RESEARCH REPORT AND DISCUSSION DOCUMENT:

LOCAL GOVERNMENT ENGAGEMENT WITH THE INFORMAL ECONOMY

6 November 2018

Prepared for: South African Local Government Association (SALGA)

By: TMHM Consulting

Contributors:Dr. Koech K. CheruiyotOlga KomaSeyco ManyakaMamokete MatjomaneThembani MkhizeDr. Tanya Zack

‘The challenge is to convince the policy makers to promote and encourage hybrid economies in which micro-businesses can co-exist alongside small, medium, and large businesses: in which the street vendors can co-exist alongside the kiosks, retail shops and large malls….they should encourage economic diversity. Also, they should try to promote a level playing field in which all sizes of businesses and all categories of workers can compete on equal and fair terms’ Ela Bhatt, founder of SEWA, the largest trade union of informal workers in the world (Chen, 2018:44).

Table of ContentsSECTION ONE: A POLICY IMPERATIVE....................................................................................................4

1. Introduction: the imperative to embrace the informal economy in South Africa..........................4

SECTION TWO: DIAGNOSTICS................................................................................................................7

2. The Informal Sector: size, nature and contribution........................................................................7

2.1. Introduction................................................................................................................................7

2.2. Definitions...................................................................................................................................7

Box 1: International Conference of Labour Statisticians Definitions.....................................................7

2.3. Trends and Signposts..................................................................................................................8

2.4. Disaggregating the informal economy and the informal sector..................................................8

Formal and informally employed workers in South Africa 8

Employment status in the informal sector 9

Breakdown of informal sector by industry 9

2.5. Analysing the informal sector by province................................................................................10

Workers in the Informal Sector sub-nationally: Provinces 10

2.6. The informal economy’s impact on poverty and marginalisation.............................................12

3. Debunking myths associated with the informal economy...........................................................13

4. Responses to the informal economy: Getting to R204.................................................................14

4.1. Challenges of managing informality..........................................................................................14

4.2. Recommendation 204: Transition from the Informal to the Formal Economy..........................15

SECTION 3: THE ROLE OF THE STATE...................................................................................................17

5. The South African state and the informal economy.....................................................................17

6. South African local government and the informal economy........................................................19

6.1. Local government struggles to integrate the informal economy..............................................19

6.2. Local government has an obligation to enable ‘the right to the city’........................................20

6.3. Local government is obliged to engage meaningfully with informal workers and economic units 21

6.4. Local government is obliged to integrate foreign nationals in the informal sector...................21

SECTION 4: POLICY GUIDELINES FOR AN ENABLING LOCAL GOVERNMENT APPROACH TOWARDS THE INFORMAL ECONOMY.........................................................................................................................22

7. Carving an enabling local level policy...........................................................................................22

7.1. Governance - poising local government for enabling inclusionary economic development.....22

7.2. Planning.....................................................................................................................................23

7.3. Conducting a review of regulations...........................................................................................23

7.4. Improving access to economic infrastructure and land.............................................................24

7.5. Enhancing the productivity of and returns to the informal sector............................................24

7.6. Improving Social inclusion.........................................................................................................25

8. Resolutions: Local government position on the informal economy.............................................25

8.1. A Local Government Declaration on Enabling the Informal Economy.......................................26

8.2. Detailing the approaches..........................................................................................................27

Local authorities commit to: 27

An economically informed approach that mainstreams the informal economy within an inclusive economy. This entails: 27

A participatory approach 27

A Constitutionally aligned and rights-based regulatory approach. This entails: 27

A strategic and area based approach to planning and infrastructure development 28

An approach that supports the growth and productivity of the informal sector 28

A knowledge based and knowledge sharing approach: 29

9. References...................................................................................................................................30

SECTION ONE: A POLICY IMPERATIVE

1. Introduction: the imperative to embrace the informal economy in South Africa

SALGA asserts that there is a national economic imperative to embrace and enhance the productivity of informal work across the country.

The global recession has provoked renewed interest in informal economic activities. The informal economy plays a vital role in providing income, employment and livelihood to millions of people across the world, particularly in the global south (International Labour Organization, 2018). It should therefore be an important concern for government policy that seeks to increase productivity, create new jobs and address poverty.

In South Africa where unemployment and inequality dominate the economic landscape and threaten political stability and social cohesion, it is imperative that equitable development be a central goal in economic and planning policy at all levels of state. Such an approach must necessarily grapple with the crucial role of the informal economy and with unleashing its potential to be part of the solution to our economic crises. This is both economically and legally necessary. Because, to dismiss the informal economy, is effectively to advance inequality, exclusion and marginalisation. And that is to breach the right to work and the right to a livelihood.

The South African informal economy, while comparatively smaller than that of other countries in the global south, accommodates roughly a third of the workforce. It is a persistent feature of the country’s labour market but remains outside the state’s protection and regulation. It provides livelihood opportunities through various activities including informal trading, small scale construction and social services.

The informal economy is associated with innovation, improvisation, innovation and opportunity but also low incomes, marginalisation and exclusion. In South Africa it has been the site of development, but also of conflict and of repression. The risk of inaction or worse, repression of the informal economy is that it pits local government against the most vulnerable of its population.

Simultaneously, local government is challenged by the competing realities that the informal economy presents. On the one hand it offers economic opportunity, and it gives expression to the rights of people to create their own livelihood. On the other hand it can stress local infrastructure and increase contestation, particularly in public space.

The informal economy is a local government matter. It implicates several local government responsibilities and it highlights the complexities of urban governance. It is the obligation of local government is to support local economic development; promote integration and inclusivity; and to protect the rights of individuals to economic activity. But it is complex to integrate economic activity that is not yet adequately covered or regulated, within local government planning, frameworks and regulations. Local government regulations affect the rights, location and nature of informal business; municipal infrastructure and public space.

