informal economy in South AfricaIf you walk down a busy street in any of South Africa’s major cities, you are bound to witness some type of informal economic activity. Whether it be a fruit stand, street-hawker selling earphones or an informal car wash business, the informal economy in South Africa is a crucial part of life for many of its residents.

The Importance of Informal Trade

Informal trade refers to any unregulated, unregistered, unprotected and untaxed activities, enterprises, or transactions. Informal jobs are an essential source of income for many poor South Africans—18 percent of working citizens work in the informal sector—a total of over three million workers. Additionally, the sector accounts for 18 percent of South Africa’s GDP. While these numbers are smaller than those of other developing countries, they emphasize the importance of informal trade in an economy with stark unemployment rates—26.6 percent as of 2016. Informal markets, like Durban’s Warwick Markets, provide jobs for those who are unable to find formal employment. Thousands depend on these markets for produce, cooked meals and clothing at affordable prices. Furthermore, the informal workforce in South Africa is overwhelmingly poor, young females. In fact, the poverty level in an area correlates positively with the proportion of people working in the informal economy.

The government recognizes the informal economy in South Africa as a viable and important form of employment and enabler of economic mobility for the country’s poor. Experience in the informal sector can help untrained people acquire skills, potentially aiding future integration into the formal sector. According to economist Loane Sharp, the informal economy in South Africa is growing faster than its formal counterpart. This prompts the government to pass policy encouraging and protecting the sector. The National Informal Business Upliftment Strategy of 2014 set up a framework of government assistance with skills development, marketing, technical support, infrastructure improvements and management training. This “inclusive growth” strategy focuses on enabling South Africa’s poor to participate in the economy rather than merely redistributing wealth through social welfare programs.

Non-governmental organizations are also working to improve conditions for informal traders. Asiye eTafuleni is an NGO in Durban that works with local government officials and vendors in the informal sector (particularly the Warwick Markets) to assist in developing infrastructure, consultations for urban planning and advocacy for informal workers. The organization also directs tourism to the Warwick Markets, educating foreigners and visitors on the functions and importance of the markets, and bringing the vendors eager customers. Asiya eTufuleni is a member of the Inclusive Cities mission, which focuses on uplifting and strengthening groups of working poor in the informal economy. The Inclusive Cities project aims to support the urban poor through lobbying, policy planning, and research. One of the ways the project does this is by advocating for “waste pickers’ rights,” the legal right of individuals to collect garbage to recycle into sellable goods. These rights are under threat by the privatization of solid waste management in many cities across Africa. Inclusive Cities also conducts research and analysis of the informal economy to support future endeavors and activism.

A Struggle for Informal Business Owners

There are many downsides to informal trade which make its participants particularly vulnerable. Informal business owners are often deterred from registering their enterprises by high taxes and strict regulations. Informal working conditions are unregulated by nature and therefore often poor. Dangerous locations, limited book-keeping skills and lack of insurance put informal traders at constant risk of losing their livelihoods. Average earnings for informal workers are less than half of what the formally employed earn. And although recent policies are attempting to expand this sector of the economy, informal workers still face significant intimidation and harassment by local law enforcement.

In July 2018, hundreds of informal traders protested by-laws which would prohibit trading in certain areas. These potentially harmful by-laws would allow law enforcement to confiscate the goods of traders without permits. The leader of the activist group responsible for organizing a march on Durban City Hall complained that the traders themselves were not included in the creation of these laws. The permit allocation procedure, he says, is corrupt, with officials soliciting bribes in exchange for permits.

It is clear that despite efforts by the government and NGOs, conditions of the informal sector have remained unsatisfactory. The disconnect between national policy, like the National Informal Business Upliftment Strategy, and local municipalities is one obstacle in the way of a safer, healthier informal sector. The informal economy in South Africa provides crucial wages for the country’s poorest and most vulnerable populations; resources should be channeled to encourage and protect laborers and merchants in the sector.

– Nicollet Laframboise

Photo: Flickr

Dharavi slum redevelopmentThe Dharavi Slum Redevelopment Project was approved by the state government of Maharashtra on October 16, 2018. The new proposal plans to renovate the entire slum as a whole while previous failed attempts planned to divide the slum into 12 parts. The new plan must take into account the previous failures in order to succeed in the redevelopment of such a populated area.

