Origin and international approaches to the sector an African... · 1. Presentation • Origin and international approaches to the informal sector • Characteristics of the informal

1. Presentation

• Origin and international approaches to the informal sector

• Characteristics of the informal sector • The informal economy in Africa • The informal economy in South Africa • Policy and assistance?

THE INFORMAL SECTOR: AN AFRICAN PERSPECTIVE

• Concept of informal portion of economy - traced back to early 1970s. • Hart (1973) highlighted uncertainty of production activities in terms

of employment and income as distinctive feature of informality • gave rise to the “Dualistic” approach: - Formal opportunities involve earning a wage in modern sector

and is amenable to enumeration by official surveys. Informal income opportunities from self-employment, and which

escape enumeration from official sources – e.g. tax returns. - Original idea adopted + revised by (ILO). Numerous refinements Extension of conceptualisation beyond self-employment to

include casual employees (Muller, 2003: 8). • Further approaches followed


2. Origin and international approaches to

the informal sector

• The Structuralist School: - formal economy reduce labour & capital costs by subordinating

small informal producers & traders. In doing so, they increase competitiveness

• The “Portes” or underground economy approach - ‘downgraded labour’. Receive lower wages, fewer benefits

& experience inferior working conditions compared to individuals employed in the formal economy

• The Legalist School - Rational response to over-regulation. SMMEs can avoid

governmental regulation & bureaucracy, reducing cost and increasing wealth creation in the process (Saunders, 2005)


3. Characteristics of the informal sector

• Play an important role in transitional & developing countries in facilitating successful adjustment to globalisation & structural reforms.

• Provide a means of survival to vast majority of poor and extremely poor workers in a society

• Play a role in unlocking entrepreneurial potential which could become lost in a mesh of formality (Guha-Khasnobis & Kanbur, 2006). HOWEVER:

• Informal workers not protected by law & exposed to certain forms of abuse & exploitation

• Being mostly an urban phenomenon, expansion of informal sector can potentially exacerbate problems connected with slums, congestion, health & environment (Guha-Khasnobis & Kanbur, 2006).


4. The informal economy in Africa

Horn (2008) notes: • 72% of non agricultural employment in sub-Saharan Africa is informal • 84% of women non-agricultural workers are informally employed in sub-

Saharan Africa • Most new employment in Africa is in the informal economy • Informal sector not internally homogeneous • Consists of a self-employed & employee segment. • Informal sector do not serve as waiting area for workers, especially

migrants, while they search for formal sector jobs. BUT • The informal sector in South Africa absorbs only a very small proportion of

the workforce by developing-country standards (Kingdon & Knight, 2001)


5. The informal economy in South Africa

The size of the informal sector in South Africa


Loots (1991), estimated the size of the informal economy as a percentage of GDP to be 12 per cent in 1989.

Informal economy accounted for roughly 7 per cent of GDP in 1999 (Saunders, 2005).

Casale, Muller and Posel (2004) estimated that employment in informal sector has grown by more than 100 000 people each year, or 8 per cent per annum from 1997 to 2003.

Average increase in informal-sector employment of 5.8 per cent between 2001 and 2005 (Barker, 2007).

Braude (2005) estimated that informal sector in South Africa comprises between 7 and 12 per cent of the total economy.

Schneider (2002) puts the size of informal economy in South Africa as a percentage of GDP for the years 1999/2000 at 28.4 per cent.

Statistics South Africa (2007) estimated non-agricultural employment in the informal sector at 18.5 per cent of total employment.

Employment in the informal economy in South Africa by different occupations, October–December 2008


Industry Informal (Thousand) Percentage

Manager 135 2.8

Professional 44 0.9

Technician 164 3.4

Clerk 136 2.9

Sales and services 608 12.8

Skilled agriculture 44 0.9

Craft and related trade 771 16.2

Plant and machine operator

297 6.2

Elementary 1 522 32

Domestic worker 1 049 21.9

TOTAL 4 769 100

Employment in the formal and informal economies by different industries, October–December 2008


Industry Formal

(Thousand) Percentage

Informal (Thousand)