It is incumbent upon South African local authorities to respond to and guide informal economic activity in their local areas in ways that are socially just and developmental, that ensure the

1

resilience and improvement of cities and towns, and that balance the needs of multiple sectors and stakeholders. This position paper proposes a policy position to be adopted by local authorities to do that. The paper examines the scale and nature of the informal sector in South Africa. It also outlines the role of the state, with social attention to the legislative responsibilities of local government. And it notes the jurisprudence in relation to the local state and the informal economy. It further outlines the challenges that face local government in engaging with the informal sector. The paper then provides guidelines for local government’s engagement with the informal sector.

This paper calls for local government to adopt the following position statement

SALGA POSITION ON LOCAL GOVERNMENT ENGAGEMENT WITH THE INFORMAL ECONOMY

GIVEN THAT:

The informal economy employs roughly one third of South Africa’s workforce

And that the informal sector contributes 5.9% of GDP

And that the informal economy and sector are a disproportionate source of employment for women.

And that the informal sector contributes to poverty reduction

And that informal work is prevalent across the country and that it is most prevalent in urban informal settlements, townships but also rural and tribal areas

AND GIVEN THAT:

Several functions of local government have direct impact on how well or badly the informal economy performs

And that local government has mandates to govern, plan for, provide services to, protect the rights of but also regulate the impacts of the activities of informal workers and economic units

LOCAL GOVERNMENT RECOGNISES THAT:

The informal economy is work.

The informal economy is a crucial component of the local economy in South African cities, towns and rural areas.

Informal economic activity creates jobs and opportunities, especially for vulnerable populations.

Local government has an important role in enabling the informal economy.

Local government must provide a conducive environment for the informal economy through the way in which it governs, plans, regulates, invests in infrastructure and urban space, supports SMMEs and furthers social inclusion.

To this end local government RESOLVES THAT:

Each municipality must align its own structures, plans, budgets and programming to achieve the benefits of inclusive economic development.

Each municipality must proactively create the conditions conducive to the productivity of informal work so that the sector can grow the quality and quantity of jobs it generates and can contribute to sustainable economic development and improving quality of life.

Each municipality must provide the space and opportunity for informal business to thrive and grow.

AND LOCAL GOVERNMENT COMMITS TO THE FOLLOWING APPROACHES TO ENABLING THE INFORMAL ECONOMY:

An economically informed approach that mainstreams the informal economy within an inclusive economy

A participatory approach

A Constitutionally aligned and rights-based regulatory approach

A strategic and area-based approach to planning and infrastructure development

An approach that supports the growth and productivity of the informal economy

A knowledge based and knowledge sharing approach

SECTION TWO: DIAGNOSTICS

2. The Informal Sector: size, nature and contribution

2.1. Introduction

SALGA notes that the informal economy is significant in scale and in its impact on the lives and livelihoods of poor South Africans. It is a necessary component of the economy that gives access to large numbers of people who would otherwise be completely excluded from the means to earn a living.

The informal economy employs roughly one third of South Africa’s workforce with the informal sector contributing 5.9% of GDP (StatsSA 2014a, Peberdy, 2018). This is a substantial contribution to a country whose unemployment levels are currently at 27% (QLFS, 2018:1).

2.2. Definitions1

There is considerable confusion about who and what activities are included in the informal economy or sector.  The International Conference of Labour Statisticians (ICLS) has approved international statistical definitions of the two distinct but related concepts.  These norms are reflected in box 1.  

Box 1: International Conference of Labour Statisticians Definitions

informal sector (enterprise-based definition) refers to the production and employment that takes place in unincorporated, small or unregistered enterprises (1993 ICLS)

informal employment (worker-based definition) refers to all workers not covered or insufficiently covered by formal arrangements through their work, including,

● own-account workers and employers in informal sector enterprise

● employees who do not have labour rights (such as not receiving social insurance

through their job or the right to vacation or sick leave, whether they work in informal or formal enterprises or households.) 

● unpaid workers, including family workers, own use producers, volunteers and

trainees (2003 ICLS)

informal economy refers to all units, activities, and workers so defined and the output from them.

Statistics South Africa applies ICLS norms, defining the informal sector as having the following two component two components:

i) Employees working in establishments that employ fewer than five employees, who do not deduct income tax from their salaries/wages; and

1 Source: Skinner et al 2018.

ii) Employers, own-account workers and persons helping unpaid in their household business who are not registered for either income tax or value-added tax. (2018: 17).

This is in contrast to informal employment which is defined as all people ‘who are in precarious employment situations, irrespective of whether or not the entity for which they work is in the formal or informal sector’.

The primary focus of this process is the informal sector. This is due to the fact that local government has far greater direct jurisdiction over work in the informal sector that for informal work in the formal economy and in households.

The informal sector covers businesses that are not registered for income tax or value-added tax (VAT) and have less than five employees (StatsSA 2014b). StatsSA’s data collection follows this official definition of the informal-sector and of informal-sector employment as comprised of the following:

Employees working in establishments that employ less than five employees and who do not deduct income tax from their salary/wages;

Employers, own account workers and persons helping unpaid in their household businesses that are not registered for either income tax or value-added tax.

By contrast, the informal economy is more encompassing as it covers all persons whose livelihoods are in the informal sector (as above) as well as those who depend on precarious employment in the formal sector and in private households; (Peberdy 2018). This aligns with the ILO (2015:4) definition of the informal economy which includes “all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements”. This does not cover illicit activities, i.e. provision or production, sale, possession or use of goods, drugs, firearms, trafficking in persons, money laundering that are legally forbidden by relevant international treaties.

