1. Presentation
• Origin and international approaches to the
informal sector
• Characteristics of the informal sector
• The informal economy in Africa
• The informal economy in South Africa
• Policy and assistance?
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
2. Origin and international approaches to
the informal sector
• Concept of informal portion of economy - traced back to early 1970s.
• Hart (1973) highlighted uncertainty of production activities in terms
of employment and income as distinctive feature of informality
• gave rise to the “Dualistic” approach:
-
-
Formal opportunities involve earning a wage in modern sector
and is amenable to enumeration by official surveys.
Informal income opportunities from self-employment, and which
escape enumeration from official sources – e.g. tax returns.
Original idea adopted + revised by (ILO).
Numerous refinements
Extension of conceptualisation beyond self-employment to
include casual employees (Muller, 2003: 8).
• Further approaches followed
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
• The Structuralist School:
-
formal economy reduce labour & capital costs by subordinating
small informal producers & traders. In doing so, they increase
competitiveness
• The “Portes” or underground economy approach
- ‘downgraded labour’. Receive lower wages, fewer benefits
& experience inferior working conditions compared to
individuals employed in the formal economy
• The Legalist School
- Rational response to over-regulation. SMMEs can avoid
governmental regulation & bureaucracy, reducing cost and
increasing wealth creation in the process (Saunders, 2005)
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
3. Characteristics of the informal sector
• Play an important role in transitional & developing countries in
facilitating successful adjustment to globalisation & structural
reforms.
• Provide a means of survival to vast majority of poor and extremely
poor workers in a society
• Play a role in unlocking entrepreneurial potential which could
become lost in a mesh of formality (Guha-Khasnobis & Kanbur,
2006). HOWEVER:
• Informal workers not protected by law & exposed to certain forms of
abuse & exploitation
• Being mostly an urban phenomenon, expansion of informal sector
can potentially exacerbate problems connected with slums,
congestion, health & environment (Guha-Khasnobis & Kanbur,
2006).
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
4. The informal economy in Africa
Horn (2008) notes:
• 72% of non agricultural employment in sub-Saharan Africa is informal
• 84% of women non-agricultural workers are informally employed in subSaharan Africa
• Most new employment in Africa is in the informal economy
• Informal sector not internally homogeneous
• Consists of a self-employed & employee segment.
• Informal sector do not serve as waiting area for workers, especially
migrants, while they search for formal sector jobs.
BUT
• The informal sector in South Africa absorbs only a very small proportion of
the workforce by developing-country standards (Kingdon & Knight, 2001)
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
5. The informal economy in South Africa
The size of the informal sector in South Africa
Loots (1991), estimated the size of the informal economy as a percentage of
GDP to be 12 per cent in 1989.
Informal economy accounted for roughly 7 per cent of GDP in 1999 (Saunders,
2005).
Casale, Muller and Posel (2004) estimated that employment in informal sector
has grown by more than 100 000 people each year, or 8 per cent per
annum from 1997 to 2003.
Average increase in informal-sector employment of 5.8 per cent between 2001
and 2005 (Barker, 2007).
Braude (2005) estimated that informal sector in South Africa comprises
between 7 and 12 per cent of the total economy.
Schneider (2002) puts the size of informal economy in South Africa as a
percentage of GDP for the years 1999/2000 at 28.4 per cent.
Statistics South Africa (2007) estimated non-agricultural employment in the
informal sector at 18.5 per cent of total employment.