Percentage

Agriculture 380 4.5 348 7.3

Mining 310 3.7 * *

Manufacturing 1 505 18 379 8

Utilities 77 0.9 * *

Construction 538 6.4 567 12

Trade 1 638 19.5 1 330 28

Transport 448 5.3 270 5.7

Finance 1 313 15.7 204 4.3

Community and social services

2 182

26

365 7.7

Private households

-

-

1 288 27

Other - - - -

TOTAL 8 395 100 4 769 100

Employment in the formal and informal economies by educational attainment, October–December 2008


Level of education

Formal (Thousand)

Percentage Informal

(Thousand) Percentage

No schooling 177 2.1 374 7.8

Less than primary completed

518 6.2 855 17.9

Primary completed

271 3.2 426 8.9

Secondary not completed

2 447 29.1 2 111 44.3

Secondary completed

2 872 34.2 790 16.6

Tertiary 2 037 24.3 128 2.7

Other 77 0.9 84 1.8

TOTAL 8 395 100 4 769 100

Average nominal daily wage or income of various informal labour markets in South Africa

Sources: 1 Blaauw & Bothma, 2003; 2 Blaauw et al., 2006: 467; Blaauw 2010

Formal car guards in

Bloemfontein (2001)1

Informal car guards in

Bloemfontein (2001)1

Day labourers in Pretoria

(2004) 2

Day labourers in South Africa

(2007)

R52.5 R33.5 R41.24 to

R50.17

R58 to

R120

Breakdown of tasks expected of day labourers in South Africa, 2007

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Gardening

D igging/ Sho veling

Lo ading/ unlo ading

C o nstruct io n

B ricklaying

B ricklaying assistant

R o o fing

R o o fing assistant

C arpentry

C arpenter assistant

P aint ing

P ainter assistant

P lumbing

P lumber assistant

C ar wash

F arming act ivit ies

Electrician

Electrician assistant

D o mestic wo rk

P lastering

Other

YesNo

Income earned in informal sector in South Africa – some examples Day labourers standing on street corners

Source: Blaauw & Pretorius, 2010

Average (R values – nominal 2007)

Income Indicator Full sample

Lowest wage received for a day’s work 57

Best wage received for a day’s work 120

Lowest wage day labourer is willing to work for 103

Earnings during a good week 387

Earnings during a bad week 164

The position of informal waste pickers in the broader waste management system


Average nominal daily wage or street waste pickers in Pretoria 2008

Source: Schenck & Blaauw, 2011

Average lowest income per day

Average highest income per day

Average weekly income in the week

preceding the interview

R19.15 R96.78 R156.35

KEY FACTS ON INFORMAL SECTOR IN SOUTH AFRICA

• Absorbs only a small proportion of workforce by developing-country standards (Kingdon & Knight, 2001)

• Long-term in nature. Between 1951 and 1991 average length of an informal-sector job was as long as 10.5 years (McKeever, 2007)

• Those in lower-status jobs in informal sector not likely to use informal sector as a springboard to formal employment. This category includes women, less-educated, inexperienced workers.

• Participants in informal economy achieved a much lower level of educational attainment. Inhibits their ability to make some sort of transition into formal economy


KEY FACTS ON INFORMAL SECTOR IN SOUTH AFRICA • Located in markedly different industries from formal

economy. Informal economy is weighted towards trade-based economic activity. Formal economy is located more in service industries.

• Activities in informal economy not equally distributed among the provinces of South Africa.

• Monthly income between formal and informal economies in South Africa is highly unequal in favour of formal economy. Explains why informal economy is considered to be a second-best alternative to formal employment.

• Impact of HIV/AIDS pandemic on informal sector is under-researched. Warrants urgent attention (Saunders, 2005).


6. What can be done to help him to improve his livelihood from the informal economy?

THE DETERMINANTS OF MIGRANT WAGES IN SOUTH AFRICA

• BE PRACTICAL • Shelters with toilet and washing facilities for informal

workers – can form the basis for other social development services. DONE IN USA

• Assist NGOs that attempt to help day labourers advertise their skills e.g. portfolios with references, skills training

• Develop inclusive policies • Municipalities can harness efforts of street waste pickers

by incorporating them in the municipal waste management system

• promote informal enterprises, improve informal jobs, protect informal workers, promote the ‘voice’ of informal workers


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Origin and international approaches to the sector an African... · 1. Presentation • Origin and international approaches to the informal sector • Characteristics of the informal