Emerging from Apartheid's Shadow: South Africa's Informal Economy.

• Author: ROGERSON, C.M.

"Post-apartheid South Africa has seen the emergence of a changed institutional and policy context, which governs the operations of informal entrepreneurs."

Since the late 1970s, issues surrounding the informal economy have become an important research focus for South African scholars.(1) Three recent books have appeared on the subject, a number of monographs treat specific segments of the informal economy and national bibliographies list between 200-300 research investigations on different facets of South Africa's informal economy.(2) This broad range of research seeks to document the origins, growth and workings of South Africa's informal economy and its potential for resolving national problems of burgeoning unemployment and poverty. While policy issues have been at the forefront of much recent South African work on the informal economy, local researchers have not overlooked the contextualization of the South African situation within international theoretical debates of informal economy, informality or informalization.(3)

In this article, I argue that South Africa's informal economy is in the process of coming out of the dark shadows cast by forty years of apartheid planning. The reconstruction initiatives of post-apartheid South Africa, promoting and supporting the development of the small, medium and micro-enterprise (SMME) sector, including the informal economy, have been of major policy significance.(4) A watershed policy shift has occurred from the apartheid period when policymakers either largely neglected the SMME economy or, in the case of black-owned informal enterprise, actively discouraged the SMME economy through negative or repressive measures.(5) Historically, under apartheid, the minority white-run government, at both national and local levels, opposed the informal economy, especially the black informal entrepreneur. By contrast, the new policy objectives of democratic South Africa on both the national and local levels of government, including promotion of job opportunities, poverty alleviation, and local economic development, are beginning to provide official support for developing the SMME economy.

The definition of the informal economy has been subject to considerable scrutiny in South Africa. In terms of official debate, it is conventional to define the informal economy as enterprises not registered for tax purposes. In discussing the informal economy in South Africa, however, a further conceptual distinction drawn between two categories of enterprise is useful. The first category is the "survivalist informal enterprise," which represents activity undertaken by people unable to secure regular wage employment or access to an economic sector of their choice. Generally speaking, the incomes generated from these enterprises, the majority of which tend to be run by women, usually fall short of even a minimum income standard. These enterprises require little capital investment and virtually no skills training and offer little opportunity for expansion into viable businesses. Poverty and the desperate need to survive are the prime defining features of these enterprises. The second category is the "micro-enterprise" or "growth enterprise." These enterprises are very small businesses, often involving only the owner, some family members and at most one to four paid employees. These unregistered enterprises usually lack all the trappings of formality in terms of business licenses, formal premises, operating permits and accounting procedures. Most have a limited capital base and require only rudimentary business skills. Nonetheless, many micro-enterprises have the potential to develop and flourish into larger formal small business enterprises.

The objective of this article is to furnish a brief analysis and review of South Africa's informal economy at this important historical moment. This article focuses on issues relevant to policymaking rather than theoretical debate and upon questions concerning the urban informal economy rather than the rural "non-farm" economy.

This article unfolds through three major sections of discussion. First, the article analyzes key features of South Africa's urban informal economy; through a case study of Gauteng, South Africa's most urbanized and economically important province.(6) The second section addresses the changed national policy environment of post-apartheid South Africa. This section presents a picture of how the informal economy as part of the SMME economy, is emerging out of theapartheid years. Finally, the last section examines certain implications of the new policy environment and key problems and constraints facing the development of informal enterprise.

THE INFORMAL ECONOMY OF GAUTENG: COMPLEXION AND GROWTH

The informal economy is not a new phenomenon in South Africa's urban areas. Despite severe official opposition toward informal entrepreneurs during the apartheid years, a steady growth of the informal economy occurred throughout the "hidden spaces" of all South Africa's urban areas. In Johannesburg, this growth is illustrated by the expansion of communities of informal street traders (hawkers), the operations of illegal beer brewers and sellers of alcohol and the surge of informal transport activities shuttling workers back and forth from their township residences to employment in the inner city factory areas.(7)

Over the past decade, the explosive expansion of South Africa's informal economy has become more evident. Nevertheless, accurate national statistics on the growth and levels of participation in the informal economy are lacking due to the problems of delimiting the boundaries of the informal economy. Moreover, at the provincial level, estimates are particularly weak, and only scattered information exists even for Gauteng.

Gauteng, which includes the major urban centers of Johannesburg, Soweto, Pretoria and the towns of the Witwatersrand, is South Africa's economically most important region. The most recent data suggests that, within Gauteng's population of 7.5 million people in 1998, at least 1.2 million people are active in the informal economy.(8) This means the number of people engaged in the informal economy is substantially greater than the number of people working either in the mining or the formal manufacturing sectors. In this section, I first sketch the major characteristics of the informal economy and informal entrepreneurs, and second, examine the key processes that are shaping the growing and evolving informal economy.

The Complexion and Composition of the Urban Informal Economy

Race is the first critical factor in the workings of South Africa's informal economy. Historically, opposition toward the informal economy in South African urban areas was linked to racist policies of influx control, which sought to deny black Africans the right of permanent residence in the so-called "white" cities. In terms of the current racial composition of entrepreneurs, Black Africans are overwhelmingly the major community in Gauteng's informal economy.(9) Black Africans occupy a host of niches in the urban informal economy, including sidewalk street traders, taxi drivers, hairdressers, and small-scale manufacturers. Presently, involvement of white and colored persons in the informal economy is relatively small, although, white participation in the informal economy has surged with the proliferation of flea markets in the Johannesburg area. For Indian entrepreneurs, participation is confined to a set of highly controlled and lucrative informal niches, such as flower selling.(10)

Another increasingly important feature of the Gauteng informal economy is the trend towards the internationalization of its participants. After the end of apartheid, South Africa has experienced a considerable flow of international migration. Since the early 1990s, groups of international migrants from Asia (Pakistan, China, Taiwan, India, Korea), Central and Southern Africa (especially Zimbabwe, Zambia, Democratic Republic of Congo), and increasingly West Africa (Nigeria, Ghana, Senegal) have established a significant number of new informal businesses. Immigrant entrepreneurs from sub-Saharan Africa represent a new and critical element in the informal economy of Gauteng, and post-apartheid South Africa. In general, the key activities in which they are involved are street trading, the production of clothing and motor vehicle repairs.(11)

The rapid growth in Gauteng's informal economy in recent years is made visible by a statistical comparison of this type of activity in the central areas of Johannesburg for 1979-1980 with the same in 1999. Surveys undertaken at the end of the 1970s reported figures of some 200 to 250 hawkers regularly trading in central Johannesburg. Similar surveys undertaken nearly two decades later estimate a population of some 15,000 street traders.(12) Such change means that in South Africa's inner cities and central business districts, sidewalks are lined with hawkers, and empty lots are rapidly transformed into informal markets.

The informal economy is evident in a host of new street or sidewalk-centered activities, flea markets, hawkers, taxi drivers, street barbers, shoe shiners and prostitutes; the proliferation of home-based enterprises, child-minding, spazas (retail outlets), shebeens (liquor outlets), backyard or garage workshops/repairs, hairdressers, video showing; and a small number of increasingly formalized ventures located at fixed business premises, such as small-scale manufacturers, hairdressers, liquor taverns. Small clothing manufacturers and service enterprises, most notably hairdressing salons, dominate the inner city micro-enterprise population. The importance of home-based enterprise is especially in townships and areas of informal settlements. For example, in the East Rand townships of Daveyton, an estimated 85 percent of informal enterprise are home-based.(13) Expanding levels of urban farming on peripheral vacant...