The South African Political Economy: Understanding the South African Informal Economy – The Case of the Minibus Taxi Industry
3.3 Overview of the South African Informal Sector or Economy
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survival reasons” (Barker, 2007; Mashigo, 2010:109). This fails to recognise that large proportions of urban households in South Africa live in both worlds (the formal and informal economies) and regularly enter and exit one or the other. For instance, employees who have been fired or retrenched in the formal economy may seek alternative, although temporary, employment in the informal economy. Thus the day-to-day connections and the connections over the long-term between the so-called two economies need to be explored (Perry et al 2007).
In this context, I now turn to understanding the informal sector or economy in South Africa, a sector that is understood through a complex and often confusing array of terminology as mentioned in Chapter One. These include, in the case of South Africa: black market, casual work, hidden sector, informal economy, informal opportunities, informal employment, informal sector, people’s economy, second economy, and petty commodity production.
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(1996:7), these include, amongst many others, the following: hawkers (fruit, fish, meat or crafts), babysitters, street barbers, garbage searchers, traditional herb collectors, spaza shop workers, car guards and street vendors. This of course is a very limited list. Black people as well are disproportionately represented in the informal economy (Mashigo, 2010). Petersen (2011) argues that
A typical informal worker in South Africa is most likely to: be black; be female; reside in Gauteng, Kwazulu-Natal, Limpopo or the Eastern Cape; be between the ages of 20 to 49; have matric or less; work in an elementary, sales or craftsmanship occupation; be low- or semi- skilled; work in the wholesale, community/social services or construction industry and earn an average income of R1000 or less (in 2000 prices) (2011:13).
As this quotation implies, women are also disproportionately represented. A significant number of women work as domestic workers, street vendors and spaza shop workers, all of which yield low incomes or profits. As Davids (2011:45) notes more broadly within South Africa, “jobs in the informal sector are characterised by a lack of benefits and are mostly non-permanent”. Given this, informal employees are likely to have no formal social protection or security whereas informal self-employed persons are often unregistered including in relation to the national revenue system.
In trying to capture the diversity within the informal sector, (Vosloo, 1994, in Davids, 2011) makes an interesting distinction between legal and illegal informal sector activities;
and Davids (2011) outlines these in a comprehensive and inclusive manner in the case of South Africa. He thus speaks of the following:
i) Legal / socially acceptable:
Producers: self-employed artisans, shoemakers, dressmakers, tailors, craft makers Distributors: hawkers, flee-market traders, petty traders, runners, shebeeners
Services: Taxi-operators, money lenders, musicians, photographers, traditional healers;
ii) Illegal / socially unacceptable:
Producers: dagga producers, counterfeiters
Distributors: pick-pocketers, burglars, robbers, embezzlers, traffickers, black marketers
Services: hustler, pimps, prostitutes, smugglers, credit sharks.
It is interesting to note that taxi-operators, according to this scheme, fall under the legal category. This implies that the taxi industry is legally recognised and is structurally situated in the South African informal economy. Even so, there are still taxi operators that are not
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registered, and they thus operate illegally.
People active in the informal sector in South Africa include employees, employers, and those who are simultaneously employers and employees (owner/operators), with the latter two categories often labelled as self-employed (Petersen, 2011). There are considerably more self-employed people compared to employees. For example, in 2007, when looking at the non-agricultural informal sector, it was estimated that 61% were self-employed while the remaining 39% worked as employees (Davids, 2011:46). It is also argued that the informal economy is considerably larger overall in non-metropolitan areas in South Africa than in metropolitan areas, with about 60% in the former areas (Wills, 2009). It is estimated that there were about 3.96 million individuals in non-agricultural informal employment (by this, meaning involved in informal economic activities) in 2005. However, there was a decline in 2007 to an estimated 3.65 million (Heintz and Posel, 2008). There is no reason to believe that this is a linear decline. For instance, for the July to September period in 2012, employment in the informal sector increased by 112,000 (Stats SA, Q3:2012).
Unemployment remains a major problem in South Africa and it is manifested daily for instance in the case of East London, the study site for this thesis. Hundreds of job seekers daily line up at the entrances of building material shops in East London, in a desperate bid of obtaining piecemeal jobs in the absence of formal employment. Men, including painters, carpenters, builders and bricklayers, sit on the side of the roads or stand near robots in the hope that people – either companies or homeowners – will stop and provide a wage for a day’s work. If employed, the daily labour-wage transaction is highly in-formalised. At the same time, entry into informal economies of any kind is extremely difficult, in East London and elsewhere because of both demand and supply side problems. On the supply side, besides the dubious neo-liberal discourse that non-entry is due to laziness (and is hence voluntary), there are serious deficiencies with regard to access to experience and skills (or human capital) amongst unemployed people (Peterson 2011). Those seeking to enter the informal economy as self-employed or employers also face such barriers as the scarcity of financial resources, physical capital and technology (Blunch, Canagarajah and Raju, 2001; Kingdon and Knight, 2003; Perry et al., 2007; Heintz and Posel, 2008). Kingdon and Knight (2001) also stress the demand side in that the unemployed are deterred from entering because of existing barriers including the sheer competition which often exists and overbearing state regulations at times (minimum-wage regulations and excessive tax burdens for firms that are relatively small)
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