Firstly, it is relatively small when compared with many other developing countries. This paper provides a detailed quantitative descriptive analysis of the south african informal sector between 1997 and 2006 using the october household survey and the labour force survey data. South africa s labour market has another important distinction. Gendered spaces of informal entrepreneurship in soweto, south. Pdf on dec 1, 2016, jane battersby and others published discussion papers no.
Apr 04, 2017 but, variation within the region is significant. Estimating size of south africas informal economy south. The informal sector is a large part of employment in african cities. The african development bank estimates that the informal sector contributes about 55 per cent of subsaharan africa s gdp and 80 per cent of the labour force. We explore challenges facing south africa s informal sector.
Nine in 10 rural and urban workers have informal jobs in africa and most employees are women and youth. The informal sector in south africa, therefore, should not be characterised as a homogenous sector which can provide freeentry to the unemployed. An informal economy informal sector or grey economy is the part of any economy that is neither taxed nor monitored by any form of government although the informal sector makes up a significant portion of the economies in developing countries, it is sometimes stigmatized as troublesome and unmanageable. Informal employment in south africa 3 contents tables 3 figures 3 executive summary 4 1. Spaza shops, street vendors, car guards and taxi drivers all form part of the informal. We consider the reasons for high informal sector employment in south africa. The distribution of enterprises per unit of population is shown in table 1.
The main link between the informal sector and income poverty, in broad terms, is through its. Small informal sector and high unemployment in south africa 11 4. Pdf on jan 1, 2003, richard devey and others published informal economy employment data in south africa. Employment in the informal sector world bank documents. Pdf informal economy employment data in south africa. Extending pension coverage to the informal sector in africa. A panel data analysis on the formalinformal sector linkages. The informal sector in africa differs in particular from that in latin amer. A regression model to estimate the informal economy was used in this study.
Reinikka, sector directors, africa human development. Slf researchers have conducted primary research in townships in cape town and gauteng. The international labour organization estimates that more than 66% of total employment in subsaharan african is in the informal sector. Coverage is thin partly because traditional contributory pension schemes, which cushion the elderly against poverty in many developed countries, apply only to the formal sector this, but. For example in india and ethiopia, up to 50% of those with jobs are employed in the informal sector. South africas informal sector contributes 8% of the countrys gdp and supports 27%. Apr 12, 2019 in kenya, the informal sector is increasingly making use of mobile applications to record transactions, in order to access finance and banking, which is a possible solution for south africa s. A survey 1 introduction and overview the term informal sector is today widely used in writings on both developing and developed countries. The informal economy in subsaharan africa international. Informal sectortaxation asindicatedearlier,theinformal sector in tanzania contributes about40%togdp. Improving skills development in the informal sector. The project was successful and led to more recognition of gis in upgrading informal settlements.
Schneider 2002 puts the size of informal economy in south africa as a percentage of gdp for the years 19992000 at 28. Durban is credited as being the first city in south africa to develop a policy for street traders. The authors said that britains informal sector represents 10% of gdp. According to the quarterly labour force survey qlfs released by statistics south africa, this is the highest unemployment rate since stats sa started measuring unemployment using the qlfs in 2008. The informal sector in west africa world bank documents.
In malawi the informal sector can include vendors, such as people selling various merchandise such as vegetables. The main african exception is south africa, where the informal sector engages merely 17 percent of workers. We explore characteristics of informal sector employment. Other estimates for the size of the south african informal economy includes an estimate from loots who estimated the size of the informal economy using the labour market approach to be 12. In south africa, new thinking about informal sector and its contribution to local economic development new thinking encourages local municipalities to view informal sector as a key service delivery function municipalities need to balance their regulatory function of the informal sector with the need to. The prominence of the informal sector in most african economies stems from the.
South africa s unemployment rate increased by 0,1 of a percentage point to 29,1% in q3 of 2019. Statistics south africa 2007 estimated nonagricultural employment in the. There are grounds for arguing that retailing in the informal economy as well as. Thus, while the informal sector in south africa is small compared to other developing countries and also subsaharan africa see the comparative analysis of grabrucker et al. Linkages between the formal and informal economy 5. Gis mapping and analysis for informal settlement upgrading. While the informal sector is the forgotten sector in many ways, it provides livelihoods, employment and income for about 2. Apr 08, 2019 south africa s labour market has another important distinction. Urban analysts in the global south are concerned with the failure of african urbanization to resonate with the. Best measured by a household survey such as the general household survey from statistics south africa.
Aug 14, 2014 informal businesses contribute five percent to south africa s gdp, with the sector itself growing in recent years, statistician general pali lehohla said on thursday 14082014. The overall objective of the research reported here is to map organizational. One in every six south africans who work, work in the informal sector. On the one hand, a large informal sector often adds to city congestion, through informal. The economy of south africa is the second largest in africa, after nigeria. Leap investigates the role of the informal sector in the local economy. Informal sector employment and poverty in south africa. This study explores the types of linkages between the informal and formal sectors with empirical research concentrating on labour churning movements between the informal and formal sectors. The informal economy of township spaza shops introduction the sustainable livelihoods foundations formalising informal microenterprises fime project has been conducting ground breaking research into south africa s informal economy. The informal sector, also known as the underground economy, black economy, shadow economy, or gray economy, is part of a countrys economy that is not recognized as normal income sources.
The informal sector serves as both an alternative opportunity and a space for aspiring entrepreneurs. It also finds significant heterogeneity, with informality ranging from a low of 20 to 25 percent in mauritius, south africa and namibia to a high of 50 to 65 percent in benin, tanzania and nigeria. Boxes, figures, maps, notes, and tables are indicated by b, f, m, n, and t, respectively. Oct 08, 2015 informal trading has always played a role in south africa s economy. Informal employment accounts for a smaller share of nonagricultural employment in southern africa 33% in south africa and 44% in namibia relative to countries in other subregions 82% in mali and 76% in tanzania vanek et al 2014.
An analysis of national household surveys sector employers through the intervention of a labour broker, for example, are not likely to receive nonwage benefits e. In 1996, an adaption of the modified method used in brazil was applied in cape town informal settlement upgrading, and it was the first time gis was used in south africa to this effect 3. It also finds significant heterogeneity, with informality ranging from a low of 20 to. Reported earnings from informal sector employees, informal employment in the formal sector, earnings from unregulated businesses street hawkers, spaza shops etc. Why does the informal sector have such a bad reputation, despite employing so many people and representing such a substantial share of the economy.
Dont underestimate the power of africas informal sector in. Informal sector employment and poverty reduction in south africa. We discuss the concept of informal sector employment. This has resulted in many unemployed members of the population joining the informal business sector.
Working paper pdf available december 2016 with 1,530. This multitude of business activity illustrates a thriving informal economy embodying these emergent urban township cities of south africa. Mar 14, 2018 the informal sector is a large part of employment in african cities. Informal businesses contribute five percent to south africas gdp, with the sector itself growing in recent years, statistician general pali lehohla said on thursday 14082014. The workers in this sector also include hawkers, marketers, vendors, artisans, small veranda khondes businesses and cross border traders. The shadow economy in the united kingdom was worth approximately. The challenges faced by informal traders in greater letaba. People who work in the informal sector do not declare their income and pay no taxes on them. The informal sector includes an understanding of various activities which in general terms are referred to own business irianto, 2014. The informal sector, economic growth and the business cycle in south africa. There are few studies on linkages between the formal and informal sectors in south africa.
Braude 2005 estimated that informal sector in south africa comprises between 7 and 12 per cent of the total economy. Econometric models informal sector national accounts shadow economy subsaharan africa. Archived from the original pdf on 25 november 2011. The term includes illegal activities, such as drug pushing and smuggling. Although individual incomes are low stats sa estimates informal. The size and composition of south africa s informal economy using an employmentbased definition of informal work, the number of persons in nonagricultural informal employment in south africa was estimated at 3. Informal trade has grown at an alarming rate in south africa because of lack of employment opportunities in both the private and public sectors. It is invoked to refer to street vendors in bogota, shoeshine workers in calcutta, specialised knitwear makers in modena and producers of fashion garments in new york.
South african economy is both unitary and heterogeneous, and that peoples. Jan 21, 2016 dont underestimate the power of africa s informal sector in a global economy. Pdf while the informal sector in south africa is the forgotten sector in many. In this lesson we discuss the difference between an informal settlement and the informal sector. South africas informal economy sustainable livelihoods. This pdf is made available under a creative commons. With a pervasive informal sector, city governments have been struggling with how best to respond. As a result, extending pension coverage to the informal sector remains achallenge in africa. South africas informal sector african centre for cities. Thesestatisticsshouldbetakenin with caution as some of the participants question the definition used to describe the sector.
Set against the backdrop of south africa s constitutional requirements for local government to provide for the rights of all citizens and for them to benefit equally from services, this cai. Only about three million people who are working about 18% of all employed 16. The informal sector is a versatile and dynamic sector which includes a variety of economic activities. Understanding the informal economy in african cities. This ranges from under 30% in south africa to 60% in nigeria, tanzania and zimbabwe.
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