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Contribution of the informal sector
towards sustainable livelihoods:
evidence from Khayelitsha
Township, Cape Town
Sinhle Thwala, Tyanai Masiya and Stellah N. Lubinga
School of Public Management and Administration, University of Pretoria,
Pretoria, South Africa
Abstract
Purpose –This study aims to investigates the contribution of the informal sector towards secure livelihoods.
Using a case study design, the study focusses on Mandela park, situated in Khayelitsha Township, Cape Town,
in the Western Cape province of South Africa. Khayelitsha is predominantly an old township established by the
apartheid government using unjust segregation laws to foster spatial planning that isolated people of colour in
areas with insufficient infrastructure and informal economic activities. Therefore, informal trading became a
survival strategy in Khayelitsha, attracting an increasing number of informal traders in public spaces within
the township in pursuit of livelihoods. Informal activities are generally conducted to generate income and
secure sustainable livelihoods.
Design/methodology/approach –This study uses a qualitative research design, incorporating structured
interviews instrumental in data collection and in-depth thematic analysis.
Findings –The study findings reveal that the informal sector positively contributes to the sustainable
livelihoods of those involved in the informal sector and the relatives of those through income generation, family
support, wealth creation, source of employment, business incubation and innovation and creativity.
Originality/value –The study concludes that given the increasing unemployment rate in South Africa,
caused by the stagnant economic growth rate, policymakers should rethink their policies on the informal
economy, acknowledge the sector’s relevance and support the sector.
Keywords Informal sector, Informal economy, Informal activities, Secure livelihoods, Khayelitsha, Informal
employment, South Africa, Cape Town
Paper type Research paper
Introduction
Although the informal sector is a significant component of the economy that seeks to provide
livelihoods to a sizeable number of workers and informal traders, this sector is consistently
underestimated. Largely missing from economic policy formulation and analysis (Fourie,
2018), the informal sector is frequently associated with precarious employment, social
security, tax evasion and poor governmental support. However, it is also a dynamic industry
that fosters job growth. For example, according to the International Monetary Fund (IMF),
Sub-Saharan Africa (SSA) continues to have one of the highest percentages of informal
economic activity worldwide (IMF, 2017). More than 60% of the world’s employed population
earns their livelihoods in the informal economy. The vast majority of employment in Africa is
at 85.8%, followed by Asia and the Pacific at 68.2% and the Arab States at 68.6%
(International Labour Office [ILO], 2018a,b).
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© Sinhle Thwala, Tyanai Masiya and Stellah N. Lubinga. Published by Emerald Publishing Limited.
This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may
reproduce, distribute, translate and create derivative works of this article (for both commercial and non-
commercial purposes), subject to full attribution to the original publication and authors. The full terms of
this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0144-333X.htm
Received 16 November 2022
Revised 23 February 2023
28 March 2023
Accepted 30 March 2023
International Journal of Sociology
and Social Policy
Vol. 43 No. 13/14, 2023
pp. 90-105
Emerald Publishing Limited
0144-333X
DOI 10.1108/IJSSP-11-2022-0289
Hogg (2020) estimates that, in South Africa, the food business in the informal sector is
worth R87 billion a year and has existed for 10–20 years. Meanwhile, the backroom rental
industry is worth around –just on the residential side –R30bn (US$1,643,556,000) a year in
rental income. Supporting the aforementioned view, Rogan and Skinner (2018) posit that over
2.5m people work in the South African informal sector. According to Stats SA (2022),
employment in the informal sector continues to grow. As of 2022, employment increased by
146,000 persons in the second quota compared to the previous years. As a survival strategy to
secure livelihoods, informal sector occupation is also considered a significant factor in food
security and poverty alleviation (Skinner and Haysom, 2016). Poor people’s logical response
to the burdensome laws gives the economy a vibrant and entrepreneurial spirit with
competition, innovation, efficiency and investment (Schneider, 2005;Misati, 2010). Moreover,
according to a study commissioned by the Organisation for Economic Co-operation and
Development and the International Labour Office [OECD/ILO] (2019a,b), people in rural areas
are nearly twice more likely to be employed in informal jobs than those in urban areas.