The major focus of this paper is on local government engagement with the INFORMAL SECTOR.

2.3. Trends and Signposts

Comprising 17% of total employment, it is relatively small compared with other countries but is still a significant employer. The South African informal sector is a significant avenue for poverty alleviation as well as employment creation and retention (Cichello and Rogan, 2017).

2.4. Disaggregating the informal economy and the informal sector

Formal and informally employed workers in South Africa

Of more than 15 million employed2 South Africans in labour market, informal workers constitute approximately a third (30%) of the total workforce. Of these, 2.9 million work in the informal sector.

Employment status in the informal sector

The informal sector comprises three distinct types of employment status – own account workers, employers, and employees. In 2018 - of the approximately 4.9 million persons who are employed in the informal economy of South Africa, 64% (about 3.1 million people) are informal employees; 28% are self-employed and work independently; 7% are informal sector employers and 1% help out in a household business without being compensated. The statistics show that thee is a relatively small number of employers, who employ a significant number of people in the informal sector. And that most informal sector workers are own account workers – they are self employed. This is illustrated below:

3163511.2; 64%

336396.3; 7%

41450.7; 1%

1400944.2; 28%

Informal employeesInformal-sector employer Informally, helping without pay in a household businessOwn-acount workers

Figure 1. Informal employment by status in employment at the national level.3

Females employed in the informal sector

The 2018 Q1 data shows that 44% of total informal employment in South Africa is female, and the same is true of the total female workforce in informal employment.

Breakdown of informal sector by industry

The informal sector is characterised by substantial diversity. Rogan and Skinner (2018) note that informal sector employment in South Africa (that excludes those working in agriculture) is driven by four main economic activities – wholesale and retail trade (42%); construction (16.6%); community, social and personal services (16.4%); and manufacturing (9%).. This is illustrated below:2 The total/exact number of employed is 15 334 190. 3 For gender, age and racial composition of the informal sector, refer to annexure 1D

3399.6; 0%

239569.9; 8%

5267.8; 0%

495677.8; 17%

1123194.7; 38%

291808.2; 10%

276478.6; 9%

532859.1; 18%

Informal-sector employment per main industries

Mining Manufacturing Electricity Construction Wholesale & retail TransportFinance Community

Figure 2: Informal sector employment per main industries.

2.5. Analysing the informal sector by province

Workers in the Informal Sector sub-nationally: Provinces

Based on their analysis of the informal sector employment by province over the 2008 – 2014 period, Rogan and Skinner (2018: 94) note that “provinces with comparatively large informal sectors are Limpopo, Mpumalanga, Eastern Cape and KwaZulu-Natal, where between 20% and 30% of total non-agricultural employment is in the informal sector.”

The figure below shows the industry breakdown (%) of the informal sector for each province. Trade comprises a significant component of the informal sector in the Free State (48.82%) and in Mpumalanga (46%) compared with the Northern Cape (where only 23.3% of informal sector employment is in trade). Community services account for more than 20% of informal sector activity in the Eastern Cape, Northern Cape and Northwest. Construction is most significant in the informal sectors of Limpopo and the Eastern Cape.

Western ca

pe

Eastern Cape

Northern Cape

Free State KZN

North W

est

Gauteng

Mpumalanga

Limpopo

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

10% 7% 11% 8% 11% 6% 6% 7% 10%

13% 20% 11%9%

16%15% 16% 16%

22%

31%37%

23%49% 34%

34% 38%46%

41%10%

15%

7%

12%9% 13% 10%

6% 7%12%

5%

19%

7%8% 9% 12%

9% 7%24%

16%26%

15%22% 21% 17% 15% 14%

Industry Breakdown (%) of the Informal Sector per Province

Mining Manufacturing Electricity ConstructionWholesale & Retail Transport Finance Community

Fig. 3: Industry breakdown (%) of the informal sector for each province

Cape Town

Mangaung

eThekwini

Eastern Cape provin

ce m

etros

Gauteng province

metro

s0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

11.4% 8.1% 11.1% 8.3% 5.9%

15.2%7.7%

16.0% 16.1% 16.0%

29.3% 46.0%38.4%

32.0% 37.0%

13.5%15.2% 10.2%

12.4% 10.7%

9.7%9.0% 4.9%

11.1% 12.7%

20.9% 14.1% 19.4% 20.3% 17.3%

Mining and quarrying Manufacturing Electricity ConstructionWholesale & retail Transport Financial Community

Figure 4. Informal employment per main industries in the metros

While much of the informal sector activity in metros centres on informal trade, there is relatively little manufacturing in this sector. This may point to low skills and low levels of artisanal training as well as a consumption driven economy.

2.6. The informal economy’s impact on poverty and marginalisation

The informal sector is a significant source of employment for the poor, it generates jobs, it offers well-located access to low cost food, and it is a source of employment for women, youth and migrants.

Informal self-employment contributed about 5% of total earnings from all employment in South Africa (Cichello and Rogan, 2017). Chen (2018) notes that the low share of self-employment in South Africa is surprising given the high levels of poverty. This matters as 70% of self-employment occurs in the informal economy.

Informal enterprises generate an average of three jobs – the same number as small formal firms. SoAP (2014)

The informal sector caters to vulnerable populations. Rogan and Reynolds (2015 in Cichelo and Rogan, 2017) found that about 41% of workers (both the self-employed and employees) in the informal sector were below the poverty line in 2012 (compared with 17% of workers in the formal sector) and that about 37% of the working poor in South Africa are from the informal sector.4

In 2012, formal sector earnings constituted 63.5% of the national total income but accounted for 42.6% of poverty reduction whilst social grants constituted 7.1% of total income but accounted for 20.9% of overall poverty reduction. Much more overall income comes from formal employment than from informal employment in South Africa. Formal employment also counts for a larger percentage of poverty reduction. But informal sector self-employment nevertheless accounts for a very significant amount of aggregate poverty reduction in the country. (ibid: 22).

