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The Informal Economy: Current Realities

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A presentation by Caroline Skinner (Researcher African Centre for Cities, / WIEGO Urban Policies Programme Director) at the Informal Trading Summit on March 20, 2013

A presentation by Caroline Skinner (Researcher African Centre for Cities, / WIEGO Urban Policies Programme Director) at the Informal Trading Summit on March 20, 2013

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  • 1. THE INFORMAL ECONOMY: CURRENT REALITIES Informal Trading Summit, 20 March 2013 Caroline Skinner (Researcher African Centre for Cities, / WIEGO Edwards Photo by J Urban Policies Programme Director)
  • 2. Outline Latest statistics - size and contribution of the informal economy / sector Internationally South Africa Approaches to street trading: Comparing SA cities Highlighting Cape Town’s strengths Common elements of ‘good practice’ interventions Conclusion
  • 3. Statistics: International
  • 4. Internationally: Informal Employment …as a proportion of non-agricultural employment is: South Asia: 82% range: 62% in Sri Lanka to 84% in India East and Southeast Asia: 65% range: 42% in Thailand to 73% in Indonesia Sub-Saharan Africa: 66% range: 33 % in South Africa to 82% in Mali
  • 5. Internationally: Informal Employment …as a proportion of non-agricultural employment is Middle East and North Africa: 45% range: 31% in Turkey to 57% in West Bank & Gaza Latin America: 51% range: 40% in Uruguay to 75% in Bolivia Source: International Labour Organization / WIEGO,2013
  • 6. Contribution to GDP The contribution of informal enterprises to national GDP’s in 16 Sub-Saharan countries varied from 58% in Ghana to 24% in Zambia. On average the informal sector contributed 41% to GDP. (Source: Women and Men in the Informal Economy, 2002)
  • 7. What the Statistics Suggest Rather than ‘disappearing’ with development, as was originally predicted, the informal economy is in fact growing. Many people, often the majority, of those who work in countries and cities of the South, work in the informal economy.
  • 8. Statistics: South African
  • 9. StatsSA Definition Informal sector: Employees working in establishments that employ less than five employees, who do not deduct income tax from their salaries/wages; and Employers, own-account workers and persons helping unpaid in their household business who are not registered for either income tax or value-added tax.
  • 10. SA Informal Sector: 2008-2012 2246 2225 2186 2175 Thousands 2150 2172 2213 2179 2197 2205 2160 2134 2109 2109 1993 2106 2085 2009 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 2011 2012
  • 11. SA Informal Sector: By Industry Manufacturing 9% Finance 6% Other 0% Transport 10% Construction 14% Trade 46% Community and Social Services 15% Source: Quarterly LFS, Oct – Dec 2012
  • 12. Race, Gender and Income Race and Gender: Black South Africans and women are over represented in the informal sector. Incomes: Although individual incomes are often low (between R500-R1500 a month), cumulatively these activities contribute significantly to local economies.
  • 13. Contribution: Overall Informal sector contributes between 8 and 10% to South Africa’s GDP. Country wide total expenditure in the informal retail stood at R52 billion in 2004. This compared well with the big retailers. Unlike their formal counterparts, the profits from these activities sustain large number of dependants in households located in poorer parts of our cities and towns.
  • 14. Contribution: Group Specific Street and market vendors are distributors of affordable goods and services providing consumers with convenient retail options. Informal fresh produce traders in Cape Town have been shown to provide better quality goods at lower prices than formal retailers – thus highlighting their role in food security. (ACC research). Waste collectors divert waste from municipal dumps – and thus playing and important role in climate change mitigation.
  • 15. Note the Bias (An aside) 15
  • 16. Street Trade verse the Informal Economy Street trade is the most visible element of informal sector, one that worries councillors, members of the public and thus city officials most. However public space traders are only one component of the informal sector.
  • 17. Street traders verses other informal work
  • 18. Approaches to Street Trading: Comparing South African Cities 18
  • 19. Street Trading: SA City Comparisons During the re-regulation of street trading (following the amendment of the Businesses Act) Cape Town had declared a bigger area than any of the other 4 cities as restricted or prohibited trade zones. Cape Town has far fewer public space traders in general and inner city traders in particular than other South African cities. Cape Town had spent less on street trader infrastructure.
  • 20. Cape Town’s Strengths A small group of dedicated officials who a. understand the sector and b. have institutional memory (other cities have had very high turnover of staff working on these issues.) Institutional location: In economic development – recognising these as economic activities. Interesting experiments with urban design. Introduction of a computerised permitting system – much more efficient.
  • 21. Common Element of ‘Good Practice’ 21
  • 22. Bylaws – The Right to Trade but also Knowledge of Rights Security of tenure – the right to trade ‘If you have a permit you can eat, you trade the way you want to trade, no one is disturbing you.’ This allows risk taking that is key to first securing and then expanding trading businesses. Traders report they are unsure of their rights – highlighting the importance of user friendly versions of the bylaws. (Research shows that confiscation of goods has devastating livelihood impacts – setting business activities back by many months and in some cases destroying them altogether.)
  • 23. Access to Viable Trading Spaces Informal traders like their formal counterparts need ‘passing feet’. Trading facilities that don’t take cognisance of this will lie empty – cases of this across the global south. This entails detailed negotiations with traders and observation / calculating of the ‘trading carrying capacity’ of public spaces. (Are there some missed opportunities? - MyCiti Bus Stops, PRASA redesigns of railway stations.
  • 24. Provision of Infrastructure Provision of essential infrastructure – water and toilets – protects traders and their customers. Provision of basic infrastructure – shelter and storage – substantially reduces stock damage; storage allows traders to increase stock levels. Access to electricity allows for more sophisticated trade. Provision of infrastructure creates more functional and aesthetically pleasing environment for all users of public space.
  • 25. Role of Infrastructure
  • 26. Provision of Infrastructure Are Councils willing to become property managers? Experience suggests that outsourcing this often leads to the exclusion of poorer traders – those who are most in need of trading opportunities.
  • 27. Street Traders as Economic Actors Street traders are one point in a chain of economic activities. Trade in different goods, often have very different infrastructure and support needs (e.g. cold storage and bulk buying for fresh produce trade verses skills upgrading for craft traders.) Understanding where traders fit into this broader set of processes is an important entry point in terms of policy interventions.
  • 28. Collaborative Planning Good practice analysis suggests this is a matter of planning ‘with’ not planning ‘for’ the informal economy. Reflecting on a case of good practice the International co-ordinator of StreetNet said ‘The council afforded informal traders … the opportunity to participate on a sustained and continuous basis in negotiations about their needs … in a low key way, often on an issue by issue basis’.
  • 29. Collective Action among Traders Individually informal traders are weak but collectively they can wield influence. The role of strong, democratically structured informal economy worker organizations– as negotiation partners with the city council but also suppliers – can not be emphasised enough. Self Employed Women’s Association in India – 1.7 million members – is perhaps the best example.
  • 30. Conclusion: An Alternative Vision How the informal economy is managed goes to the heart of our vision for our city. “The challenge is to convince the policy makers to promote and encourage hybrid economies in which micro-businesses can coexist alongside small, medium, and large businesses: in which the street vendors can co-exist alongside the kiosks, retail shops, and large malls. …. Just as the policy makers encourage bio diversity, they should encourage economic diversity” ~Ela Bhatt, Founder of Self Employed Women’s Association and Founding Chair of WIEGO
  • 31. thank you | caroline.skinner@uct.ac.za www.inclusivecities.org; www.wiego.org / www.acc.uct.ac.za.