Additionally, 78.9% of people with formal jobs live in cities, compared to 60.1% with informal
jobs. Furthermore, informal sector employment has proven to be a survival strategy in
countries that lack social safety nets, such as unemployment insurance, or where wages and
pensions are too low to cover the cost of living.
Based on the aforementioned aspects, the context of the existing potential of the informal
sector (as evidenced in other countries) helps focus on the opposing narratives, such as the
deliberate evasion of regulations and taxation by the informal sector in South Africa.
Alternatively, there should be a shift to navigating, appreciating and supporting the essential
role played by the informal sector in securing sustainable livelihoods. This study seeks to
investigate the informal sector’s contribution towards sustainable and secure livelihood. This
study uses Khayelitsha Township as a case study because of its historical significance in the
context of South Africa. Accordingly, it relies on a qualitative approach and data are collected
using unobtrusive research techniques, such as documentary analysis and interviews.
We believe this study makes two significant contributions to understanding how the informal
sector contributes to the secure livelihood of the poor. It also contributes to the academic
understanding of the role played by the informal sector in stimulating the gross domestic
product (GDP) of an economy, which subsequently creates an enabling environment for
alleviating poverty and unemployment. The study also adds to the understanding of the
informal sector’s contribution to sustainable livelihoods, emphasising its significant role in
reducing vulnerability.
The remainder of the study is organised as follows. The next section describes the
literature and context of the South African informal sector. The following methodology
section presents the findings and discussion. Lastly, based on empirical research, it is
concluded that the informal sector positively contributes to sustainable livelihoods.
Informal sector context: South Africa
There are varying definitions of the informal sector (ILO, 2000). With its roots dating back to
economic efforts of the 1950 and 1960s, the term was first coined by British anthropologist
Keith Hart in 1971 and published two years later in their essay (Hart, 1973) and the ILO’s
Report on Kenya (ILO, 1972). According to the ILO, the informal sector is not limited to
employment outside major cities, specific professions, commercial pursuits or informal
activities. Its norms are characterised by the following aspects: (1) low barriers to entry,
(2) reliance on local resources, (3) family ownership of businesses, (4) small-scale operation,
(5) labour-intensive and adapted technology, (6) skills learnt outside the formal educational
system and (7) unregulated and competitive markets (ILO, 1972). In 1980, because of the
economic crisis, the definition was broadened to include employment, where the informal
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sector was seen as a source of employment alongside open unemployment (Tokman, 1984).
In 1993, the informal sector was defined by the Fifteenth International Conference of Labour
Statisticians (15th ICLS) in terms of the characteristics of the enterprises (production units) to
include all individuals working in at least one production unit of the informal sector,
regardless of their employment status and whether it was primary or secondary (ILO, 1993).
Furthermore, in 2015, the ILO Recommendation (No.204) concerning the transition from the
informal to the formal economy was published; it described the “informal economy”as
referring to all economic activities by workers and economic units that are, in law or practice,
not covered or insufficiently covered by formal arrangements (OECD, 2019b). However,
according to Small and Medium Enterprises South Africa 2022, the formal sector is primarily
composed of one-person companies, small local firms and any unlawful or unregulated
commercial endeavours that are considered a part of the informal sector (SME South
Africa, 2022).
Despite the aforementioned definitions, the intent of this research is neither to trace the
conceptual evolution of the informal economy nor to explore its current state. Therefore, this
study adopts the definition given in the 15th ICLS of 1993. It describes the informal sector as
businesses owned by individuals or households that are not organised as distinct legal
entities separate from their owners, do not have a complete set of accounts, produce some of
their goods for sale and have fewer than five employees (OECD, 2019b;The Republic of
Tanzania, 2019).
