Self-employment in South Africa’s informal sector: Prevalence, prospects and policy

Abstract

This text describes research undertaken to investigate small-scale self-employment at the margins of the South African economy. Despite high levels of poverty and unemployment South Africa’s informal sector is, by developing country standards, comparatively small. As economic informality is crucial to the livelihoods of many impoverished households, this is not only an issue of theoretical interest but of public policy significance. The research described in what follows drew on an integrated qualitative and quantitative inquiry in order to understand the contribution of informal self-employment to the livelihoods of impoverished households. The study sought to examine the factors that both enable and constrain informal self-employment, as well as state policies and programmes concerned with economic informality. The chapter concludes by discussing a number of policy recommendations intended to enhance the ability of policymakers to appropriately support the livelihoods of the poor. Since being coined almost four decades ago, the nomenclature of the ‘informal sector’ has been used to describe marginal and low-productivity economic activities, often outside the realm of state regulation and taxation (Hart, 1972). More recently enterprise-based definitions of economic informality have been eclipsed by employment-based conceptions, and refer to those who labour outside networks of employment contracts, protections and benefits (Jutting et al. 2007). However, in much the same way as the controversial concept of a ‘second economy’ (African National Congress, 2004), the moniker of the informal sector potentially invokes an overstated dualism. It overlooks the manner in which formal and informal are intertwined, and the manner in which the precarious employment conditions associated with informality are increasingly to be found at the heart of ‘formal’ enterprises and economies. These are increasingly manifest in practices such as outsourcing, casualisation and contractualisation. Although the concept of the informal sector enjoys much continued usage it is a contested and imprecise concept that potentially obscures as much as it reveals.