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The informal economy in the Southern African Development Community
(SADC): Challenges, recommendations and demands
A briefing paper prepared for the SADC Civil Society Forum and Heads of
State meeting in Mozambique 6 – 9 August 2012.

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General introduction
Founded in 1996, the Ecumenical Service for Socioeconomic Transformation (ESSET) is an
independent ecumenical organization that works for social and economic justice and
transformation against the systematic exclusion and exploitation of the poor. The imperative to
work for socioeconomic justice was understood as working for transformation of socioeconomic
processes, systems and structures so that the quality of life of the poor is enhanced in a
sustainable manner. ESSET’s mission is to advocate for social and economic justice by
committing ourselves to being in solidarity with the poor in their struggles against economic and
social exclusion. Our mission is based on the belief that the post-apartheid economic system has
produced new lines of economic and social exclusion, condemning the poor to the margins of the
economy and society. Our work is thus aimed at challenging social and economic injustices by
supporting poor people’s struggles against material deprivation and political alienation and by
exploring social and economic alternatives in collaboration with grassroots formations of the
poor and unemployed. ESSET’s work is based on values of solidarity, democracy, respect, and
equality and preferential option for the poor and unemployed.
The informal economy challenges and corresponding recommendations and demands presented
in this briefing paper are mainly based on the outcomes of discussions with local and cross-
border traders in five countries, including South Africa, Zimbabwe, Zambia, Swaziland and
Lesotho. The discussions are part of an ongoing participatory research project that ESSET
embarked on in April 2012 to deepen and enhance the collective knowledge of the informal
traders participating in the project and ours about the policy, organizational and political
challenges impeding street and market trade. But first, the paper presents a short overview of the
size and shape of the informal economy with reference to SADC countries.
Overview of the informal economy
The dominant mainstream assumption about the informal economy is that it is counter-cyclical,
meaning that it expands during periods of low economic growth and shrinks during economic
upturns. The limited available statistics on the informal economy, however, paint a very different
picture. It suggest that the informal economy is an important contributor to economic
development in developing countries with reasonable economic growth rates such as Brazil,
India, Kenya and South Africa (Heintz 2006:23). In Kenya, informal wage and own account
workers account for 61% of all non-agricultural work that is counted when the gross domestic
product (GDP) is calculated (Budlender 2011:2) and, in South Africa, more than a third (33%) of
all employed people are informal workers (Budlender 2011:2). In Zambia, 80% of the country’s
workforce is in the informal economy (War on Want 2007:1). A national survey on
Mozambique’s informal economy found that 7.7 million workers were informally employed by