About Dharavi

Dharavi is considered Asia’s largest slum, spanning almost 600 acres of land. Located in Mumbai, Maharashtra, India, it is a long stretch of shanty houses, dirt roads and open sewage. It is estimated that the percentage of people in Greater Mumbai living in slums may be as high as 41.3 percent. Dharavi has a population of around one million people. Because Mumbai has some of the highest rental prices in the world, Dharavi has become a more affordable option for those moving to the city.

The slum was founded in 1882 during the time of British rule during the country’s urbanization. When the plague spread through India, the British government transferred much of its industry to Dharavi. What began as a fishing village has since grown into a densely populated, culturally rich and diverse area. It has an active informal economy where businesses will employ many slum residents for leather, textiles and pottery products.

About the Dharavi Slum Redevelopment Project

Redevelopment plans for Dharavi have been on hold for the past 15 years, beginning in February 2004. There is hope now that the Dharavi Slum Redevelopment Project will follow through after a Dubai-based firm called Sec-Link Technology Corporation (STC) won the global tender to renovate Dharavi for good.

Sec-Link Group is a special purpose organization working to redevelop slum around the world. This project is largely backed by the UAE. The Dharavi Slum Redevelopment Project will cost around Rs 22,000 crore, which is over $3 billion. However, if the project continues to be delayed, the cost could grow to Rs 40,000 crore. STC proposed that slum residents will have larger, carpeted homes with 350 square feet as a minimum. Those above 300 square feet will get 400 square feet, and those over 500 will get an additional area of 35 percent.

The Dharavi Slum Redevelopment Project includes using 200 acres to rehabilitate residents and build commercial units, 100 acres for a community garden and the remaining 300 acres will be for sale and commercial complexes. This also means that new infrastructures will be implemented, such as water systems and container housing.

Previous Issues

The reason that past redevelopment projects have failed is largely due to resistance from slum residents who felt the plans were not in their interest. Because Dharavi is so condensed, it has grown into its own ecosystem. Residents rely on the micro-enterprises in the slum, some of which take part in homes and outdoor spaces being used for places of work and social interaction. It is important to residents that the economy of Dharavi and their own livelihoods are supported during this change.

In order for a housing upgrade to work for all residents, it’s important the Dharavi Slum Redevelopment Project allows for the economic and social activities that thrive in slums. By converting slum buildings into industrial centers, Dharavi can grow from deprivation into a magnet of commerce. STC will begin working on the project in 2019 and plan to finish it in nine years.

Isadora Savage
Photo: Flickr

Informal Sector in India
The socio-economic landscape in India is largely informal. According to the International Labor Organization, close to an estimated 81 percent of all employed people in India are engaged in the informal economy, most of which is in the agricultural sector.

The Informal Sector in India

Contrary to popular belief, the informal sector in India has seen improvements in productivity and employment and, to some extent, wages. The informal sector contributes to the economy and also helps the formal economy; however, informal economy workers continue to earn lower wages, lack social security and have less protection than their peers in the organized sector. The informal sector attracts the workforce because it offers easy access; the formal sector, on the other hand, hosts barriers to entry that are often costly and tedious to get through.

The informal sector in India is socially regulated rather than state-regulated; however, the government is attempting to gather data and regularize the informal sector through the process of digitization. This will allow for effective regulation of cash transfers and provide the government with the tools to better understand the informal sector. By mapping the vast informal sector, the government will have more information about the real growth in India’s economy.

Women Workers in India

Around 94 percent of total women workers are employed in the informal sector, most of whom work as agricultural workers, construction labor and domestic help. Many women are able to gain entry and jobs in this sector, as there are no barriers with regards to skill. This then acts as a way for women to provide for their families. Women find it difficult to enter the organized sector, and their gender exposes them to political, economic and social discrimination, which is why they enter the informal sector.

There is hope that women’s participation in the workforce will reduce gender inequality and that integrating women into the labor force will allow for social and economic empowerment. However, there is a  lack of recognition of the role of women in both their homes and at work.

