Director of proceedings
All protocols observed
Good morning.
We are gathering here today to reflect on the role of the informal business in our country and province’s economy. Some years ago when street trading was emerging in both developed and developing nations, it was not taken seriously as it was believed to be a temporary retreat for those that had been ejected by the formal sector.
However, the changing global market, which is often torpedoed by sporadic fluctuations similar to those of the recent global financial crisis, has resulted in the tolerance of informal trade as an alternative practice to absorb people who couldn’t find jobs or engage in a formal enterprise.
In view that South Africa wasn’t exempted from the increasing number of people living on this sector, government has responded by looking at policy options that would assist in meeting the expectations of those involved. This is because informal business has curved its own niche in our economy in that it was significantly contributing in the reduction of unemployment in our communities.
It’s argued that if the role of the informal economy wasn’t acknowledged, the actual estimates for the unemployed people in this country would have been around 47,5% compared to the current measure of 25,6%. Meanwhile about 2,1 million people are said to be earning a living through informal trade which is contributing an estimated R160 billion to the national gross domestic product that is in the region of 28,4%
.
Interestingly the majority of participants in the informal economy are men who out of 2,1 million people, make 1,2 million compared to the 857 600 women which could be reflective of the impact of unemployment amongst men who had to switch to informal economy.
At the same time the restricted number of women in this sector could be indicative that the majority of females that could not be absorbed in the formal economy tend to stay at home to avoid risks associated with trading on the streets.
With the number of unemployed people bulging as shown in the 51 000 jobs lost in January 2013 alone, there is a certainty that most of these people will end up absorbed in the informal business.
The dwindling employment opportunities and collapse of demand for South African products in the manufacturing and mining industries has seen sporadic retrenchments in the affected sectors leading to those at the receiving end having no option, but to join the growing army of informal traders gracing our streets, offering a plethora of services and products to members of the public that are also financially stressed due to ever rocketing cost of living.
With the re‐adjustment of the country’s economy to fit in the global markets, especially the shift from commodities to predominantly service industries, it is inevitable that new skills would be required to steer the economy towards the new orientation.
In the process those that couldn’t retain their jobs because of the nature of skills required in the market, would be the first casualties of unemployment and the mining sector has been hard hit by this, especially that besides the shrinking demand for raw commodities, the sector is gradually mechanising which calls for new breed of mine workers for the new rules of the game.
Around 1994 it is estimated that the mines had 1,4 million people in their books and this has scaled down to mere 520 000 in recent years. This implies that those that couldn’t get jobs in this sector and other alternative operations due to new skills requirement were likely to seek livelihood in the informal economy.
While mining and agriculture were shedding jobs, the service industries were steadily growing with more than five million working in the retail and three‐point‐five million in the financial services. The question is whether our education system has prepared the majority of our people for the new industries to be able to seize the opportunities offered by the repositioned economy that is responding to the current global market.
As said above informal trade has been perceived as the poor people’s economic activity that often becomes the alternative source of income for many heads of households that would have either lost a job and was unable to access employment.
The increasing urbanisation where rural residents also flock en mass to the cities and towns in search for `better life options’ contributes to the growth and visibility of this form of social phenomenon. This has forced many governments to develop policies and strategies to cater for informal traders.
Up until 1973 there was no formal or universal descriptive name for informal economy as it was regarded as being insignificant and irritating for both those involved in the formal business and authorities that regarded it as illegal engagement.
However, Keith Hart coined the term informal trade having observed its impact on the economy of Ghana as the capital city of Accra’s experienced increased number of small scale sellers of various items from snacks to household necessities. He then described this form of business as a reference to `people who conduct informal street trading on a small scale, mostly from street pavements and who as group offer large variety of products and basic services to prospective clients’.
In South Africa we have the same experience where informal economy has been growing in lips and bounds and authorities as pointed out above have learnt to tolerate and accept this practice through the formulation of policies for its regulation its operations which complements formal business.