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20051
. It is interesting to note that the informal economy in sub-Saharan Africa excluding South
Africa contributes between 20 and 50% of non-agriculture GDP (Chalmers 2000). In South
Africa, informal employment contributed 7.1% of non-agriculture GDP by 2004 (Davies and
Thurlow 2009). Thus, whilst it is true that work in the informal economy is generally linked to
poverty, thanks to the installation of neoliberal capitalist economic policies on the continent, it is
an important source of livelihood and economic development.
Meanwhile, informal wage employment is said to be more important in South Africa (22.8% in
2004) compared to informal self-employment (14.4% in 2004) (Valodia & Heintz 2008:36),
whereas in Kenya whose economy greatly depends on agriculture, informal self-employment is
relatively more important than informal wage employment (Heintz & Valodia 2008:9). For
example, own account workers or one person owned enterprises accounted for 70% of Micro
Small Enterprises by 2003, providing employment to 1.8 million people (Mitullah 2003:2). In
total, 57% of informal workers do agricultural work (Budlender 2011:2). Similarly, many of
Zambia’s own account or self-employed workers are small-scale farmers (War on Want 2007:1)
When we break down the figures by gender, in Kenya, 58% of men are informal workers
compared to 66% of women (Budlender 2011:2). In terms of informal agricultural employment,
61% are men and 54% are women (Budlender 2011:2). On the other hand, women account for
89% of informal non-agricultural wage work in urban areas and men for 54% (Budlender
2011:2). There are thus significantly more male owned non-agricultural informal enterprises
operating in urban areas than female owned ones. Not surprisingly, more women (58%) than
men (27%) are engaged in informal trade (Budlender 2011:2). Moreover, of the country’s 65%
of women non-agricultural informal workers, 214 500 are street traders and 320 000 are home or
domestic workers (Budlender 2011:3). Similarly, in South Africa, women are more likely to be
informal workers than men – 39% of all employed women are informal workers and 29% of
employed men (Budlender 2011:2). They account for 60.16% of informal employment in
wholesale and retail and 75.73% of informal employment in domestic or homework (Wills
2009:18). Meanwhile, a quarter (25%) of the country’s informal workers are own account
workers or self-employed (Budlender 2011:2). Furthermore, from the 530 000 street traders
recorded by the Labour Force Survey in the second quarter of 2010, 70% are women (Budlender
2011:3). From the evidence we can infer that street trade accounts for a large share of own
account work, whereas a significant number of informal wage workers are in domestic or
homework (900 000 domestic workers were recorded by the LFS (Budlender 2011:3).
Moreover, like in the case of informal wage employment, marked gender differences exist in the
conditions of self-employed or own account workers in the informal economy. For example,
whilst women account for higher rates of participation in the informal trading sector, their
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earnings are generally lower than that of men informal traders, which means that their share of
poverty will be higher, resulting in smaller private savings. To demonstrate the point, in Kenya
and South Africa, men informal traders’ hourly earnings were 74% and 54% the estimate of
average hourly earnings by 2005 and 2004, respectively, compared to women informal traders’
63% and 43% for the same periods (Heintz and Valodia 2008:39). In addition, Very Small Micro
Enterprises, like bigger enterprises, are extremely gendered, meaning that relations between men
and women informal traders are highly unequal, which hold negative consequences not only for
women’s participation in informal trader organizations, but also their access to services.
Finally, the above evidence shows that most workers in African countries fall outside the scope
of labour legislation and so it does not support the argument for labour market deregulation as a
way to create jobs. What is apparent from the evidence is that the informal economy devoid of
legal recognition and social protection is an important source of income and employment for
working age people in African countries. Interestingly, a survey on labour regulations conducted
in 5 African countries found that many firms do not see regulations as a significant barrier to
growth and development (Heintz and Pollin 2008:10). Furthermore, the unemployed will derive
little benefit from underemployed or low wage work, resulting from a reduction in formal wages,
without sufficient compensation. In fact, the losses to individuals in wage work and their families
outweigh the benefits to the unemployed (Heintz and Pollin 2008:9). Job creation through a
reduction of formal wages will only entrench existing high levels of poverty in African countries.
Informal economy challenges
1. The prevailing lack of policy aimed at supporting the informal economy is fueling the
exploitation and marginalization of informal workers, especially women, in African
countries. For example, it enables big retailers to drop their prices willy-nilly in order to
unfairly compete with informal traders in the sale of cheap goods, threatening their
income and livelihood. Moreover, it leaves women informal traders unprotected against
sexual harassment and abuse suffered at the hands of corrupt government officials and
male customers with sexist and patriarchal attitudes.
2. Government provided enterprise development and business support for the informal
trading sector is being undermined by patronage and nepotism, in some countries, and by
a lack of financial assistance, in others. The main beneficiaries are often well established
SMMEs, as a result, the needs of very small informal enterprises that lack physical and
financial capital are being largely ignored.
3. Women informal cross-border traders are often forced to have sexual relations with
strange men in order to meet their transport, food and accommodation needs, which put