Equality, Gender and Children

It might appear that there is little gender discrimination in the informal sector, as it is commonplace to see women working alongside men, carrying heavy loads on construction sites or in brick kilns. However, closer examination reveals that amongst the more skilled and higher-paid jobs — such as that of masons, plumbers or carpenters — the workforce is predominantly male.

There are also concerns about the welfare of children —  women are often left with no option but to bring infants to the workplace, where they exist largely unattended. Non-governmental organizations are now setting up mobile creches so that the children of migrant workers receive some care; but this option is limited in its current status as an urban phenomenon, confined to the metropolises.

Goal for Growth

Women’s collectives are agencies which provide women with the space to grow and demand rights. This provides women with legal training to seek social services and adequate work conditions. In recent years we see greater activity here, especially in the field of legal aid, and women-only police stations make it easier for women to seek justice.

Some areas, however, remain untouched; domestic workers, for instance, have no written contracts, they enjoy no mandatory weekly off days nor any regulated working hours. Thus. one can see that there is a need to create regulations in the informal sector in India to measure growth, empower women and improve working conditions.

– Isha Kakar
Photo: Flickr

women in poverty
Economic inequality is an issue that has existed for years around the world, especially in developing countries. Sometimes dubbed “global capitalism,” this inequality can be argued to have, in turn, created social classes that have ultimately influenced women in poverty around the world.

Such women often find themselves in situations of informalization, flexibilization and feminization as capitalism causes a high discrepancy between earning wages and living affordability in certain countries. Developed countries could arguably do more to help those in developing countries so that women in poverty do not find themselves relying on the informal sphere to survive and make a living.

What is Informalization?

Any economic activity that isn’t regulated, legal or outside of the formal sphere is considered work in the informal economy. This work usually isn’t ideal as it is not monitored, regulated or taxed by the government; it is considered a labor activity lacking authority where cash is barely exchanged. This work ranges from household child- and elder-care, to domestic labor and community projects, which are often seen as examples of “invisible” informal work.

Interestingly, it can be irregular activities where payment is expected that legal regulation is difficult to enforce. These activities can range from street vending, petty trade, home-based industries, sex work, drug dealing and arms trade — most of which are seen as illegal informal work. Since it’s usually dangerous or precarious work, these scenarios lack major benefits to the employee other than an income. Women working in this sphere lack protection, labor laws or even social benefits. In fact, they often work in unsafe working conditions with risk of sexual harassment.

This type of work environment also has long-term effects on women — if workers don’t have pensions globally, many find themselves in situations of poverty in their old-age as well; in other words, this system creates a never-ending cycle for women in poverty. In fact, “today researchers estimate that informal activities constitute more than one-half of all economic outputs, and equal 75 percent of the GDP of some countries.” According to U.N. Women, 95 percent of women in South Asia, 89 percent of Sub Saharan Africa and 59 percent of women in Latin America and the Caribbean work in the informal sphere.

How Does Informalization Lead to Flexibilization and Feminization?

Flexibilization and feminization are sources of inequality that derive from informalization. Flexibilization is usually non-permanent or part-time work that ends up feminizing the workforce. People in these situations tend to be women, which is where feminization comes into play.

These minimum wage jobs require docile but reliable workers who are available for part-time/temporary work and willing to labor for low wages. Although women generally aren’t most of these qualifications, gender stereotypes depict women as perfect candidates for these informal jobs, especially in developing countries.

How Can the Women in Poverty be Alleviated From These Situations?

When women in poverty aren’t getting paid enough for their labor, they aren’t able to support themselves and their families. Consequently, these women then need to get second jobs or find themselves in situations of informalization, flexibilization and feminization. Thankfully, many are finding ways to help women out of these jobs through news outlets, organizations or simply word of mouth.

Often, developed countries are viewed as not doing enough to help developing countries. Increases in the wealth gap lead to an increase of women in these precarious jobs. Therefore, organizations like the U.N. Women, Me to We, The Borgen Project and numerous others try to address this inequality and help women around the world.

U.N. Women started a project towards this goal that trains women and families to become entrepreneurs by creating their own businesses. This is an example of just one organization and project working towards improving the lives of women in poverty working in the informal sphere.

