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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

Hunger in South AfricaFood insecurity plagues approximately 14 million South Africans. Poverty and unemployment are the two leading contributors of hunger in South Africa, caused in part by the 2008 global economic crisis, which limited job creation opportunities and the purchasing power of South African households. The nation’s economy has also been stagnant, at a growth rate of 3.3 percent since 2011 and shows little signs of improvement. In 2006, 28.4 percent of the country’s population was living in extreme poverty. In 2015, the rate had only decreased to 25.2 percent.

Causes of Hunger

Other factors of poverty include the legacy of apartheid. Apartheid barred black individuals from a proper education system and thus skilled and higher paying occupations. South Africans also seem to display a sense of disinterest in entrepreneurship, given the lack of investment within the business space. High food and fuel prices, high-energy tariffs and increasing interest rates further exacerbate hunger within the nation, as households are struggling to meet basic needs.

Solutions for Hunger

In hopes to mitigate hunger in South Africa, several initiatives have been taken. For instance, Dr. Louise Van Rhyn founded Partners for Possibilities in 2010. Partners for Possibilities is a leadership development program focused on using grassroots and cross-sector collaboration efforts to help teachers and business leaders. The program pairs a business leader as a co-partner to a school principal. By forcing them to adapt and learn to lead a complex and unfamiliar environment, business leaders gradually develop leadership capabilities in the process. The principals learn to work with other individuals, as well as a partner to help them better manage under-resourced schools.

This approach not only improvement schools, spurs individuals to be involved in a business, but it also empowers individuals to succeed in their careers, strengthening South Africa’s education system, economy strengthening households from hunger and food insecurity.

Major international nonprofits such as the World Health Organization have invested in millions of dollars on food aid programs. Often times, even though there is food in markets, it is not necessarily available. Thus, these programs compensate for the lack of access. CARE is another major organization that has been trying to limit hunger in South Africa. Their programs focus on the nutrition specific needs of fetal and child development, as well as home-based practices, making them easy to follow for households of various conditions. One of their most notable developments is the creation of the integrated model: Collective Impact for Nutrition. This particular model was established after 10 years of programming where “key nutrition-sensitive interventions support a core nutrition-specific behavior-based approach, ensuring not only the promotion of improved nutrition practices but also helping to provide the necessary foundation for adopting them.”

Ultimately, hunger in South Africa is a complicated issue, as there are many factors at play. From high rates of unemployment, lack of accessibility to food markets and economic instability due to a lack of education, its difficult to resolve hunger. Recent statistics have shown there has been some improvement in the nation’s economy, though small. For these reasons, it is vital the organizations on the ground continue their efforts to limit hunger within South Africa.

– Iris Gao
Photo: Flickr