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them at risk of HIV infection. Many governments, however, lack HIV and AIDS services
for women informal cross-border traders.
4. In addition, high import duties compromise the earnings of informal cross-border traders,
as it force them to sell their goods at higher prices, thus, reducing the number of sales.
5. The requirements for accessing finance from private banks are generally exclusionary
and insensitive to the economic and cultural conditions of street and market traders,
especially women traders. They are unable to afford the high risk premiums of formal
financial services, such as bank loans and credit. Moreover, because women are most
disadvantaged by the education system in many African countries and generally lack
collateral, women informal traders have fewer opportunities to gain access to formal
financial services than men informal traders.
6. Economic and political structural problems within countries have a knock-on effect on
organization and mobilization in the informal trading sector. In some countries, street and
market traders fear that they will lose their trading spaces, if they embark on collective
action to engage their governments on issues such as rental, maintenance, shelter, storage,
etc. Municipalities often use divide and rule tactics to demobilize street and market
traders. Meanwhile, some governments are being accused by street and market traders of
being more concerned about the taxes that their organizations or associations are
expected to pay than creating an enabling environment for the formation of informal
trader organizations or associations.
7. Finally, informal traders are often excluded from policy formulation processes, especially
at the level of local authorities. And in countries where systems for participatory
governance do exist, public participation is often treated merely as a bureaucratic
requirement, which promotes tokenistic participation. Meanwhile, informal trading
policies generally fail to accommodate the needs of women informal traders.
Recommendations and demands
1. Labour legislation needs to take into account the nature of work within the informal
economy, which includes both wage workers and own account workers. Their lack of
legal protection means that informal economy workers are generally vulnerable to
exploitation by business and government, despite the GDP contributions of their work.
To this end, in accordance with the ILO resolution on the employment relationship
adopted in 2006, which recognizes own account workers, ESSET recommends that, like
in Ghana, governments in the SADC region use the term “worker/s” rather than
“employee/s” in their labour legislation. In addition, they could use commissions of

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inquiry to investigate the dynamics of own account work within their countries in order to
determine the extent of legal reform necessary for accommodating this category of
workers.
2. Flowing from the above recommendation, the informal economy should be considered as
an integral part of the Decent Work agendas of SADC countries. In this regard, ESSET
recommends that governments in the region be guided by the Conclusions concerning
decent work and informal economy adopted at the 90th session of the International
Labour Conference of the ILO in June 2002. Clause 2 of the conclusions read:
“The promotion of decent work for all workers ….. requires a broad strategy: realising
fundamental principles and rights at work; creating greater and better employment and
income opportunities; extending social protection; and promoting social dialogue. These
dimensions of decent work reinforce each other and comprise an integrated poverty
reduction strategy.”
In addition, an integrated approach to addressing the challenges of the informal economy
is required, including
• enterprise development,
• training and skills development,
• social protection (social services and HIV services), and
• the creation of an enabling environment for the formation of organizations or
associations.
3. Governments should consider the solidarity or social economy concept as a vehicle for
fostering pro-poor development that is underpinned by the principles of collectivism,
self-management and participatory democracy. The solidarity or social economy draws
attention to the structural fault lines of the capitalist profit-driven economy.
4. In addition to the above recommendations, informal cross-border and local street and
market traders are making the following demands:
• The strategic plans of SADC countries should be reviewed to include employment
creation and sustainable livelihoods in the informal economy.
• Informal cross-border traders should be exempted from paying tax on goods worth less
than $1000.
• The duty-free threshold for goods imported into countries within the region should be
increased.
• Specific financial assistance programmes are needed for informal cross-border traders.
• SADC countries should establish a uniform legal regime for supporting informal cross-
border trade within the region.

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• More public land with access to basic infrastructure should be made available for
informal street and market trade within SADC countries.
• Government provided enterprise development and business support programmes should
take into account the specific needs of local informal street and market traders.
• The governments of SADC countries should promote and facilitate the participation of
informal street and market traders in the formulation, implementation and review of
public policies, especially at a local level. Moreover, these policies have to be gender-
sensitive.
• The governments of SADC countries should develop targeted interventions for tackling
youth unemployment within the region.
• Representatives of informal economy actors should be included in the delegations of
SADC countries to future Summits.
• The declaration of the Summit should acknowledge the contributions of the informal
economy to economic development and livelihoods within SADC countries.
References
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Brief No1, May 2011.
Budlender, D. (2011). Statistics on Informal Employment in Kenya, WIEGO Statistical Brief
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Charmes, J. (2000). The Contribution of Informal Sector to GDP in Developing Countries:
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