Persecuted informal sector keeping millions afloat
Backyard motor mechanics, vegetable sellers, cigarette hawkers, hairdressers. They are the lifeline of South Africa, employing and keeping millions out of poverty.
In Cape Town, the informal sector plays a huge role in poverty alleviation, reducing the city’s poverty rate from 25.1% to 20.6%.
This is equivalent to pulling 186000 people out of poverty, according to the city’s latest economic performance indicators.
Economists say the informal sector is South Africa’s lifeline.
Yet many informal traders are harassed by the authorities, hit with hefty fines and routinely have their goods confiscated.
South Africa’s informal economy – employing over 2million people – contributes between 7% and 20% to the national economy.
“There are about 1.3million self-employed people in this country, most of them in the informal sector,” said economist Mike Schussler.
He said the informal sector played an important role in the economy “but our rules are not conducive to the informal sector and we often chase street traders away and prohibit them from trading on major roads”.
“If people are found fixing cars other than their own they need special permission.
“We should allow people to get permission easily.
“We have to become much more understanding of the people in the informal sector. They are struggling to make ends meet and survive.”
The predominant groups in the sector are African and male, with an average age of 41.
According to Cape Town’s latest economic performance indicators, if the informal sector were viewed as a conventional economic sector, it would be the fifth-largest employer in the city, just below manufacturing and just above construction.
The report surveyed 200 informal trading enterprises along transport corridors and business nodes across the city. It focused on informal businesses that operate according to Cape Town’s permit system.
It showed that traders specialised in products and services according to specific areas.
A popular trade is manufacturing burglar bars and security gates, and car body repairs. Most of the businesses in this sector in Cape Town yield an average profit of R5000 a month.
These businesses have the potential to create employment and transfer skills.
“If we are going to get the informal sector to contribute more to the economy then we need to give it a smoother ride. The informal sector mops up a lot of the school-leavers and the unemployed,” Schussler said.