This is changing the public attitude and perception of what this sector is all about in many urban settlements which influence spatial planning for infrastructure and provision of basic services such as ablution facilities and storage for street traders to ensure hygienic distribution of food materials traded amongst these outlets.
Durban has been the pioneer in this regard where through section 152 of the constitution local government authorities are now able to plan and provide for these survivalists enterprises. This has contributed in reducing tensions between and harassment of informal traders by enforcement agencies as was the case with the apartheid government that was oblivious to the contribution of this sector to the economy and social stability.
However, while the more progressive regulations have been promoted to create space for informal business to flourish side by side with formal trade, local authorities have to ensure proper zoning that prevents potential obstruction of free public and traffic movement on the street pavements and exposure to dangerous facilities used by some traders such as gas stoves and other related hazardous materials that could hurt the citizens.
The regulation is for both the good for the traders and indeed residents who are in all respects customers purchasing assortments of items from vendors. In view that most of these products are food stuff, hygiene couldn’t be compromised hence the local authorities had to ensure that public were protected from accessing unclean food materials.
Other consumables like African herbs or traditional medicines have become a prominent feature in the value chain and it’s therefore crucial that some form of regulation is in place to serve the interest of both traders and public.
The adoption of an informal economy policy places both traders and authorities at the centre as it illustrates equitable responsibilities for all parties to ensure smooth and orderly business with the latter having to provide for suitable facilities with all basic needs such as water and sanitation.
Likewise traders have to ensure clean environment through disposal of refuse or waste generated during the cause of business in the designated containers such as rubbish bins.
Having consulted extensively with other stakeholders, Durban had developed informal economy policy as back as 2001 and this has been the reference point for many authorities.
Indeed, the Province of KwaZulu‐Natal took the cue from Durban to ensure there was uniformity in the manner in which the informal economy was being catered for throughout the province. This was because we realised that informal trade was no longer a temporary economic pursuit to alleviate poverty, but had become a permanent activity for many of our people.
These had to be empowered with knowledge to ensure their source of living was sustainable and wasn’t in conflict with the laws of the land and was diversified enough in terms of product or service offering to ensure growth for each participant. Ours has been to recognise that this kind of business is the livelihood of the majority of the people in the base of the socio‐economic pyramid.
We have to ensure they fully understand the tricks of business beyond just being the conduit or distributors of finished goods from formal outlets to street users. Whilst providing jobs and income, the sector, we believe should be encouraged to serve as the entry point for those aspiring to migrate to formal business in the future.
The policy therefore calls for proper planning for trading space, identification of markets for suitable zoning, determination of registration and rental procedures, provision of business and technical skills, funding access and of course health education to ensure acceptable hygienic standards in the designated areas for informal traders.
All these form the package of what we want to see happening in this business and should further create an avenue for participants to identify opportunities in the formal sector using the combination of the experience and training offered while selling on the street to challenge for bigger and more secured business operations.
This was not the case prior to 1994 where there was no protection for those people earning a living in this sector of the economy who were often risking being harassed and arrested with their materials confiscated ad destroyed without the prospect of compensation.
In the process, the policy provides for informal traders to be educated about their rights and responsibilities essential in addressing conflict situations where law enforcement agencies had in the past experienced resistance from traders that refused to comply with the set regulations.
Informed traders like all citizens would be more inclined towards observing the laws and alert authorities if there were incidents of abuse of their rights. At the same time, informed traders would be likely to educate fellow traders about acceptable and unacceptable practices in their trade. We therefore believe that the formulation of the Provincial Informal Economy has been an omen normalise the environment for informal sector to co‐exist with the formal business in our cities and towns.
Today we are meeting as partners in the process of promoting a healthy informal economy in our province where we are reflecting on the progress that had been made since the promulgation of the aboveb mentioned policy in October 2010.
