector is considered when sampling sub-sectors such as food items, automobile sales and repairs and services such as car wash. Purposive sampling was selected because of its allowance to deepen the respondents' engagement and ask follow-up questions to get in-depth insights into the research phenomenon. Saunders et al. (2016 , p. 301) argues that “with purposive sampling, you need to use your judgement to select cases that will best enable you to answer your research question(s) and to meet your objectives”. Hence, the selected technique is relevant to this study.

In-depth interviews were used to collect data. According to Rutledge and Hogg (2020) , in-depth interviews are used to conduct detailed interviews with a small number of participants and enable the researchers to invest a significant amount of time for each participant, employing a conversational format. The in-depth interviews were conducted with fifteen respondents, at which point saturation had been reached.

Thematic data analysis was used to analyse the qualitative data collected from the respondents through in-depth interviews. Key themes focussed on the informal sector's contribution to sustainable livelihoods. Excerpts from the respondent's transcripts were used to generate thematic material, which assisted in summarising findings and drawing conclusions (See Figure 1 below).

The study was conducted in Mandela Park, Khayelitsha Township, within the city of Cape Town, Western Cape Province, South Africa. Mandela Park in the Khayelitsha Township covers 1.86 square kilometres (0.72 square miles) of area (see Figure 2 below). It was established by the apartheid government in 1986, using segregation laws to demarcate areas for black South Africans. It has a population of up to 18,747, according to the city of Cape Town Census 2011 ( Strategic Development Information and GIS Department, 2011 ).

This study used a qualitative approach to examine the data collected from fifteen people operating in the informal sector in Khayelitsha; amongst them, 47% were men and the remaining 53% were women. Averaging between the age of 18 and 60 years old, the majority of samples were between 35 and 49 years of age. The interviewees were engaged in several informal occupations, such as selling food items, non-food items such as toiletries, airtime, clothing and metal tools and service-based informal activities, such as automobile services and sales, saloons and car wash.

Thematic analysis was used to analyse the collected qualitative data and examine the key themes of the study, focussing on the informal sector's contribution to sustainable livelihoods. After analysing the data, the generated themes included income generation, family support and wealth creation, employment, business incubation and innovation and creativity. These themes are discussed in detail below.

Income generation

Respondent 1 said, ‘Informal activity has helped me generate income that helped me to raise my children well by making sure that they go to school and put food on the table’.

Respondent 3 said, ‘I have been able to build a decent house from the money I get through my informal trading on the streets and also pay school fees for my children’.

Respondent 3 supported Respondent 5’s response by saying , ‘It has been very helpful in paying school fees and buying assets’.

Respondent 8 gave a similar perspective: ‘I used the profit generated from the informal activity to build my own house in the Eastern Cape and pay university fees for my daughter’.

Respondent 7 said, ‘during holidays such as Christmas, I can buy food in bulk and clothing for the children’.

All the aforementioned responses clearly show that, according to the interviewees, their involvement contributes to securing their livelihoods. This aligns with the sentiments of Cichello and Rogan (2017) , who established that informal traders generate income in Cape Town to sustain livelihoods.

Family support and wealth creation

Being involved in informal activities enables me to secure income to meet the needs of the immediate household and for my late sister’s children.

Respondent 3 also supported this by saying, ‘with the income I generate from the informal activity, I can look after my children’s essential needs and also send money at home in the Eastern Cape to my family, mother, and siblings to be able to buy groceries for the month’.

Respondent 6 revealed that through the involvement in informal trading, she managed to secure for her family; She said, ‘I have solved shelter issues, I no longer pay rent, I built my family a house, and I am educating my children’.

Similarly, Respondent 11 says, ‘The work helped me, especially in educating my children to college level.’

Furthermore, Respondent 3 confirmed that ‘The business helped me in a way that today my children have a decent shelter, they never went to bed without food, and I bought a Toyota Avanza for the business and my family because of the income generated from the informal activities’.

The findings based on the respondents' excerpts reveal the significant role of informal traders in securing capabilities to provide basic needs for households, particularly decent housing and education for the children to secure sustainable livelihood and future social security. The findings reveal that informal traders in the informal sector have the potential to access resources and assets.

To gain further insights, the respondents were asked to indicate the categories of assets acquired. The results are given in Table 1 below.

