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