Studies show that the informal sector contributes significantly to food security. In the first instance it is a source of income for the poor, which enhances access to food. Secondly the urban poor continue to choose to source their food in the informal sector (Steyn et al. (2013) in Skinner and Haysom, 2016). Thirdly these sources offer fresh often more wholesome foods than might be sourced at supermarkets, in more accessible locations than supermarkets do (Battersby and Peyton, 2014 in Skinner and Haysom, 2016)

The informal sector is an avenue of employment for local and foreign migrants. ‘The labour force statistics are unlikely to adequately capture international migrants - especially undocumented migrants, asylum seekers, and refugees - who are largely excluded from the formal labour market and have little choice but to create their own employment (Crush et al., 2015). But the role of migrants in the economy generally and the informal economy in particular has not been positively recognised in policy. Rather the focus if any on their economic activities has been on regulation and registration (ibid).

The informal sector is crucial in South Africa’s quest for addressing poverty. At the same time, ut it should not be assumed that the informal sector is a buffer against economic recession. In fact Rogan and Skinner’s work show otherwise. They show that the informal sector has actually shrunk during economic recessions. And Cichello and Rogan (2017) caution policymakers against seeing formal sector jobs as the only way to address, if not redress, poverty, and view informal sector jobs as a problem to be solved though formalisation. Informal sector employment is quite potent at reducing poverty (despite the smaller number of informal sector

4 The informal sector and its contribution to food security is contained in annexure 1F

jobs and very low earnings in the informal sector). The authors suggest that policymakers focus on building the capabilities of informal sector enterprises rather than assimilating them within the formal economy (ibid.: 1).

3. Debunking myths associated with the informal economy

SALGA contests the myths that surround debate about the informal economy and upholds the factual contribution that this component of the economy makes.

There are a number of myths associated with the informal economy and these have been demystified over time using available data and research findings (WIEGO, 2015):

Myth 1: There are no linkages between the informal and formal economies: This suggests the economy is divided into the formal (first economy) and informal (second economy) segments (Chen, 2012; WIEGO, 2015). But on the contrary - there are strong linkages between informal and formal sector where the informal sources supplies from the formal businesses. In addition informal business attracts customers who also shop at adjacent formal shops. Shopkeepers in the Johannesburg CBD expressed a high level of interdependence for customers between shopkeepers and street traders (Zack, 2017)

Myth 2: The informal economy will eventually disappear with economic growth: Some parts of the informal economy might expand or decline with economic growth and that is the nature of its mechanisms. Evidence however continues to show that the informal economy is growing in many parts of the world even when there is economic growth (ILO, 2018).

Myth 3: The informal economy is constituted by entrepreneurs who deliberately avoid regulation and taxation: The majority of those work informally earn too little to qualify to pay income or business tax. They pay VAT on many of their inputs. Many informal operators would be willing to pay local levies in return for security of tenure.

Myth 4: Informal economy represents unfair competition to formal firms: The fact is that many informal operators directly or indirectly pay some fees to government in order to operate. For instance, the goods that the informal workers source from the formal sector include value added taxes (VAT) and some operators pay operating fees to the government. And while informal and formal operators may sometimes clash over access to space (e.g. when street traders trade in front of shops), they often work cooperatively.

Myth 5: The informal economy contradicts visions of ‘world class cities’: The fact is that the informal economy is also a channel through which inequality, unemployment and poverty are reduced, an agenda which is in line with the world class city vision (WIEGO, 2015). Indeed many ‘world class cities’ also embrace informal economic activities (e.g. the fish markets in Japan, spice markets in Morocco) or have actively sought to cultivate similar types of activities (e.g. food markets like the Burrough Market in London or indoor food markets in New York).

Myth 6: Certain informal economy activities act as fronts for criminal activities: It is undeniable that some informal enterprises sell contraband and counterfeit goods such as cigarettes and falsely branded apparel (WIEGO, 2015). But the vast majority of informal work is legally compliant work.

Myth 7: The informal economy is backward: Informal economic enterprises, particularly in the developing world, are often a greater source of innovation than those in the formal sector. They are associated with innovation, with improvisation and with adaptation under circumstances of scarcity (Kraemer-Mbula and Wunsch-Vincent, 2016:1)

The informal sector is productive, it is diverse and it is a vulnerable sector of the economy. Too little attention and resources are focused on how it functions, how it links with the wider economy and what roles it plays in the daily lives and people’s ability to sustain themselves and their families in the face of unemployment and poverty. And too little attention is paid to the role of the state and particularly the local state in harnessing the advantage of this economic activity and integrating it into the economic and spatial structure of urban areas.

4. Responses to the informal economy: Getting to R204

SALGA recognises the challenges facing local authorities in engaging with informality and in carving a locally relevant response to these challenges SALGA upholds the commitments South Africa has made to enhance the potential of informal work within frameworks developed by the ILO.