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
Employment in the informal economy in South Africa by different occupations,
October–December 2008
Industry
Informal (Thousand)
Percentage
Manager
135
2.8
Professional
44
0.9
Technician
164
3.4
Clerk
136
2.9
Sales and services
608
12.8
Skilled agriculture
44
0.9
Craft and related trade
Plant and machine
operator
Elementary
771
16.2
297
6.2
1 522
32
Domestic worker
1 049
21.9
TOTAL
4 769
100
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
Employment in the formal and informal economies by different industries,
October–December 2008
Formal
(Thousand)
Percentage
Informal
(Thousand)
Percentage
Agriculture
380
4.5
348
7.3
Mining
310
3.7
*
*
1 505
18
379
8
Utilities
77
0.9
*
*
Construction
538
6.4
567
12
1 638
19.5
1 330
28
448
5.3
270
5.7
1 313
15.7
204
4.3
Industry
Manufacturing
Trade
Transport
Finance
Community
and social
services
Private
households
26
2 182
-
-
365
1 288
7.7
27
Other
-
-
-
-
TOTAL
8 395
100
4 769
100
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
Employment in the formal and informal economies by educational attainment,
October–December 2008
Level of
education
Formal
(Thousand)
Percentage
Informal
(Thousand)
Percentage
177
2.1
374
7.8
518
6.2
855
17.9
271
3.2
426
8.9
Secondary not
completed
2 447
29.1
2 111
44.3
Secondary
completed
2 872
34.2
790
16.6
Tertiary
2 037
24.3
128
2.7
Other
77
0.9
84
1.8
TOTAL
8 395
100
4 769
100
No schooling
Less than
primary
completed
Primary
completed
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
Average nominal daily wage or income of various informal labour
markets in South Africa
Formal car
guards in
Bloemfontein
(2001)1
Informal car
guards in
Bloemfontein
(2001)1
Day labourers
in Pretoria
(2004) 2
Day labourers
in South Africa
(2007)
R52.5
R33.5
R41.24 to
R58 to
R50.17
R120
Sources: 1 Blaauw & Bothma, 2003; 2 Blaauw et al., 2006: 467; Blaauw
2010
Breakdown of tasks expected of day labourers in South Africa, 2007
O t he r
P la s t e ring
D o m e s t ic wo rk
E le c t ric ia n a s s is t a nt
E le c t ric ia n
F a rm ing a c t iv it ie s
C a r wa s h
P lum be r a s s is t a nt
P lum bing
P a int e r a s s is t a nt
Yes
No
P a int ing
C a rpe nt e r a s s is t a nt
C a rpe nt ry
R o o f ing a s s is t a nt
R o o f ing
B ric k la ying a s s is t a nt
B ric k la ying
C o ns t ruc t io n
Lo a ding/ unlo a ding
D igging/ S ho v e ling
G a rde ning
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Income earned in informal sector in South Africa – some examples
Day labourers standing on street corners
Average (R values – nominal 2007)
Income Indicator
Full sample
Lowest wage received for a day’s
work
57
Best wage received for a day’s
work
120
Lowest wage day labourer is
willing to work for
103
Earnings during a good week
387
Earnings during a bad week
164
Source: Blaauw & Pretorius, 2010
The position of informal waste pickers in the broader waste
management system
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
Average nominal daily wage or street waste pickers in Pretoria
2008
Average lowest
income per day
Average highest
income per day
Average weekly
income in the week
preceding the
interview
R19.15
R96.78
R156.35
Source: Schenck & Blaauw, 2011
KEY FACTS ON INFORMAL SECTOR IN SOUTH AFRICA
• Absorbs only a small proportion of workforce by
developing-country standards (Kingdon & Knight, 2001)
• Long-term in nature. Between 1951 and 1991 average
length of an informal-sector job was as long as 10.5
years (McKeever, 2007)
• Those in lower-status jobs in informal sector not likely to
use informal sector as a springboard to formal
employment. This category includes women, lesseducated, inexperienced workers.
• Participants in informal economy achieved a much lower
level of educational attainment. Inhibits their ability to
make some sort of transition into formal economy
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
KEY FACTS ON INFORMAL SECTOR IN SOUTH AFRICA
• Located in markedly different industries from formal
economy. Informal economy is weighted towards tradebased economic activity. Formal economy is located
more in service industries.
• Activities in informal economy not equally distributed
among the provinces of South Africa.
• Monthly income between formal and informal economies
in South Africa is highly unequal in favour of formal
economy. Explains why informal economy is considered
to be a second-best alternative to formal employment.
• Impact of HIV/AIDS pandemic on informal sector is
under-researched. Warrants urgent attention (Saunders,
2005).
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE
6. What can be done to help him to
improve his livelihood from the informal
economy?
THE DETERMINANTS OF MIGRANT WAGES IN SOUTH AFRICA
• BE PRACTICAL
• Shelters with toilet and washing facilities for informal
workers – can form the basis for other social
development services. DONE IN USA
• Assist NGOs that attempt to help day labourers advertise
their skills e.g. portfolios with references, skills training
• Develop inclusive policies
• Municipalities can harness efforts of street waste pickers
by incorporating them in the municipal waste
management system
• promote informal enterprises, improve informal jobs,
protect informal workers, promote the ‘voice’ of informal
workers
THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE