How informal traders in South Africa contribute to the economy
By John.G Kawamba (Ph.DMkt; MCIM; MIPR; Bsc; Dip.Expt)
The classic South African tv series, Rythim City featured a beloved character named Mamokete Khuse, Bra Kop’s wife. This character typifies the image of our local informal traders in South Africa as she ran a small spaza shop (informal tuck shop trading business). Mrs Khuse, is seen trading in anything from ‘Amazimba’ (Potato Crisps), Fruits, ‘Amagwinya’ (Fritters) and cool drinks as such. Later on in the story, this character passes away however her daughter manages to study medicine as a medical doctor in university through the provisions contributed by Mrs Khuse’s spazashop.
Undoubtedly there are millions of Mr & Mrs Khuse’s in South Africa whose very livelihood and aspirations totally depend on informal trading.
The informal sector, of which informal trading is a major sub-sector, is a giant that is probably not often given the recognition it deserves in so far as its contribution to the South African economy is concerned. The informal sector tends to be known by many names, namely, the black economy, shadow economy, gray economy, and underground economy. The very fact that the sector is known by so many names could point to the indecisiveness or reluctance on the part of people to recognize the very crucial role that the sector plays in the economic development of the world economy including South Africa. Informal traders in South Africa comprise of but not limited to street vendors, spaza shops owners, taxi rank traders in Locations, hawkers, windscreen cleaners at traffic lights, newspaper sellers and other unregistered micro businesses. 1/
Almost 70% of people who start an informal business in South Africa do so because they are unemployed and have no alternative source of income. This was just one of the findings of the Survey of Employers and Self-Employed (SESE) released by Statistics South Africa (Stats SA) .
In its report of 2002 the International Labour Organization estimated the number of people working in the informal sector to be between 2 million to just under 4 million of which 500,000 were street traders9.
In their report The informal sector and economic growth of South Africa and Nigeria: Ernest Etim and Olawande Daramola, project that the South African informal sector would grow at an average rate of 23.59% of GDP per year during the fourteen years between 2011-2025 10 .
Fig 1.1 from Statista Illustrates the after effects of COVID 19 where South Africa experienced a 2% increase in the unemployment rate from the many job losses in the Country.
South Africa went through a series of lockdown including one for twenty-one days following the onset of Covid-19 last year. Overnight hundreds and thousands of people were put out of business which was a disruption to food supply. If it wasn’t for “a national debt relief facility” to these micro business enterprises announced by Minister for Small Business Development Khumbudzo Ntshavheni many informal traders would have found themselves in a precarious situation.
Among other initiatives the Department of Small Business Development (DSBD) quickly partnered with Nedbank to empower 40 000 informal fruit and vegetable traders and help them to restart their businesses with a grant of R1000 each. In total R40 million was laid out to qualifying traders .
Many of the operators in the informal sector have typically been forgners. it is estimated that over 85% of informal stores are run by foreigners. A typical statementby these foreigners has been:
“We come from a place of war and famine and death. Here it is paradise! You have all that you need to make a living, We are prepared to work hard to make a living”.
Informal traders face many challenges, no less one is training to empower them with the right skills to manage their businesses.
A June 2017 report to parliament noted that only 4 400 informal sector operators had been trained10. This is one weakness that needs to be addressed. There are many institutions that have capacity to train informal traders in many skills, among them that is aimed at specializing in the Informal Traders sector is Tjantjello Training Solutions ( TTS ).
Whilst grants and other financial support rendered is crucial, formal training and skills development is the one commodity that South Africa can utilize in its efforts to promote the informal traders in the country.
As the old English saying goes “give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime”
There is no doubt that the South African Government is making strides in supporting and empowering the informal sector in order to maximize its contribution to the national economy. However there is more that needs to be done yet and with the collaborative efforts from both the government and private sector to partner with specialized informal trader training institutions such as Tjantjello Training Solutions (TTS), the future stands to be bright for the economic development of informal traders.
Training programs such as the Tjantjello Training Solutions (TTS) Informal Traders short skills programs that offers several courses in financial management, marketing, customer service, hygene skills etc plays a crucial role in empowering and improving the landscape of the informal trader sector so as to ensure they gradually develop in order transform their businesses to operate in the mainstream economy.
- The informal sector in South Africa: Women street traders in Durban – Part 1, by Nombulelo Siqwana-Ndulo through Consultancy Africa Intelligence’s Gender Issues Unit ( email@example.com
- The informal sector in South Africa: Women street traders in Durban – Part 2, by Nombulelo Siqwana-Ndulo through Consultancy Africa Intelligence’s Gender Issues Unit ( firstname.lastname@example.org
- Kuwait Chapter of Arabian Journal of Business and Management Review Vol. 4, No.6; February. 2015
- The role of informal trading in economic development : the case study of Mtubatuba.
University of Kwazulu Natal, Digital library, by Khumalo, Sakhile Mandlenkosi Siyathokoza
- The sleeping giant-Informal trade in South Africa, by Hippo Zourides. tradeintelligence.co.zaor email@example.com 3/
- How is the lockdown affecting informal traders and spaza shop owners? by Matshepo Sehloho, 8 April 2020
- The informal sector in South Africa: Women street traders in Durban – Part 1, by Nombulelo Siqwana-Ndulo through Consultancy Africa Intelligence’s Gender Issues Unit ( firstname.lastname@example.org
- Organizing in the informal economy; a case study of street trading in South Africa by Shirin Motala, International Labour Organization, Geneva, 2002
- The informal sector and economic growth of South Africa and Nigeria: A comparative systematic review by Ernest Etim and Olawande Daramola, Journal of Open Innovation
- Informal economy/ sector, Institute for Economic Justice, August 2018