4.1. Challenges of managing informality

Local government officials are at the coalface of regulating and managing the informal economy but are faced with the challenge of balancing developmental approaches and managing its relationship to other economic activities (Skinner and Watson, 2018). There are a variety of positions and approaches by different local governments to address the informal economy. These range from

Repression: where the state focuses on law enforcement and on punishing those who contravene its laws through actions such as clean up campaigns, harassment, confiscation of goods, fines and in some cases arrests

Tolerance/benign neglect: where the informal economy is perceived to be a temporary symptom of economic challenges that will be eliminated by formalisation; to

Acceptance: whereby it is recognised that the informal economy cannot simply be eradicated through law enforcement and formalisation as its proliferation is an outcome of the triple challenges of poverty, unemployment and inequality in the global south; to

Inclusion: which acknowledges the informal economy as a positive aspect for cities contributing significantly to the economy. The results of adopting this strategy requires concerted efforts by local government to engage, value and support the informal economy in ways that are developmental.

Local government may adopt inconsistent and contradictory approaches at various times to achieve certain goals (SoAP, 2014). For instance, government allocates trading spaces and subsequently evicts the very same traders. There could also be support of informal activities by one department while another department adopts a more repressive approach (SoAP, 2014). In some instances, there are different views politically and administratively within one city where there are disagreements on the approach to the informal economy.

The political climate plays a significant role in determining local governments’ gravitation towards repression or inclusion of the informal sector (Skinner and Watson, 2018). Pressure and multiple interests from various stakeholders also play a role in the approaches adopted by

local government. Important decisions of how the informal economy should be addressed are not taken by local governments in isolation but require engagement and negotiation with multiple stakeholders such as politicians, the urban elite, residents, informal workers and informal worker associations and associations (to name a few).

4.2. Recommendation 204: Transition from the Informal to the Formal Economy

The growing recognition of the value and entrepreneurial nature of the informal economy has shifted perspectives towards a transitioning of the informal economy towards formalisation. This deals with reducing the underlying causes of informality by addressing the regulations or the market conditions that motivate enterprises to operate informally (Kraemer-Mbula and Konte, 2016:298).

This approach is spurred by the recognition that the informal economy will not transition without state intervention. During its 2014 and 2015 International Labour Conference, the International Labour Organization (ILO) upheld Recommendation 204 (R204) focusing on the transition from the informal to the formal economy. South Africa is a signatory to the Recommendation. The crux of the Recommendation is that existing livelihoods should be protected and preserved during the transition to formalisation and that access to workplaces (which are in most cases public spaces) should be adequately regulated.

The share of informal employment has not diminished over time. Yet many firms could migrate to greater formality if there was greater economic growth and if the factors that constrain these informal firms, including access to capital, were reduced (Chen, 2018). In South Africa spatial factors and crime are key constraints to business development and need to be addressed if transition towards greater formality is to be achieved. Spatial segregation – great distances between townships and core urban ‘labour markets’ deter people from setting up or sustaining their own businesses (Chen, 2018).

The ILO identifies a number of key challenges facing the South African informal sector, in particular with regard to notions of ‘decent work’. (ILO, 2015). The idea of ‘transitioning’ the informal economy towards formalisation is not only about changing the ways in which informal work operates but it is fundamentally about changing the conditions and the environment in which informal work operates to enable it to be recognised and productive. This means addressing the unsafe and inadequate working conditions that confront many informal workers as well as addressing the need for services and for rights-based regulation of the sector.

The 2014 and 2015 International Labour Conference focused on the informal economy. This resulted in Recommendation 204: Transition from the Informal to the Formal Economy (R204). This is a major policy development on the informal economy in the international arena with R204 providing an important framework for informal economy policy making. In addition, the South African government is committed to implementing R204. Key elements of R204 include the following – many of which are directly relevant to local authorities:

● Preserving and improving livelihoods of informal workers during the transition to

formalization.

● Providing rights, protections and incentives for informal workers, and recognises

the need for a friendly legal and policy environment.

● Recognising public spaces as work places, and the need for regulated access by

informal workers to public natural resources.

● Ensuring freedom of association and collective bargaining for informal workers.

● Including the membership-based organisations of informal workers in all tripartite

negotiations and consultations on issues that affect them

● Promoting the preservation and expansion of formal jobs, with the informalisation of

formal jobs to be prevented

● Providing social protection, including the extension of social insurance coverage, and

occupational health and safety for informal workers.

● Ensuring gender-based equality and the elimination of all forms of discrimination and

violence against informal workers, including gender-based violence.

● Extending labour inspection to protect informal workers.

● Collecting statistics on the informal workforce.

South Africa was selected as test case for the ILO of implementation of R204. The South African government, together with the three social partners in the tripartite plus one arrangement, has committed to the implementation of R204. To date the main features of the R204 implementation process have been:

A national workshop of organised labour and informal worker organisations in April 2016.

An Informal Economy National Summit convened in June 2016. The establishment of an implementation Task Team in June 2017 comprising

representatives of government, organised labour, informal worker organisations, business and the ILO. The Task Team has agreed terms of reference and is supposed to meet once every two months, although meetings have to date been slightly less frequent. The Task Team has agreed on an expanded version, to meet when necessary, with more representatives for each social partner.

Agreement by the Task Team on a process of identifying a number of municipalities in which pilot policy and implementation engagement processes should be rolled out, including the establishment of local negotiating forums between the council authorities and informal worker organisations.

The establishment by the Task Team of a legal reform sub-committee to make recommendations on legal reform (specifically to the Labour Relations Act and the Basic Conditions of Employment Act), in accordance with a mandate from the R204 Task Team.

In principle agreement by the Task Team that Social Protection needs to be established as an additional stream of work, with proposals on what needs to be focused on having been tabled in the Task Team (See Annex 3).

A National Dialogue in March 2018, which produced a roadmap of actions.

SECTION 3: THE ROLE OF THE STATE

5. The South African state and the informal economy

SALGA notes that local authority engagements with the informal economy have been contested in South African courts. SALGA asserts its commitment to upholding and giving expression to the spirit and requirements of the South African Constitution in all local authority engagements with informal work.

