McKeever (1998) reports that in Durban, 40 per cent of hawkers were in informal employment because they lacked the skills required for formal employment. In contrast, a study conducted in Pietermaritzburg by Mayrhofer (2001) found that 70 per cent of traders did not associate business growth with training, while only 30 per cent of interviewed street traders acknowledged the need for training. Owing to low profit levels for training street traders, training service providers in South Africa are reluctant to train street traders (Skinner, 2000b).
Cultural ideas such as „Ubuntu‟ that emphasise common good and a lack of entrepreneurial culture also prevent people from seeking assistance that could build their enterprises into sustainable businesses (Mayrhofer & Hendriks, 2003). Properly targeted education and training of micro-entrepreneurs in their category of trade not only motivates street traders to attend training but also increases chances of business success (Evers & Mehmet, 1994).
3.12. THE IMPACT OF BACKWARD LINKAGES, SUBCONTRACTING AND
forms of social protection or safety nets in times of crisis means that a percentage of informal economy workers, including both self-employed and wage-workers are poor and more vulnerable to livelihood insecurity compared to those working in the formal economy (ILO, 2002).
Utter poverty and livelihood insecurity forces vulnerable groups into exploitative economic relationships and employment relations as an attempt to access business resources to generate livelihoods in the informal sector. Business resources such as capital, stock and mobile stalls or fixed structures require financial investments that the urban poor do not have. Often, the urban poor are already living below the poverty line or earning just enough for basic needs (Unni, 2002; Bhowmik, 2005).
To access these resources, individuals enter into credit relationships with large wholesalers or retailers who supply goods on credit or petty traders are employed by larger firms as commission agents (Bromley, 1978; Dasgupta; 1992b; Bromley, 2000).
Bromley (1978), Gerry (1978), and Dasgupta (1992a; and b), have analysed how the socio-economic structure and employment relations of petty trading in Calcutta, India;
Cali, Colombia; and Dakar, Senegal create livelihood vulnerability by the type of relationship the trader develops with wholesalers and the manner in which the trader is
„employed‟ or sub-contracted to increase sales of wholesalers and large firms.
Dasgupta (1992b) argued that street trader vulnerability was determined by backward linkages or the type of relationship the trader had with the wholesaler. Vulnerability of petty traders to food and livelihood insecurity was influenced by the financial dominance of wholesalers in business transactions with petty traders by controlling credit interest rates and merchandise prices of small scale producers. Petty traders were linked to the wholesaler through credit relations; as commission agents; owner operators and producer sellers (Dasgupta 1992b).
Of the four types of backward linkages, commission traders were better off and could afford $1.85 consumption expenditure per household member per month, although this
meant that the trader had to give up his independence and could not make any decisions regarding his own business (Dasgupta, 1992a: 236). The advantage was greater livelihood security through higher incomes, faster business consolidation and capital accumulation. Ultimately, the relationship that the petty trader had with the wholesaler, type of goods sold and location determined livelihood vulnerability as these had a direct impact on profit levels (Dasgupta, 1992b).
Although Dasgupta (1992b) highlights that capital accumulation is key to business consolidation and livelihood security, Gerry (1978) argues that the capitalist mode of production not only dominates and subordinates petty producers, but also controls the institutional mechanisms that facilitate capital accumulation. Petty traders are denied access to licences, formal credit and contracts even though they have the expertise and skill required to fulfil contracts. Petty traders are only able to reproduce their existing quality of life because they remain trapped in unprofitable trading activities (Gerry, 1978).
In Dakar, most petty producers are excluded from lucrative opportunities owing to quality standards or lack of capital and equipment and many seek employment as sub- contractors and by fitting themselves in to a subcontracting chain. Using the construction industry as an example, Gerry (1978) explains how wealthy, established firms or individuals act as contract brokers, acquire tenders and then sub-contract to petty producers who benefit financially from this relationship. The subcontracted firms may do the work or subcontract to jobbing agents who employ apprentices to fulfil the contract (Gerry, 1978). At each point of subcontracting, middlemen usurp large amounts of the payment while the jobbers and apprentices work for very little or no remuneration (Gerry, 1978). This arrangement allows for maximum profit for large firms, removing responsibility for employment insurance, minimum wages and pension payments while simultaneously subjecting petty producers to marginal incomes (Gerry, 1978).
Exploitation of street traders within the context of capitalism continues when street
newspapers (Bromley, 1978). Street traders become substitutes for hiring staff, but without the legal recognition of formal sector employment such as contracts, right to maternity leave, minimum wage and unemployment insurance. Street traders are used by companies to reduce distribution costs and product prices without social, legal and financial obligations to these disguised wage workers who remain vulnerable to income fluctuations, unregulated competition and livelihood shocks (Bromley, 1978:1365; Chen et al., 2000; ILO, 2002).
Bromley (1978) characterises exploitative employment relations through categories of workers, the commission sellers, dependent workers and workers who engage in a combination of these relations. Commission sellers are either mobile vendors (such as newspaper vendors and ice cream sellers) or operate from kiosks selling company products and keep a percentage of the sales (Bromley, 1978). Workers who depend on individuals or companies to provide the equipment, stall, goods or credit to purchase goods to facilitate economic activity do not keep a percentage or commission on each item sold. For example, a fruit vendor may hire a cart from a wholesaler and obtain fruit on credit to sell during the day, at the end of the working day the vendor pays for hiring the cart, for fruit bought on credit and the five to ten per cent interest on the credit purchase (Bromley, 1978). This type of employment increases wholesaler sales without hiring and paying staff. Commission selling and dependent working are highly unstable working conditions, yet many traders engage in this type of work to earn higher incomes than they would as independent operators, since goods, credit and equipment are easily accessed by renting, compared to larger risky financial investments required to purchase these (Bromley, 1978).