Transcript The Informal Economy, Globalisation and Development

The Informal
Economy in SA
Trends and policy
challenges
Caroline Skinner, School of Development
Studies, UKZN
eThekwini Informal Economy Conference, ICC
9 November 2006
1
Presentation Outline
• Definitions
• International statistics
• South African statistics
• Formal informal linkages
• Challenges
• eThekwini’s approach
• Concluding thoughts
2
Informal Economy –
Definitions
The Statistics SA definition:
‘The informal sector consists 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).
3
Informal Economy - International
Size of the Informal Economy
Informal Sector
Share of
Latin
America
Africa
Asia
Non agricultural
Employment
57%
78%
45-85%
Urban
Employment
40%
61%
40-60%
New Jobs
83%
93%
N/A
Source: Chen
The informal economy is growing and here to
stay
4
South African
Statistics
5
SA: Employment in Informal
Enterprises, 1997-2005
2500000
2,340,984
2000000
1,802,050
1,797,722
1500000
1,779,371
1,800,332
1,590,343
1160400
1000000
1131600
500000
0
1997
1999
2000
2001
2002
2003
2004
2005
6
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.
7
SA: Informal Enterprises –
Income, Sept 2005
40%
36%
35%
30%
24%
25%
21%
20%
15%
11%
7%
10%
5%
1%
0%
None
R1-R500
R501-R1000
R1001-
R2501-
R2500
R8000
R8000+
8
Contribution to GDP
• 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.
9
SA Cities: Informal Economy,
2004
Cape
Town
eThekwini
Johannes
burg
Tshwane
Total
Employ
-ment
Informal
Employment
%
Informal
902,706
938,482
187,201
295,237
21%
31%
1,188,388
692,437
296,746
171,327
25%
25%
Source: SACN, 2006: 18
10
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.
11
Challenges
12
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.
13
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.
14
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)
15
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.
16
eThekwini – Progress
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.
17
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.
18
eThekwini - Challenge
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.
19
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’.
20
Thank you
[email protected]
21
SA Labour Force, Sept 2005
Informal other
Informal agriculture
19%
Formal agriculture
5%
3%
Domestic work
9%
Formal other
64%
22
SA Labour Force Sex and Race
Formal
Emp.
Informal
Emp.
Domestic
Workers
Total
Populati
on
Male
63.1%
56.3%
3.4%
49.2%
Female
36.9%
43.8%
96.6%
50.8%
Black
60.1%
90.7%
91.4%
79.4%
Coloured
13.1%
4.7%
8.6%
8.8%
Indian
4.8%
1.1%
0.0%
2.5%
White
22.0%
3.4%
0.0%
9.3%
23
Informal Enterprises –
Sector
Finance/bu
siness, 3%
Transport,
6%
Services, 9%
Agriculture,
14%
Manufacturing, 10%
Trade, 46%
Constructio
n, 13%
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