According to Hovsha and Meyer (2015), the apartheid legislations and segregation laws
were amongst several factors that gave rise to the South African socioeconomic condition,
which consequently undermined quality education training and entrepreneurial skills
acquisition. Consequently, this led a large segment of the unskilled population to seek refuge
in the informal sector to secure livelihood and reduce the level of vulnerability. South African
socioeconomic conditions are essential to be understood in this historical context. According
to Stats SA (2022), the informal sector is estimated to contribute to almost a third of the total
employment nationally, demonstrating its significanceinreducingpovertyand
unemployment. Furthermore, Delechat and Medina (2020) argue that improving access to
and quality of education is the single most powerful way to lower informality. They also
acknowledge that the informal sector is currently the only viable income source for billions of
individuals globally.
South Africa is the largest country in the Southern African Customs Union, with the
highest margin of inequality. It ranks first amongst 164 countries in the World Bank’s global
poverty database (World Bank, 2022). According to Stats SA’s (2022) Quarterly Labour Force
Survey (QLFS), South Africa reported a 33.95% unemployment rate in the second quarter of
2022. The government’s responsibility to address socioeconomic inequality and poverty must
remain focussed on empowering the most vulnerable individuals who find the informal sector
as an alternative to employment.
Unemployment and growing inequality are likely to have caused significant
developmental challenges in most developing countries, such as South Africa. Despite
having an inconsistent policy that is directly responsible for the plight of the informal sector,
South Africa’s informal sector is smaller than that of other developing countries. Nonetheless,
it is considered a significant source of employment and plays a vital role in household income
(Skinner and Haysom, 2016). For example, while the other countries in SSA have an informal
sector share of 50%, it is estimated to be 17.8% in South Africa (Grabrucker et al., 2018). Stats
SA estimates the informal sector’s contribution at 6% of the GDP (Stats SA, 2014).
Furthermore, evidence suggests that informal retail is an effective medium for poor and food-
insecure households to acquire nutrition (Skinner and Haysom, 2016).
There are many distinct kinds of informal companies throughout South Africa. These can
be categorised according to typical instances of illegal trade, including spaza shops, street
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vendors, hawkers, sellers on the sidewalk and those who operate laundromats and other
small businesses from their homes (SME South Africa, 2022). Among these, street vending is
generally viewed as an everyday activity in the informal sector, representing a sizeable
number of women involved in the informal sector. It is commonly perceived as an essential
survival strategy by informal traders for securing livelihoods, reducing vulnerability,
increasing the capabilities to generate income and ultimately providing household basic
essential needs (Rugutt, 2017).
Various legislations have been enacted over the years to support the informal sector, both
at the national and provincial levels in South Africa. At the national level, National Informal
Business Upliftment Strategy (NIBUS) was the first national strategy to be implemented after
apartheid, aimed explicitly at informal business (DTI, 2014). The Department of Small
Business Development is responsible for governing the NIBUS, which focusses on the growth
of small, medium and micro Enterprises. It aims to assist informal enterprises, help them
grow and aid municipal offices with local economic development (Ramsuraj, 2020).
At the provincial level, several policies pertaining to the informal sector have been
implemented. For example, the Gauteng Informal Business Upliftment Strategy (GIBUS) and
the township economy are priorities in the province of Gauteng. The provincial government
has been able to help the informal economy through financial and non-financial support. For
example, in the financial year 2016–17, over 746 township-based informal businesses were
supported in various ways (Gauteng Province, 2017).
In 2014, the Informal Sector Framework was launched in Western Cape. The Department
of Economic Development and Tourism (DEDT) created the Informal Economy Policy
(DEDT, 2010b), which governs the informal economy in Kwazulu-Natal (DEDT, 2010a). The
two primary goals of the strategy are to abolish regulations that impend the government’s
ability to play a developmental role in the informal economy and establish an environment
that promotes a sustainable economic growth path.