It is the role of policy to provide a coherent framework for action that complies with legally binding legislation.

The Constitution has several provisions that protect the livelihoods of informal workers. These have been documented, inter alia, by SALGA’s 2012 Guidelines for Municipalities in respect of adopting a more Developmental Approach towards the Informal Economy.

The Socio-Economic Rights Institute of South Africa (SERI) has detailed the court cases that have dealt with informal trade in recent years (SERI, 2018a). The organisations publication Informal Trade in South Africa: Legislation, Case Law and Recommendations for Local Government (June 2018) is instructive in addressing the ways in which municipalities have struggled especially with dealing with informal trade. That report ‘ responds to the fact that municipalities have struggled to fully come to terms with the law relating to informal trade. The report unpacks court judgments which have substantially contributed to the rights of informal traders and identifies a range of legal principles governing the rights, duties and obligations of informal traders, law enforcement officers and local government. The report dispels a number of longstanding myths associated with informal trade, including the belief that the law does not grant protection to foreign nationals who participate in informal trade, that informal traders often act illegally or unlawfully while trading, and that the only regulatory mechanisms available to local government are the impoundment of traders’ goods and the eviction or relocation of traders’ (SERI, 2018a).

This work is twinned with a set of recommendations around the regulation and management of informal trade in SERI (2018b) Towards Recommendations on the Regulation of Informal Trade at Local Government Level.

These publications focus on informal trade, although much of the principles embedded in them are more widely applicable to the informal sector generally. But substantially more work is required to focus on the challenges and requirements for the protection and promotion of other specific categories of work in the informal economy.

The Constitutional Laws Act of 2005 gives local government executive authority to govern and oversee the informal economy. The Act must be read in conjunction with Chapter 2 of the Constitution Bills of Rights, of which section 7 states that ‘the state must respect, protect, promote and fulfil the rights in the Bills of Rights’. The onus is on the state to uphold these rights in a manner that does not interfere with the rights of those that participate in the informal economy. In addition, section 9 of the Constitution states that ‘[e]veryone is equal before the law and has the right to equal protection and benefit of the law’. Furthermore, the section states that everyone has to be fairly treated, and not be unfairly discriminated against on the basis of their ‘race, gender, sex, pregnancy, marital status, ethnic or social origin, colour,

sexual orientation, age, disability, religion, conscience, belief, culture, language and birth’. The Constitutional Court and Supreme Court of Appeal have essentially located the rights of informal traders to participate in informal trade in the right to human dignity in section 10 of the Constitution. This means that this right is by far the most important right in the context of informal traders as it essentially provides that they have the right to trade. It has application for other workers in the informal economy. Section 22 states that ‘[e]very citizen has the right to choose their trade, occupation or profession freely. The practice of a trade, occupation or profession may be regulated bylaw’. The right to trade extends to any type of trade that remains within the jurisdiction of the law. The Businesses Act 72 of 1991 (the Businesses Act) bestows powers upon local government to draft by-laws that regulate street trading.

Directed towards ensuring a good and quality environment, section 24(a) of the Constitution states that everyone has the right ‘to an environment that is not harmful to their health or wellbeing’. Section 25 outlaws the arbitrary deprivation of property, and provides that if a person is deprived of property then the deprivation must be provided for in terms of a law of general application which must serve a legitimate governmental purposes. Section 33, the right to just administrative action, provides and regulates any action taken by a government officials in the performance of their public functions. Section 33(1) states that everyone has the right to administrative action which is lawful, reasonable and procedurally fair. This means that when making an administrative decision, including decisions to grant, suspend, revoke of withhold a trading license or permit; impose any conditions or restrictions on a trading license or permit; impound informal traders’ goods; or relocate or evict informal traders from their stalls, local government officials must ensure that they act lawfully, reasonably and in a manner which is procedurally fair.5 Section 33(2) of the Constitution states that ‘[e]veryone whose rights have been adversely affected by administrative action has the right to be given written reasons’. Those whose rights are/or have been infringed have the right to request justification of the actions from the municipality.

Furthermore, the rights contained in section 33 are given expression in the Promotion of Administrative Justice Act 3 of 2000 (PAJA). This act regulates just administrative action. Some of the key terms of administrative law are: ‘Lawful’ means that all municipal actions with regard to the informal sector must align with the legislation or bylaw that gives officials the power to act; ‘reasonableness’ means that the decision must be rational and proportional; and ‘procedural fairness’ means that the decision can only be taken after the person affected by the decision was given adequate notice of the decision, information about the decision and given the opportunity to appeal the decision. If these requirements are not complied with it could lead to a court declaring the decisions invalid.

The Businesses Act 72 of 1991 governs informal trade. It recognises informal trade as a critical sector that contributes to people’s ability to support them. It shifts the focus from repression of trade to allowing people to trade freely, with few exceptions. It regulates permits and licences and the power of local authorise regarding informal traders. Amendments to the Act allow municipalities to develop bylaws that govern informal trade and to regulate or restrict trade in certain areas. These also provide specific processes that municipalities must follow in order to legally restrict or prohibit informal trade (SERI, 2018a)

5 See Annexure 6 for judicial cases on street trading in South Africa

6. South African local government and the informal economy

6.1. Local government struggles to integrate the informal economy

SALGA recognises the complex challenges and trade-offs that confront local authorities in their engagement with informal work. In mapping the duties of the local state in this regard, SALGA asserts local authority's obligation to enable he right t the city for all residents; its obligation to engaging meaningfully with informal economic workers and economic units; and its obligation to integrate foreign nationals within the informal sector

There are many reasons why developing policy that might foster the opportunity in the informal economy confounds local government. Local governments struggle to conceptualise and measure the nature and contribution of the informal economy. They often have limited access to this economy other than in the realm of street trade and spaza shops and their interface with it is often regulatory and compliance-based.