Table 1 depicts that, based on the informal sector earnings, 40% of the respondents were found to have decent housing. Comparatively, 26.70% of respondents were able to purchase tools and equipment for work purposes and another 26.70% were able to acquire household furniture. Only 6.70%, which accounts for one respondent, managed to acquire a motor vehicle for the business.

This informal activity has enabled me to generate income for my family and also opened employment opportunities for seventeen full-time people here.

Similarly, Respondent 15 also said, ‘I am grateful for the informal sector because I did not finish school and I can’t find work, so the sector helped me as I was able to start this business to ensure that I generate income for myself to increase the capability to provide for my family’.

Respondent 13 also said, ‘I resigned from my previous job because I hated to be treated like a child who can’t think; I then decided to become my boss ' .

This finding demonstrates that the involvement of informal traders enables them to increase capabilities to reduce vulnerability, subsequently securing livelihoods. To some, informal trading is viewed as the only way to secure livelihoods because of their level of education, which renders them unemployable in the formal labour market.

Given the high levels of unemployment and poverty in South Africa, the finding resonates with Brata (2010) , who has positioned the informal sector as a survivalist livelihood strategy. During a crisis, the informal sector provides a survivalist livelihood strategy undertaken by laid-off employees and unemployed persons. Accordingly, it enables them to create opportunities and earn income. According to Hausarbeit (2018) , given that the informal sector helps a large number of individuals earn money and cover their living expenses, it plays a vital role in a society's socioeconomic development. This also has a significant impact on reducing poverty. It also confirms WIEGO's (2019) statistical brief, which indicated that informal employment makes up approximately 30% of all employment (less than 5m people) and approximately 24% of informal employment is concentrated in the eight largest metropolitan regions in South Africa.

Business incubator

Another finding was that the informal sector acts as a business incubator, providing and equipping people with business acumen. It is the ability of individuals to understand the basics of how business is conducted, how to get things done, take over a business and experiment with different approaches. This also confirms the findings of Williams (2014) , which states that the informal sector is a breeding ground for enterprise creation, where business upstart-ups test the validity of their business ambitions before deciding whether to establish a sustainable business. Additionally, the ILO (2002) states that the informal sector acts as “an incubator for business potential and … transitional base for accessibility and graduation to the formal economy”.

I became involved in the informal business activities after being introduced by my father, who used his business to generate income that ensured that our family’s essential needs were met.

Respondent 5 said they were grateful for the experience gained and how far they have come in business growing up; they said they sold sweets, which has since shaped them into who they are as they learnt how to deal with problems and come up with solutions.

Respondent 10 stated, ‘My late husband introduced me to the informal business activities, and I loved it since then and decided to continue even after his passing’.

Respondent 7 explained, ‘I used to help my late husband sell his business when he went to buy trading stock, and I managed to establish a customer base, which later made me realise that I could start my business’.

Innovation and creativity

As an example, Respondent 5 stated that ‘because most of us selling food items such as meat, vegetables, fruits, and other perishable food items do not have storage for their products. As a result, some items get rotten. So, to avoid this, we have to be creative and use traditional means to avoid our stock from getting spoilt; we joined as a team to rent a space to ensure that our stock does not get spoilt’.

The same sentiment was shared by Respondent 11, that stated that ‘It is not easy to sell meat in a place that does not have a water supply system and electricity, we conduct our business under difficult conditions, but we are compelled to find enabling ways to make money for our families’.

Another respondent 8 stated that ‘involvement in the informal sector activities has made me creative, where I have been able to add new products to my spaza shop’.

Based on the study findings, it can be concluded that the informal sector positively contributes to securing the livelihood of people residing in Mandela Park, Khayelitsha Township. This concurs with literature from various scholars (e.g. ILO, 2002 ; Williams, 2014 ; Cichello and Rogan, 2017 ; Brata, 2010 ; Hausarbeit, 2018 ; Oberholster, 2020 ). These studies all assert that the informal sector contributes to securing livelihoods. In support of this, this study established that the informal sector contributes to income generation. Most of the respondents indicated that they were happy with the income generated from their involvement in informal activities because this income helps in the fight against poverty. This aligns with the sentiments of Cichello and Rogan (2017) , who established that informal traders in Cape Town generate income to sustain livelihoods.

Furthermore, the study also established that the informal sector creates employment and offers an opportunity for those in the informal sector to offer employment to others in the same area. The same finding supports the literature asserting that the informal sector contributes to employment and retention ( ILO, 2011 ; de Beer et al. , 2016 ; Rogan and Skinner, 2018 ; Fourie, 2018 ), and informal employment is a possibly permanent future in regions such as Latin America and Africa ( Biles, 2009 ). This also confirms WIEGO’s (2019) findings, which indicated that informal employment makes up approximately 30% of all employment (less than 5m people) and approximately 24% of informal employment is concentrated in the eight largest metropolitan regions in South Africa.