Informal economy and sustainable livelihoods
Sustainable livelihood is a concept and approach that interprets socioeconomic interactions
based on household income and livelihood formation processes and seeks to elaborate social
conditions to understand reality and reduce poverty. The sustainable livelihood approach
highlights the theoretical disconnect between economic growth and poverty reduction while
acknowledging economic growth as an essential component of poverty reduction. The
relationship between the two is not automatic in nature; instead, each depends on the
capabilities of vulnerable groups to benefit from opportunities made available by relevant
structures or institutions. As an analytical framework and macro and micro-analytical tool,
Mensah (2011, p. 12) asserts that “sustainable livelihoods framework posit that households
possess different levels of resources endowment and capabilities, endure different scales of
exposure to the institutions and policies that conditions the environment in which they
operate, and the interaction of these factors determine their livelihood choices and the
consequences differences in welfare outcomes”.
Their study further highlights that poverty reduction cannot be achieved through income
generation alone and various factors influence sustainable livelihoods, such as health,
education and other social services. Thus, it is prudent for the government to consider the
sustainable livelihood approach to determine the constraints that impede poor people from
securing sustainable livelihood and develop measures to support activities that seek to
reduce their vulnerability. Hovsha and Meyer (2015, p. 37) further argue that “income and
employment generation become possible when people are encouraged and enabled to
participate in a diverse range of livelihood activities”. This argument is also enhanced by
Takaza and Chitereka (2022), who posit that a livelihood is sustainable only when people can
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cope with and recover from stress and shocks, maintain or enhance their capabilities and
assets and provide livelihood opportunities to the next generation. Given the aforementioned
agreements, this study concludes that the relationship between the informal economy and
sustainable livelihood plays a significant role in poverty reduction and employment.
In explaining the relationship between these aspects, it is imperative to understand the
heterogeneity of the informal economy regarding the rationalisation of securing sustainable
livelihood through the informal sector.
Hovsha and Meyer (2015) assert that the creation of livelihoods within the informal
economy presents an integral opportunity to contribute to the overall growth in South Africa.
An informal economy tends to be characterised by activities that comprise market value and
can add value to the tax-based hub and economic growth if recorded; it is perceived as a
globally widespread phenomenon (Delechat and Medina, 2020). Steiler and Nyirenda (2021,
p. 3) reveal that, in 2016, the government of Tanzania introduced a framework to incorporate
the informal sector into the government’s planning; this came after the destruction of a street
market in the city of Mwanza and protests by informal traders. The government finally
conceded to the argument, emphasising the significance of informal trading in poverty
reduction and unemployment. Informal traders were permitted to operate and provided
suitable public spaces. Later, in 2018, informal traders were issued IDs and the government
began collecting revenues from licensed traders. This added value to the tax revenue base of
Tanzania (Steiler and Nyirenda, 2021).
The South African informal economy comprises street vendors, spaza shops in public
spaces and other informal activities such as wind-screen washing, car washing and
distributing newspapers on public streets. Informal activities are essential for livelihoods in
developing countries, especially those confronted with high levels of unemployment and
inequality (Hovsha and Meyer, 2015). The vulnerable population tends to find refuge in the
informal sector when seeking survival. The informal sector is generally dominated by the
uneducated, semi-skilled labour force seeking to secure its livelihood (Tshuma and
Jari, 2013).
Research method
This study adopts a qualitative research approach. This approach allows for examining and
untangling the in-depth life experiences of those taking part in the study (Alase, 2017).
Additionally, Busetto et al. (2020) posit that qualitative methods are predominantly
considered with pictures and arguments applied to determine human behaviour and
understand common suppositions. The qualitative research method is ideal for this study
because it assists with answering research questions where quantification is not possible. It
can also help explore the unique complexities of livelihoods. Additionally, adopting the
qualitative strategy for this study provides a more in-depth understanding of the
phenomenon in question and helps determine the informal sector’s contribution to
sustainable livelihoods.