In their examination of innovation, Kraemer-Mbula and Konte (2016:303-311) find a number of policy challenges that impede innovation in the informal economy. In her examination of the history of state policy Skinner (2018: 432-444) offers insights into the areas in which South African policy is helpful and where it falls short.

The challenges identified by these authors include:

i. Resources: A typical problem local government faces internationally and in South Africa is that resources for economic development are concentrated at national and provincial spheres of government, but the responsibility for regulation and for management as it pertains to the informal sector are located at the local level (Kraemer-Mbula and Konte, 2016:299). This points to the importance of aligning national, provincial and local government responses.

ii. Linkages between the formal and informal economy: A major problem in policy making around the informal economy is that policy targeting the formal economy generally excludes the informal economy (Skinner, 2018). The challenge is to deepen the reach of economic policy to include the informal economy and to deepen the reach of the informal economy up the supply chain of formal economic services and products (Kraemer-Mbula and Konte, 2016). It is the linkage between these two ends of the continuum of formality/informality that will generate a robust productive local economy. The informal economy is seen as separate rather than a subset within each economic sector and so the bureaucracy does not facilitate linkages between informal and formal economic sectors. And there is a severe shortage of economically trained sector specialists who are focusing on deepening the reach of the informal sector into various economic segments (Skinner, 2018). Moreover, linkage works both ways. Yet there is no focus on policy around the formal sector adapting to reach to include the informal sector (Skinner, 2018)

iii. The policy context: Macroeconomic policy, trade, industrial and competition policy impact on the informal sector and need to consciously incorporate measures that enable and do not exploit those working informally (Skinner, 2018). Innovation policies focus on the formal sector and on research and development whereas the innovations and adaptations that are developed in the informal sector are generally non-research based (Kraemer-Mbula and Konte, 2016).

iv. Evidence based data: A lack of systemic evidence about the informal economy limits the potential to focus on the needs or opportunities in that sector. There has

been an overbearing focus on regulation with little emphasis on empirical research. For example, there is little examination of how the informal sector experiences the bureaucracy (Skinner, 2018).

v. Contradictory approaches and slippage between policy and action: It is difficult to translate policy into actionable strategy. Worse, there are serious contradictions between developmental sentiments in policy and bylaw enforcement approaches (Skinner, 2018). Local government’s development responsibilities and its law enforcement responsibilities and units are often at odds with each other over responses to the informal sector.

vi. Refining the support measures: While there has been progress on providing access to finance, and country wide business support centres, the training system requires a review to ensure it reaches scale (Skinner, 2018). Some support measures are exclusionary - often requiring enterprises to be registered and so excluding informal enterprises. This is especially true for funding support (Kraemer-Mbula and Konte, 2016). Importantly, because of the link with marginality, support to informal business often requires more than one type of support but also requires social support. Local government struggles with coordinating support across various departments. And the interventions that are developed to target youth unemployment or transfer of technology (such as entertainment or ICT hubs) are often inaccessible to enterprises in the informal economy (Kraemer-Mbula and Konte, 2016).

vii. Punitive responses: Much of the response at local level to the informal sector has been punitive. And it has often been associated with associated with police and law enforcers’ harassment of informal workers, with arbitrary or unlawful actions on the part of police and police brutality, especially to informal traders. An anti-migrant approach is driving a punitive response to the informal economy (Skinner, 2018). Informal traders are often subjected to criminal rather than administrative sanction (Skinner, 2018)

viii. Meaningful engagement: Research and strategy development around the informal sector requires participatory approaches. But the informal sector often doesn’t have access to technology that is required for various platforms of engagement or support from local government. While there has been some broadening of organisation and representation of the informal sector – particularly of street traders, more remains to be done to expand consultation and participation to ensure meaningful engagement.

6.2. Local government has an obligation to enable ‘the right to the city’

South Africa has embraced a developmental mandate for various spheres of government. The passing of the Business Act paved the way for the deregulation of the informal economy and for local government to proactively develop policies that would enable informal activities.

Municipalities are required to align their policies with national legislation, and equally to consciously embrace a socially just, right to the city approach to dealing with all expressions of marginality in their urban areas. The right to the city seeks to provide a developmental urban alternative in addressing urban inequality and exclusion. We have already discussed how regulatory instruments continue to limit and deny the rights to accessibility (i.e. land, services, infrastructure etc.). Internationally, the UN-Habitat’s New Urban Agenda places ‘the right to the city’ as the driving force in managing urbanisation by calling for a ‘cities for all’ slogan. South Africa’s Integrated Urban Development Framework (IUDF) calls for “[l]iveable, safe, resource-

efficient cities and towns that are socially integrated, economically inclusive and globally competitive, where residents actively participate in urban life”.

6.3. Local government is obliged to engage meaningfully with informal workers and economic units

According to the Local Government White Paper, developmental local governments are focused on:

i. Improving economic growth and social development;ii. Integrating and coordinating developmental activities of other state and non-state

agents in the municipal areas; iii. Promoting public participation within all local government policy-making and

implementation;iv. Creating social networks that are linked to economic and cultural growth within

municipal area (de Visser, 2007: 8).

And so the imperative to work in a developmental frame also obliges local government to practice participatory governance. This obliges local government both to include those working in the informal economy in plans and strategies that affect them.

6.4. Local government is obliged to integrate foreign nationals in the informal sector

Migrants make a substantial contribution to the socio-economic well-being of neighbourhoods within which they work. They pay rent largely to South African property owners or the municipality, they source goods from South African owned businesses, they often create employment for South Africans and they introduce new ranges of goods and services to local areas.