Additionally, the research study also established that respondents involved in informal trading are able to create opportunities for themselves to acquire assets that enhance their ability to reduce the level of vulnerability and secure a livelihood. The study further revealed that the income generated by respondents involved in informal trading is also spread across a relatively large number of uses, such as education fees, food and shelter, based on the fact that most of the respondents had more than four dependants. According to the respondents, their involvement in the informal sector helped them support their extended families in times of need.

The study also established that the informal sector acts as a business incubator, providing and equipping people with business acumen. This finding concurs with the literature, suggesting that the informal sector is an incubator and promoter of entrepreneurial skills ( ILO, 2002 ; Williams, 2014 ).

Additionally, the findings revealed that the informal sector provides those involved with the knowledge to be innovative and creative to ensure that their businesses thrive. These findings align with those of Audretsch and Feldman (2003) and Booyens (2011) . Kawooya (2014) confirms that amongst the automotive artisans in Uganda, those who were involved in the Open-Air project, the senior artisans helped their relatives or friends acquire skills by hiring them as cheap labour; once they mastered the skill, they were assigned senior tasks and some ended up opening businesses. This raises important issues regarding how knowledge and innovation are appropriated by original inventors ( Kawooya, 2014 ).

The findings of this study reveal that the informal sector positively contributes to securing the livelihoods of those involved in the informal sector and their relatives. This is accomplished through income generation, which, in most cases, is used to improve capabilities and reduce the level of vulnerability. It also aids in the creation of employment and the acquisition of assets. Moreover, the informal sector is found to act as a business incubator that provides and equips people with business acumen. Lastly, it provides those involved in the informal sector to be knowledgeable, innovative and creative, enabling their businesses to thrive. Therefore, based on these findings, the informal sector's contribution cannot be ignored, especially in light of the increasing unemployment rate in South Africa, caused by the stagnant economic growth rate. Policymakers should rethink the role of the informal economy and acknowledge its relevance, providing practical interventions to support and enable those employed in the informal sector.

Research method flowchart

Khayelitsha Township map

Assets acquired

Source(s): Authors' compilation

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Further reading

Bundler , D. , Skinner , C. and Valodia , I. ( 2004 ), (rep.). Budgets and the Informal Economy: An Analysis of the Impact of the Budget on Informal Workers in South Africa , University of Kwazulu Natal , Durban , pp.  1 - 92 .

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de Beer , J. , Fu , K. and Wunsch-Vincent , S. ( 2016 ), “ Innovation in the informal economy ”, Wunsch-Vincent , S. and Kraemer-Mbula , E. (Eds). The Informal Economy in Developing Nations: Hidden Engine of Innovation? , pp.  53 - 99 . Cambridge University Press , Cambridge , doi: 10.1017/CBO9781316662076.007 .

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Corresponding author

About the authors.

Sinhle Thwala is Master of Philosophy in Public Administration Student in the School of Public Management and Administration (SPMA) at the University of Pretoria. His research interests include informal sector growth and employment creation.

Tyanai Masiya is Senior lecturer at the University of Pretoria's SPMA. He holds a PhD (Public Administration) from the University of the Western Cape. His research focus is on public administration and public policy, with specific emphasis on public service delivery, citizenship and democracy as well as local government management. He has also written extensively on constitutionalism, democratisation as well as transparency and accountability of the state

Stellah N. Lubinga is Lecturer and PhD Coordinator in the SPMA at the University of Pretoria. She holds a Doctorate in Administration from the University of the Free State. Before joining the University of Pretoria in 2021, she was the Head of Academics at the Independent Institute of Education (IIE) Varsity college Sandton responsible for academic recruitment, student support and lecturer management. Between 2014 and 2016 she worked as a Senior Head of the Programme at ADvTECH, focussing on assessment design and quality assurance. From 2011–2014. She was full-time lecturer at the University of the Free State. She has engaged in research for the past years, publishing and presenting at local and international conferences. Her research interests are mainly human resource management, governance, citizen participation and service delivery, but she is always eager to expand her horizon.