A case study design is employed at Mandela Park, Khayelitsha, Cape Town. This
township was selected because the population is prone to accommodating many black and
previously disadvantaged individuals. According to Stats SA (2011), 98% of Khayelitsha’s
population is black, with 4.9% estimated to have obtained higher education. These people
include young people, women and men who constantly seek means to secure income for
survival and livelihood. Khayelitsha is also characterised by the highest concentration of
informal settlements in the Western Cape and the second highest in South Africa, after
Soweto. Informal trading is an everyday livelihood practice (Even-Zahav, 2016). For most
people living in Mandela Park, informal activities present a legitimate and readily available
way of securing a livelihood.
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A purposive sampling strategy is applied, leading to fifteen informal sector entrepreneurs
being sampled for the study. Representation of sub-sectors within the informal sector is
considered when sampling sub-sectors such as food items, automobile sales and repairs and
services such as car wash. Purposive sampling was selected because of its allowance to
deepen the respondents’engagement and ask follow-up questions to get in-depth insights
into the research phenomenon. Saunders et al. (2016, p. 301) argues that “with purposive
sampling, you need to use your judgement to select cases that will best enable you to answer
your research question(s) and to meet your objectives”. Hence, the selected technique is
relevant to this study.
In-depth interviews were used to collect data. According to Rutledge and Hogg (2020), in-
depth interviews are used to conduct detailed interviews with a small number of participants
and enable the researchers to invest a significant amount of time for each participant,
employing a conversational format. The in-depth interviews were conducted with fifteen
respondents, at which point saturation had been reached.
Thematic data analysis was used to analyse the qualitative data collected from the
respondents through in-depth interviews. Key themes focussed on the informal sector’s
contribution to sustainable livelihoods. Excerpts from the respondent’s transcripts were used
to generate thematic material, which assisted in summarising findings and drawing
conclusions (See Figure 1 below).
Study area
The study was conducted in Mandela Park, Khayelitsha Township, within the city of Cape
Town, Western Cape Province, South Africa. Mandela Park in the Khayelitsha Township
covers 1.86 square kilometres (0.72 square miles) of area (see Figure 2 below). It was
established by the apartheid government in 1986, using segregation laws to demarcate areas
for black South Africans. It has a population of up to 18,747, according to the city of Cape
Town Census 2011 (Strategic Development Information and GIS Department, 2011).
Findings
This study used a qualitative approach to examine the data collected from fifteen people
operating in the informal sector in Khayelitsha; amongst them, 47% were men and the
remaining 53% were women. Averaging between the age of 18 and 60 years old, the majority
of samples were between 35 and 49 years of age. The interviewees were engaged in several
informal occupations, such as selling food items, non-food items such as toiletries, airtime,
clothing and metal tools and service-based informal activities, such as automobile services
and sales, saloons and car wash.
Thematic analysis was used to analyse the collected qualitative data and examine the key
themes of the study, focussing on the informal sector’s contribution to sustainable
livelihoods. After analysing the data, the generated themes included income generation,
family support and wealth creation, employment, business incubation and innovation and
creativity. These themes are discussed in detail below.
Income generation
When asked, what the respondents thought were the contributions of the informal sector to
sustainable livelihoods. Among the fifteen respondents, 14 respondents believed that their
involvement in the informal sector generated income and helped secure their livelihood. They
believed that the income generated from informal activities comes in handy in the fight
against poverty.
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Respondent 1 said, ‘Informal activity has helped me generate income that helped me to raise my
children well by making sure that they go to school and put food on the table’.
Respondent 3 said, ‘I have been able to build a decent house from the money I get through my informal
trading on the streets and also pay school fees for my children’.
Respondent 3 supported Respondent 5’s response by saying,‘It has been very helpful in paying school
fees and buying assets’.
Respondent 8 gave a similar perspective: ‘I used the profit generated from the informal activity to build
my own house in the Eastern Cape and pay university fees for my daughter’.
Source(s): Authors’ compilation
Figure 1.