When we christened this framework we were aware that we have to educate our people about its content so that they apply it in their daily engagements with customers. This was crucial as this policy states the rights and privileges enjoyed by the affected parties while at the same time it calls for all to adhere to the rules by internalising the sense of responsibility to ensure harmonious development of our economy where each sector is allowed space to contribute to our socioeconomic transformation.
We made a commitment that through the associations and leadership structures representing informal traders and local authorities we would broaden public awareness through a combination of communication initiatives including interactive sessions such as workshops.
Notwithstanding the challenges associated with the vastness of our province and limited resources required to reach out to each and every corner we are delighted to note that many people have been exposed to the policy and fully comprehend what is expected of them to comply with the regulations to bring about stability in this sector.
However, while appreciating what is being done to embrace the significance of informal trade in our economy we are equally mindful that the sector is being abused by some unscrupulous people that use it to pursue their dastard acts. We are alerted that some people involved in the formal businesses do exploit indigent people who they hire to sell their items on the streets despite that these are licensed traders that should be setting positive precedence to inspire those still considering venturing into formal business.
It’s more likely that when purchasing goods or services from a street vendor, with a belief that we are empowering those trading on the streets we are conversely supporting formal traders who are hiding behind these poor people. This means some of holders of permits to trade on streets are proxies for established entrepreneurs and are acting as fronts undermining collective efforts directed at assisting the real poverty stricken communities.
The danger of this practice is that it frustrates government planning to provide effective and quantifiable support to informal traders that have to be empowered with necessary skills to challenge for space in the highly competitive formal business. At the same time, registration of income levels and categorisation of people according to their socio‐economic profile to enable proper planning and distribution of resources becomes blurred.
Amongst the reasons why people would prefer to exploit informal trade to hide their real socio‐economic status is mainly greediness as those practicing this know very well that selling on the streets is exempted from taxation. Tax evasion is a known act that government continues to deal with, but depriving really poor people space to compete in the informal business with their peers instead of having to face up to already established business people, is completely immoral and disheartening.
These people are not only squeezing an already over‐subscribed market, but by hiring people to sell on their behalf instead of having them working on formal premises creates an opportunity for casual labour where formal labour incentives such as basic salaries and related fringe benefits are not paid to those sell informally on the streets.
This further suffocates the state revenue as the under reporting of actual income to disclose profits outside formal business premises through vending is not exposed to taxation. This denotes that informal economy is not doom and gloomy, especially for those who could manipulate the system.
Informal business could therefore be the most lucrative commercial undertaking for others,especially those specialising in overstocking their formal business outlets, but sell on the streets to earn non taxable income that robs the state the opportunity to collect enough revenue to fund essential services such as education, healthcare and social services. Already our country has a small tax base hence those still fortunate to be still in formal employment or trade are under pressure to pay more taxes to make for people on the economy’s periphery. In addition another concern is that some goods sold on the streets are counterfeits.
The reason why some people prefer not to sell them in their own formal shops, but use poor people to peddle them around is because they are aware of the legal implications if caught. We have seen bogus cigarettes, compact disks, and some food stuffs that haven’t been tested by authorities to ensure their compliance with set quality and safety standards.
The mushrooming of illegal goods by virtue that these are manufactured outside this country, they contribute to job losses and growth in the informal sectors that is not sustainable in the long term. As the custodians of the informal trade we have an obligation to raise hands if we witness illegal practices committed under the pretext of informal economy.
We have to be conscientious and vigilant against tendencies that could sour the image of this sector that has evolved to capture a positive stature and respect that has seen government intervening to ensure its accommodation within the country’s economy. We should not allow dubious acts to frustrate efforts and gains that had been made to bring about dignity and respect amongst those working to make an honest living in the informal economy.
Our policy is designed to assist the poorest of the poor and protect people from being exposed to anti law business practices including exposure to illegal supplies that are prohibited because of their danger to our economy and health of our people generally.
I thank you.