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THE ROLE OF THE INFORMAL SECTOR IN ECONOMIC GROWTH AND DEVELOPMENT IN AFRICA

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Ahmed El-Bakly

Informality has been a challenge for Egypt for some decade with the informal employment growing at a faster rate than the formal one and it accounts for about 40% of the total labour in 2012. Data series on new entrants to the labour markets (18+) show that in 1969 around 20% were disproportionately drawn into informal sector, increased to 70% in 1998. Recent data in 2014 suggest that this trend remains true. The negative impacts of informality are not restricted to individuals, households or institutions that are working in the informal sector but on the economy as a whole. Many attempts are trying to deal with informality for different purposes, some attempt to integrate informal sector into formal one, others see the economic unites or individuals belong to the informal sector as potential tax payers. Others are seeking to find decent work in the informal sector. Formalising the informal sector, encouraging people to join the formal sector, or recommending mandatory legislative, executive and judicial reforms aiming at depriving individual from joining the informal sector requires conceptualizing the informal sector and identifies the framework in which it operates and examining factors that influence people’s choices in entering labour markets, where the current paper is trying to uncover. The paper provides a discussion on the informal sector conceptualisation through range of literature on the Less Developed Countries with the main focus on Egypt. The discussion covers the terms and definitions used, the framework in which the informal sector theoretically operates, the determinants and factors that assumed or explored to affect the informal sector whether the starting point or its growth. The main result is that a universal definition of the informal sector cannot hold true for every single country context. In addition, instead of defining the informal sector unites a shift occurred toward defining the informal labour market workers. The criteria suggested to identify the informal sector workers include non-registration ofthe workplace, lack of contract, lack of social insurance and lack of health insurance. The conceptualisation and the framework in which the informal sector operates have changed over time. From the tripartite division of activity that failed to represent the heterogeneity of activities found under each subsystem, to the sectorist school that view the informal and the formal parts of the economy as two sectors operating under one economic system characterised by either a complementarity or competitiveness relationship. Informal sector within the Arab countries is assumed to be operating within the sectorist view. A shift of discourse on notion of the informal sector in Egypt is a substantial change, from the notion “margins” of the “modern” economy to the “engine of growth” of the economy. Till the end of the 1960s, the informal sector (margins population) was a problematic segment. After 1960’s, this problematic segment became a solution to the economic crisis just by redefining it to the “engine of growth” and suggesting that it can play an important role in addressing employment crisis. It seems that the determinants or factors that affect the growth of the informal sector differ between Developed and Developing Countries, while there are common factors between the two groups that affect its growth. The failure of the modern economy in the Developed Countries to provide sufficient jobs for the growing number of job seekers could be the starting point of the informal sector, while the sudden penetration of capitalism associated with twentieth-century techniques may have created the initiatives of the informal sector in the Developing Countries. On the other hand, informal sector growth in Developed and Developing Countries is affected by same factors: regulations and legislation, economic recession, and macro-economic policies. On the micro level factor, poverty, education, and skill level, along with the lack of jobs in the formal sector, are those factors that influence the growth of the informal sector.

Informality has always been a challenge for Egypt as a developing country. The informal employment has jumped from 30.7 per cent in 1998 to 40 per cent in 2012. The main reasons behind the increasing informality are varied, numerous and different. Moreover, the negative impacts of informality are not only confined to the individuals, households or companies that are working in the informal sector but on the economy of Egypt as a whole. Hence, an integratedregulatory approach must be adopted to rescue Egypt’s economy and get it out of the unforeseen future.

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Olabisi Yusuff

Development and Change

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The informal sector.

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                          The Characteristics of Informal Sector.              The concept of "informal sector" was firstly introduced by the International Labor Organization (ILO) in 1973, in its official report of its comprehensive employment mission in Kenya. However, the concept itself, until now, is still in debate. The most difficult thing in the debate is to make an agreement in setting definite boundaries between the informal sector and the formal sector (Dijk, 1998, 179; Whyte, 1991, 34). There are many different perceptions and definitions in determine the scope and, even, the characteristics of the informal sector. This discussion does not focus on the debate, but it rather aims to accomplish a general overview of the informal sector as a basis of this project analysis.              However, it is interested to refer the characteristics of the informal sector given by Michelle Hansenne, the Director-General of ILO in his speech-report (ILO, 1991, 4), as follows:.              1. It is a very small-scale unit producing and distributing goods and services. The measurement limit of a small-scale is different from one's opinion to others. It can be the small scale on its place, capital, number of labor, or others. .              2. It consists largely of independent, self-employed producing in mostly urban areas in developing countries. Some, such as Dijk (1998, 179), call this characteristic as an unorganized small business. .              3. Many of them employ family labor and/or a few hired workers or apprentices. Some state, such as in Hansenne (1991, 7), Bozzoli (1991, 15) and Whyte (1991, 35), that women of the family has an important role in the their informal sector activities. .              4. It operates with very little capital or none at all. However, the limit of the capital is not clear, as a country to others has its own economic condition.              5. It utilizes a low and irregular incomes and highly unstable employment. .              The sector could be called as "informal" as it is, of course, out of the formal sector characteristics.