Research method
flowchart
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Respondent 7 said, ‘during holidays such as Christmas, I can buy food in bulk and clothing for the
children’.
All the aforementioned responses clearly show that, according to the interviewees, their
involvement contributes to securing their livelihoods. This aligns with the sentiments of
Cichello and Rogan (2017), who established that informal traders generate income in Cape
Town to sustain livelihoods.
Family support and wealth creation
Another theme discussed in the interviews was family support. The study found that most
respondents were involved in informal trading to secure livelihoods for their households. The
study further revealed that the income generated by respondents involved in informal
trading is spread across a relatively large number of uses such as education fees, food and
shelter. This is based on the fact that most of the respondents had more than four dependants.
Involvement in the informal sector helped them support their extended families in times of
need. Respondent 7 suggested as follows:
Being involved in informal activities enables me to secure income to meet the needs of the immediate
household and for my late sister’s children.
Respondent 3 also supported this by saying, ‘with the income I generate from the informal activity, I
can look after my children’s essential needs and also send money at home in the Eastern Cape to my
family, mother, and siblings to be able to buy groceries for the month’.
Respondent 6 revealed that through the involvement in informal trading, she managed to secure for
her family; She said, ‘I have solved shelter issues, I no longer pay rent, I built my family a house, and I
am educating my children’.
Figure 2.
Khayelitsha
Township map
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Similarly, Respondent 11 says, ‘The work helped me, especially in educating my children to
college level.’
Furthermore, Respondent 3 confirmed that ‘The business helped me in a way that today my children
have a decent shelter, they never went to bed without food, and I bought a Toyota Avanza for the
business and my family because of the income generated from the informal activities’.
The findings based on the respondents’excerpts reveal the significant role of informal traders
in securing capabilities to provide basic needs for households, particularly decent housing
and education for the children to secure sustainable livelihood and future social security. The
findings reveal that informal traders in the informal sector have the potential to access
resources and assets.
To gain further insights, the respondents were asked to indicate the categories of assets
acquired. The results are given in Table 1 below.
Table 1 depicts that, based on the informal sector earnings, 40% of the respondents were
found to have decent housing. Comparatively, 26.70% of respondents were able to purchase
tools and equipment for work purposes and another 26.70% were able to acquire household
furniture. Only 6.70%, which accounts for one respondent, managed to acquire a motor
vehicle for the business.
Employment
The debate on informal sector employment is whether it should be defined as employment or
not (Oberholster, 2020). The study reveals that another contribution of the informal sector
engagement is that it provides employment and opportunities for those in the informal sector
to offer employment to others in the same area, such as relatives or strangers. For example,
Respondent 11 stated as follows:
This informal activity has enabled me to generate income for my family and also opened
employment opportunities for seventeen full-time people here.
Similarly, Respondent 15 also said, ‘I am grateful for the informal sector because I did not finish school
and I can’t find work, so the sector helped me as I was able to start this business to ensure that I generate
income for myself to increase the capability to provide for my family’.
Respondent 13 also said, ‘I resigned from my previous job because I hated to be treated like a child who
can’t think; I then decided to become my boss’.
This finding demonstrates that the involvement of informal traders enables them to increase
capabilities to reduce vulnerability, subsequently securing livelihoods. To some, informal
trading is viewed as the only way to secure livelihoods because of their level of education,
which renders them unemployable in the formal labour market.
Given the high levels of unemployment and poverty in South Africa, the finding resonates
with Brata (2010), who has positioned the informal sector as a survivalist livelihood strategy.
During a crisis, the informal sector provides a survivalist livelihood strategy undertaken by
Categories of assets Frequency Percentage (%)
Decent housing 6 40.00
Tools and equipment for work 4 26.70
Household furniture 4 26.70
Motor vehicle 1 6.70
Source(s): Authors’compilation
Table 1.