– Negin Nia
Photo: Flickr


On December 1, 2016, the BBC reported that Albania’s clandestine drug industry may be producing almost half of the nation’s total GDP on a yearly basis. The recent aspiration of the Albanian government to become admitted into the European Union, though, has successfully and drastically accelerated efforts to crack down on the mafias, corruption and poverty in Albania which allow these occurrences to take place.

But first, the events beg the question: how has the situation gotten so bad? Albania has been stable in recent decades, although not on a large enough scale. For instance, while the capital of Tirana had seen significant growth in services and order, most of the rest of the country was neglected. Poor and impoverished citizens in the rural regions were left to fend for themselves – and found a better life through the growth of illegal drugs. These are just a few examples of the effects of poverty in Albania backed by research.

In response to this, Prime Minister Edi Rama showed eagerness in establishing prosperous policies and projects. For instance, the government of Albania is attempting to curb issues mentioned heretofore by providing financial services to rural areas, establishing consumer protection and promoting tourism throughout the nation. Also, police salaries have risen between 10 and 17 percent to steer away bribery.

Of course, more turbulent methods are also being pursued — Rama has promised to deal with the more aggressive concerns by expanding currently existing assets. With the help of the Italian government, and significantly more senior officers, keeping track of and attacking these illicit organizations has become easier. For instance, Rama oversaw the besiege of Lazarat in 2014, a village in southern Albania, where civilians ineffectively utilized military-grade weaponry against police.

At this rate, the flow of certain drugs throughout Europe should significantly decrease since Albania is one of the root causes of this spread. Today, Albania has opened up more government jobs to citizens while it also works to rebuild and refurnish once-neglected regions. Programs to promote rehabilitation are also a must to not only help in reducing poverty in Albania, but to also further the nation as a whole. As a result of these efforts, Rama hopes Albania will be accepted into the EU in the early 2020s.

– Kristopher Nasse

Photo: Flickr

Informal EconomiesInformal economies are all too often associated with deviance and insecurity, with people making money outside of formal sectors, not paying taxes, increasing poverty and lacking labor and social protection.

However, from the floating markets of Nigeria to the burgeoning markets of India, informal economies, or what Robert Neuwirth calls “system D” economies, are filling the void left by globalization. Secure jobs are becomimg more and more scarce, as multinational corporations control ever more of the production and distribution of goods across the globe. As these practices continue to drive up economic inequality and leave people battling unrelenting poverty, informal economies are quickly reversing the course and offering alternative economic practices that are quelling the tide.

An informal economy, as defined by the International Labor Office (ILO), is “all economic activities by workers or economic units that are — in law or practice — not covered or sufficiently covered by formal arrangements.”

Informal economies are on the rise across the globe, although accurate statistical data is hard to come by. They are estimated to be worth $10 trillion a year.

Terence Jackson reports that the informal economic sector in Africa “represents about three-quarters of non-agricultural employment, and about 72 percent of total employment in sub-Saharan Africa.” In India, informal economies are estimated to generate 90 percent of jobs and half of the national output. In both Africa, Asia and the world at large, many GDPs are heavily reliant on informal economies.

As talk of new and emerging economies fill the airwaves, informal economies offer alternative means to lift local people and communities from the coercive and restricting structures of globalization. Ironically, globalization is credited as having increased the size and importance of informal economies while these very economies stand to threaten the reign of multinational corporations and globalization.

A study by Martha Alter Chen, a lecturer in public policy at the Harvard Kennedy School and international coordinator of Women in Informal Employment Globalizing and Organizing (WIEGO), explores how in today’s economy, formal jobs are not being created in sufficient quantities, and existing jobs are being made informal. “Informal employment is here to stay in the short, medium, and probably long term. It is the main source of employment and income for the majority of the workforce and population in the developing world,” her study states.

Informal economies across the globe are expanding, and increasing numbers of people are dependent on the profits generated. As informal economies seem to be here to stay, it is imperative the world embraces the revolutionary entrepreneurship pouring out of the sector. It holds the potential to not only fill the labor void left by globalization but to offer an alternative way forward that addresses local problems with local answers.

Joseph Dover
Photo: Flickr