Informal traders get a leg up in Gauteng

SERVICES NEWS

IOL Business - May 6th, 09:04

The informal economy is the major contributor to a number of emerging economies globally. In sub-Saharan Africa, the sector constitutes 70 percent of the workforce while in other countries such as Ghana, the informal economy employs 85 percent of the workforce. In India 400 million people work in this sector. 

The informal sector contributes just more than 3 million jobs to the South African economy. This number includes street traders, shoe repairers, hair salons, dressmaking businesses, spaza shops, retail and many others.

Despite this contribution, our country is still marked by unemployment, inequality and poverty. The dual nature of the economy, with a formal and informal sector, and high unemployment indicate that there should be a strong focus on the informal economy especially in light of the job crisis gripping the country for many years.

Recently, there has been a revival of the interest in the informal economies of a number of countries. The revival has been driven largely by an increase in the size of the informal economies.

South Africa is no exception to this trend and more and more people are entering the informal economy space. One of the reasons for the growth of the informal sector is the decline in global demand especially from South Africa’s major trading partners and the loss of more than 1 million jobs in 2008 and 2009.

The rapid urbanisation of the black population, the slow pace of economic growth and the decrease in formal employment are factors contributing to the recent growth of South Africa’s informal economy.

Despite the resolution taken by the ANC congress in Polokwane in 2007 to prioritise the informal economy through the support of the inclusive economy and the decent work pillar, the sector continues to be marginalised or disconnected from the mainstream formal economy.

The factors behind this include the absence of a coherent informal economy policy, and lack of infrastructure such as market stalls, water and sanitation, and storage for products.

In addition to these challenges, the majority of informal traders lack business skills, financial support and they suffer continuous harassment at the hands of police officers.

Some of these challenges can be attributed to the informal traders themselves for their reluctance to comply with municipality by-laws such as registration of business, trading in legal spaces and also complying with tax regulations.

By doing so the informal traders miss a lot of opportunities such as applying for grants or financial support, tendering and also benefiting from government programmes through the strategic procurement strategy, which emphasises support for the previously marginalised section of the community such as youth, women and people with disabilities, and the use of local content.

There seems to be a consensus from the majority of the informal traders’ associations in Gauteng around the issue of compliance and regulation.

The informal traders’ associations are rethinking their strategies and share the view that the sector needs to comply with the regulations, hence the call for government interventions.

The other challenge is the fragmentation of the sector and various players pulling in different directions while driving for a common purpose. The recent clarion call for unity and a uniform vision has the potential to take the sector to greater heights.

The Gauteng government’s renewed focus on the informal economy is commendable. The province intends to assist informal traders to register their businesses, provide business skills and also mobilise other stakeholders to address infrastructural challenges and ease the cost of doing business in this sector.

The proposed relaxation of stringent financial lending requirements and grant allocation by the Department of Economic Development would assist in the expansion of the informal industry, create new business opportunities and increase the absorption rate of the unemployed.

A focus on the informal sector should form an integral part of any strategy aimed at addressing the triple challenge of poverty, inequality and unemployment.

Thulani Guliwe is the head of research at the Gauteng Department of Economic Development