Assets acquired
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laid-off employees and unemployed persons. Accordingly, it enables them to create
opportunities and earn income. According to Hausarbeit (2018), given that the informal sector
helps a large number of individuals earn money and cover their living expenses, it plays a
vital role in a society’s socioeconomic development. This also has a significant impact on
reducing poverty. It also confirms WIEGO’s (2019) statistical brief, which indicated that
informal employment makes up approximately 30% of all employment (less than 5m people)
and approximately 24% of informal employment is concentrated in the eight largest
metropolitan regions in South Africa.
Business incubator
Another finding was that the informal sector acts as a business incubator, providing and
equipping people with business acumen. It is the ability of individuals to understand the
basics of how business is conducted, how to get things done, take over a business and
experiment with different approaches. This also confirms the findings of Williams (2014),
which states that the informal sector is a breeding ground for enterprise creation, where
business upstart-ups test the validity of their business ambitions before deciding whether to
establish a sustainable business. Additionally, the ILO (2002) states that the informal sector
acts as “an incubator for business potential and ... transitional base for accessibility and
graduation to the formal economy”.
As an example of the above, Respondent 14 said,
I became involved in the informal business activities after being introduced by my father, who used
his business to generate income that ensured that our family’s essential needs were met.
Respondent 5 said they were grateful for the experience gained and how far they have come in
business growing up; they said they sold sweets, which has since shaped them into who they are as
they learnt how to deal with problems and come up with solutions.
Respondent 10 stated, ‘My late husband introduced me to the informal business activities, and I loved it
since then and decided to continue even after his passing’.
Respondent 7 explained, ‘I used to help my late husband sell his business when he went to buy trading
stock, and I managed to establish a customer base, which later made me realise that I could start my
business’.
Innovation and creativity
Another theme observed in the interviewee’s responses is that their involvement in informal
activities provided them with the knowledge to be innovative and creative and ensure that
their business thrives. This confirms Audretsch and Feldman’s (2003) views, suggesting that
small enterprises are an engine of innovative activity in specific industries. This same view
was confirmed by the South African National Innovation Survey 2002–2004, which
established that small enterprises stood out as being the most innovative, with an innovation
rate of 39.3%, followed by micro-sized enterprises (9.6%) and medium-sized enterprises
(2.2%) (Booyens, 2011).
As an example, Respondent 5 stated that ‘because most of us selling food items such as meat,
vegetables, fruits, and other perishable food items do not have storage for their products. As a result,
some items get rotten. So, to avoid this, we have to be creative and use traditional means to avoid our
stock from getting spoilt; we joined as a team to rent a space to ensure that our stock does not get spoilt’.
The same sentiment was shared by Respondent 11, that stated that ‘It is not easy to sell meat in a place
that does not have a water supply system and electricity, we conduct our business under difficult
conditions, but we are compelled to find enabling ways to make money for our families’.
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Another respondent 8 stated that ‘involvement in the informal sector activities has made me creative,
where I have been able to add new products to my spaza shop’.
Respondent 7 explained, ‘I used to help my late husband sell his business when he went to buy trading
stock, and I managed to establish a customer base, which later made me realise that I could start my
business’.
Discussion
Based on the study findings, it can be concluded that the informal sector positively
contributes to securing the livelihood of people residing in Mandela Park, Khayelitsha
Township. This concurs with literature from various scholars (e.g. ILO, 2002;Williams, 2014;
Cichello and Rogan, 2017;Brata, 2010;Hausarbeit, 2018;Oberholster, 2020). These studies all
assert that the informal sector contributes to securing livelihoods. In support of this, this
study established that the informal sector contributes to income generation. Most of the
respondents indicated that they were happy with the income generated from their
involvement in informal activities because this income helps in the fight against poverty.
This aligns with the sentiments of Cichello and Rogan (2017), who established that informal
traders in Cape Town generate income to sustain livelihoods.