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Essays Related to The Informal Sector

1. reason for the growth of informal economies.

Firstly, I will provide a brief definition of informal and formal economies. ... The formal sector is our capitalistic principles that regulates our market. ... industrial expansion would result in increased wage sector employment on the basis that there was inevitably a positive relationship between the growth of output, employment and labour productivity, while the "filter down" effect would lead ultimately to the redistribution of resources and income throughout society ( p. 1042). ... The informal economy gives multinational corporations the opportunity to subcontract assignm...

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2. Establishing A Sustainable Economy In Kosova

People engaged in informal economy i.e. doing illegal business and evading taxes have been operating in Kosova with almost complete impunity in the last four years. In this way, they are doing a huge damage to the Kosova Consolidated Budget (KCB) and especially to the public sector. ... More protests and social unrests can be expected in the future if the budget share for the public sector is not increased. ...

• Word Count: 359
• Approx Pages: 1
• Grade Level: Undergraduate

3. Feminism and Globalization

The feminization of the proletariat in the informal economy results in the devalorization of women's labor in the "strategic nexus of the global economy (86). ... The female characters of Devi's short story, exposes the invisible sector of labor among subaltern women. ... The Chinese ethnic minority control the informal labor in the Philippines via the exploitation of the ethnic Filipino population. Sassen's feminist critique on the gendered and racialized informal economy makes invisible a "whole range of workers, firms, and sectors that do not fit the prevalent images of globa...

• Word Count: 2299
• Approx Pages: 9

4. Mayo And Roth.

As managers played a bigger role, informal norms were created where social factors such as cooperation, Mgt. supervision, working conditions and informal groups became important. ... Roethlisberger and Mayo also mention the importance of informal groups within an organization, yet they fail to see how it can hurt an organization. When informal groups are created there is always a good possibility of subcultures or countercultures to form within these informal groups. This causes a lack of communication within the organization and may even escalate into unfriendly competition between sectors th...

• Word Count: 657
• Approx Pages: 3

5. Communication Systems in Large Organisations

Informal communication systems But as well as the formal methods of communication all businesses have informal communication networks that are not controlled by senior management. ... All of this leads to informal passing of information. ... It is important to point out that informal channels can both help and hinder formal communication, but one definite advantage of informal communication is that, when used it can bypass layers of hierarchy. ... These networks need to complement the traditional hierarchical organisational structures which are still found as the sole communication network ...

• Word Count: 1737

6. Structural Adjustment Policies In Urban Turkey

Namely, stabilization and structural adjustment policies have led to falling real wages, increased prices for some wage goods and loss of public sector jobs, with knock-on effects on the rest of the economy. ... Moreover, beside using methods external to the household relations like, ethnic or illegal networks, sometimes under the pressures of structural adjustment households may pushed to work under the insecure and harsh environments of informal sectors of their own society. For example, Alan4 argues, that the increasing pressure of structural adjustment policies the depressed urban workers ...

• Word Count: 2575
• Approx Pages: 10

7. Dumping And Tariffs

As long as Free Trade is around restricted trade will exist. 2) Dumping is an informal name for the practice of selling a product in a foreign country for less than either; a) the price in the domestic country or b) the cost of making the product. ... By promoting the reduction of tariffs in the sectors of the economy that are important to the US, industries will be able to expand and grow. ...

• Word Count: 366

8. Academic Research of Economic Journal

Stress testing has become an essential and very prominent tool in the analysis of financial sector stability and development of financial sector policy. ... Informal organizations do not want to act in a fashion complementing state-driven social protection. They reject the state and charity activities of the business sector, they want to treat the beneficiaries of their activities as participants in the collective production and distribution of social assistance, and view social solidarity in the context of the economic crisis as part of a wider political movement to construct alternative form...

• Word Count: 1048