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The Informal Economy in SA Trends and policy challenges. Caroline Skinner, School of Development Studies, UKZN eThekwini Informal Economy Conference, ICC 9 November 2006. Presentation Outline. Definitions International statistics South African statistics Formal informal linkages
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The Informal Economy in SATrends and policy challenges Caroline Skinner, School of Development Studies, UKZN eThekwini Informal Economy Conference, ICC 9 November 2006
Presentation Outline • Definitions • International statistics • South African statistics • Formal informal linkages • Challenges • eThekwini’s approach • Concluding thoughts
Informal Economy – Definitions The Statistics SA definition: ‘The informal sectorconsists of those businesses that are not registered in any way…’ ILO Definition: The informal economy is ‘all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements’ (ILO, 2002a).
Informal Economy - International Size of the Informal Economy Source: Chen The informal economy is growing and here to stay
SA: Informal Enterprises, Sept 2005 Portion of the labour force: 19% (excludes 1 million domestic workers, just less than 400 000 involved in subsistence agriculture) Sector: Just under 50% of SA informal enterprises are involved in trading Race: 90% of those working in the informal economy are black South Africans Sex: There are a disproportionate number of women working informally, with women often dominating segments of the informal economy where remuneration is low.
Informal enterprises contributed between 8 and 10% to South Africa’s GDP Country wide total expenditure in the informal economy stood at R52 billion in 2004. The total annual trade value of traditional medicinal products in KZN is R281 million. The informal trade turnover in Warwick Junction is estimated to be R1 billion annually. Contribution to GDP
SA Cities: Informal Economy, 2004 Source: SACN, 2006: 18
Formal – Informal Linkages There are multiple backward and forward linkages. Consider for example: • Traders – formal suppliers • Manufacturers – inputs sourced from the formal economy, some outputs end up in formal chain stores Big business is involved • South African Breweries, Unilever and Mondi • It is these linkages that are critical to policy.
Policy Challenges Diversity of activity – not only in terms of industry but in terms of nature ‘the informal economy simultaneously encompasses flexibility and exploitation, productivity and abuse, aggressive entrepreneurs and defenseless workers’ Portes, 1989 Dynamism – many activities fail, while new ones emerge and existing ones diversify. In these processes there are different demands on public and private spaces and government services. This requires high levels of day to day management and ongoing, rather than ad hoc, consultation.
Policy Challenges Demands particularly proactive intervention – Research has demonstrated that in the post apartheid period support providers have not serviced this group. For example: • Training: Research on training providers indicated that trainers are very reluctant to work with informal economy workers. The Department of Labour does not conduct training itself but relies on the private sector to respond to incentives.
Policy Challenges • Business support: In the 2002 survey of over 500 informal firm owners working in Durban not one of them had walked through a door of a local business service centre. • This poses a challenge to national government departments (DTI and DoL)
Policy Challenges • In managing the informal economy the local state has to balance the interests of many different groups– various formal and informal sector interests, general public, (pedestrian and traffic flows) among others. • They have to balance management of and support to the informal economy. • There are outspoken representatives from organisations that are not always strictly democratic, some workers not represented at all. • The activities of different levels of government and different departments within each level of government impact on those working in the informal economy – difficult to get a consistent approach.
Huge progress has been made with the development of infrastructure - R40 million spent on capital works for informal economy infrastructure and a further R3.5 million on maintenance. eThekwini has dedicated more staff, and given greater institutional profile, to the informal economy than any other South African city. Significant strides have been made into support for those working informally – 1000 traders trained and sector support, through innovative co-operative development, initiated. eThekwini – Progress
The city is the site of award winning projects like Warwick Junction. Its approach to health and hygiene for street traders has been internationally recognised by the United Nations body FAO. Projects like the traditional medicine development programme exemplify the notion of sector support. The informal economy policy accepted in 2002 has been hailed as a progressive approach and progress has been made on implementation. eThekwini – Progress
At minimum 100 000 people in eThekwini are working in informal trade, a big proportion of whom operate from the streets. Approximately 8000 street traders operate in Warwick Junction alone. Business Support has issued 6073 permits in the city, of which 2512 have been issued in the CBD. They have also employed 50 auxiliary police officers (costing R3.7million) to remove un-permitted traders. There are many reports of the hardships this intervention has generated. If eThekwini is to build on its good track record, this aspect of their approach needs to be reconsidered. eThekwini - Challenge
Conclusion Statistics demonstrate appropriate regulation and support provide all levels of government the opportunity to both grow the economy and to alleviate poverty. The colourful myriad of crafters, bovine head cookers, muthi (traditional medicine) traders, mielie (corn on the cob) sellers, taxi drivers, tailors, haircutters among others, although doubtless a management challenge, is what makes our cities distinctly South African. The challenge is harness this energy and not be seduced into northern notions of ‘cityness’.