Furthermore, the study also established that the informal sector creates employment and
offers an opportunity for those in the informal sector to offer employment to others in the
same area. The same finding supports the literature asserting that the informal sector
contributes to employment and retention (ILO, 2011;de Beer et al., 2016;Rogan and Skinner,
2018;Fourie, 2018), and informal employment is a possibly permanent future in regions such
as Latin America and Africa (Biles, 2009). This also confirms WIEGO’s (2019) findings, which
indicated that informal employment makes up approximately 30% of all employment (less
than 5m people) and approximately 24% of informal employment is concentrated in the eight
largest metropolitan regions in South Africa.
Additionally, the research study also established that respondents involved in informal
trading are able to create opportunities for themselves to acquire assets that enhance their
ability to reduce the level of vulnerability and secure a livelihood. The study further revealed
that the income generated by respondents involved in informal trading is also spread across a
relatively large number of uses, such as education fees, food and shelter, based on the fact that
most of the respondents had more than four dependants. According to the respondents, their
involvement in the informal sectorhelped them support their extended families intimes of need.
The study also established that the informal sector acts as a business incubator, providing
and equipping people with business acumen. This finding concurs with the literature,
suggesting that the informal sector is an incubator and promoter of entrepreneurial skills
(ILO, 2002;Williams, 2014).
Additionally, the findings revealed that the informal sector provides those involved with
the knowledge to be innovative and creative to ensure that their businesses thrive. These
findings align with those of Audretsch and Feldman (2003) and Booyens (2011).Kawooya
(2014) confirms that amongst the automotive artisans in Uganda, those who were involved in
the Open-Air project, the senior artisans helped their relatives or friends acquire skills by
hiring them as cheap labour; once they mastered the skill, they were assigned senior tasks
and some ended up opening businesses. This raises important issues regarding how
knowledge and innovation are appropriated by original inventors (Kawooya, 2014).
Conclusion
The findings of this study reveal that the informal sector positively contributes to securing
the livelihoods of those involved in the informal sector and their relatives. This is
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accomplished through income generation, which, in most cases, is used to improve
capabilities and reduce the level of vulnerability. It also aids in the creation of employment
and the acquisition of assets. Moreover, the informal sector is found to act as a business
incubator that provides and equips people with business acumen. Lastly, it provides those
involved in the informal sector to be knowledgeable, innovative and creative, enabling their
businesses to thrive. Therefore, based on these findings, the informal sector’s contribution
cannot be ignored, especially in light of the increasing unemployment rate in South Africa,
caused by the stagnant economic growth rate. Policymakers should rethink the role of the
informal economy and acknowledge its relevance, providing practical interventions to
support and enable those employed in the informal sector.
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About the authors
Sinhle Thwala is Master of Philosophy in Public Administration Student in the School of Public
Management and Administration (SPMA) at the University of Pretoria. His research interests include
informal sector growth and employment creation.
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Tyanai Masiya is Senior lecturer at the University of Pretoria’s SPMA. He holds a PhD (Public
Administration) from the University of the Western Cape. His research focus is on public administration
and public policy, with specific emphasis on public service delivery, citizenship and democracy as well
as local government management. He has also written extensively on constitutionalism, democratisation
as well as transparency and accountability of the state Tyanai Masiya is the corresponding author and
can be contacted at: tyanai.masiya@up.ac.za
Stellah N. Lubinga is Lecturer and PhD Coordinator in the SPMA at the University of Pretoria. She
holds a Doctorate in Administration from the University of the Free State. Before joining the University
of Pretoria in 2021, she was the Head of Academics at the Independent Institute of Education (IIE)
Varsity college Sandton responsible for academic recruitment, student support and lecturer
management. Between 2014 and 2016 she worked as a Senior Head of the Programme at ADvTECH,
focussing on assessment design and quality assurance. From 2011–2014. She was full-time lecturer at
the University of the Free State. She has engaged in research for the past years, publishing and
presenting at local and international conferences. Her research interests are mainly human resource
management, governance, citizen participation and service delivery, but she is always eager to expand
her horizon.
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