Foreign migrants are subject to the same challenges that South African informal operators face such as the absence of a conducive regulatory framework to conduct their businesses. However, informal worker migrants operate under even harsher conditions than their South African counterparts. They face particular challenges owing to their foreign status, including: financial constraints, harassment, limited protection from police and officials and limited negotiating power with officials. It is important to recognise that a significant number of outbreaks of xenophobic violence have been strongly connected to areas where people have grievances about service delivery, and areas that have for long remained disadvantaged, deprived neighbourhoods of urban areas.

Local government’s responsibility in this regard is articulated in law. In short local government must in the first instance act to prioritise the servicing of underserviced areas of their municipal jurisdictions. And to do so regardless of who lives in those areas. Secondly, the role of local government and local police forces must be unequivocal in acting within the law to protect all residents. Municipalities cannot unfairly discriminate against foreign nationals when deciding who can participate in informal trade (this is clear from the SCA’s judgment in the Somali Association case (SERI, 2018a)). The right to human dignity (which is granted to “everyone”) also protects foreign nationals’ right to participate in informal trade. In essence, municipalities

cannot prevent foreign nationals from participating in informal trade (as long as foreign traders follow the rules).

SECTION 4: POLICY GUIDELINES FOR AN ENABLING LOCAL GOVERNMENT APPROACH TOWARDS THE INFORMAL ECONOMY

7. Carving an enabling local level policy

SALGA asserts that there are key areas in which local government directly impacts on the potential of the informal sector. These are the bases of policy and strategic levers that need to be geared towards enhancing the productivity of the sector.

There is a need for a coherent, systematic and enabling municipal approach to the informal economy. Such an approach would enable the informal economy’s productivity and its contribution to job creation.

The desktop research, dialogues held in three provinces, key informant interviews and strategic workshops undertaken in preparation of this position paper, reveal that in order to create an enabling environment for the informal economy, municipalities can focus on six areas of priority. These are: governance; planning; regulatory environment; infrastructure and land; support informal enterprises; organisation and representation and promoting equality and social inclusion:

7.1. Governance - poising local government for enabling inclusionary economic development

The structure and resourcing of municipal functions, municipal wide strategy and participatory governance all have implications for the informal economy.

Local government policy treads an uneasy balance – between locating informal work in the development/economic imperatives of the municipality and locating it within the law enforcement/ urban management concerns of the municipality. In truth the starting point needs to be to mainstream informal work as a normal part of the local economy.  Informal work is fundamentally a productive and an important survivalist economic activity that must be supported. In the interest of job creation and economic development it is important that municipalities embrace and promote the benefits of the informal economy while addressing the needs, challenges and the consequences of its impact.

Maximising the positives of the informal economy as a source of job creation, wealth distribution and poverty alleviation require the following interventions:

Building the in-house capacity and knowledge to engage with the sector, Ensuring high levels of urban management, Facilitating access to well developed programmes for skilling of informal economic units

and workers, Place-marketing, Space economy plans that ensure competitive strategies, Planning at city wide as well as local area level where informal economic development is

catered to within the context of the uses and needs within the precinct while being part of the neighbourhood and inner city economy. 

These actions require a governance approach in municipalities that mainstreams the informal economy.

Planning and economic development units within municipalities must take the lead in programming and managing informal economic development and its impacts. Law enforcement must follow these programmes. Municipalities must restructure units where necessary in order to mainstream this economic activity and must build the skills required to engage effectively with informal work.

The capacity of informal businesses and of informally employed person to organise and to be represented is crucial to their needs being heard as well as to their participation in the creation and execution of plans, policies and interventions that impact on their livelihood. Programmes that support organisational capacity can empower informal workers in articulating their needs and in accessing marketplaces and assistance. Similarly programmes that support economic clustering can build local markets. Local government must enable support for representative organisations, cooperative arrangements and intermediaries.

In terms of their obligation towards participatory governance, there is a need for municipalities to engage meaningfully with informal sector workers and economic units.

7.2. PlanningAll empirical evidence shows that the formal and informal economies are intertwined – they are indeed part of a single economy. Where there are conflicts over for example the use of public space, law enforcement approaches have proved to be expensive and unsustainable. A development approach to the informal economy implies integrating plans and targets into IDPs and economic and spatial plans. Each sector needs to be reviewed in terms of how inclusionary its plans are. For example, informal trade is part of the retail economy and it co-exists with other parts of economy. So that informal trade needs to be seen and programmed as part of the retail offerings of municipalities and to be accommodated and supported as a productive retail function. 

Such programming requires that planning for informal economic activity take place within every level of planning in the municipality.  Within this framing, regulatory and urban management needs (which are crucial to the successful operation of street trading, markets and any other informal economic activity) are a consequence of this economic activity and need to be addressed in order to ensure the success if the activity and the success of its placement in relation to other activities and needs in the inner city.

7.3. Conducting a review of regulations

The regulatory environment is overarching and impacts on all aspects of productivity. The laws that govern labour, social relations, business operations and spatial development impact informal economic agents.

Any municipal bylaws that are unconstitutional need to be amended.

The regulatory environment must centre on a rights based approach. And local government must be accountable to uphold such a rights-based approach. This means that all workers and economic units in the informal economy must be treated equally. Women, disabled persons,

youth and local and foreign born migrant informal businesses need to enjoy the same rights and privileges and comply with the same laws as any other informal economic activities.

Regulation is tied to management. The approach must also embrace a managed approach to the informal economy that is supportive and not unnecessarily punitive. And it must promote self-regulation where possible. Regulation and management must be undertaken without prejudice.

7.4. Improving access to economic infrastructure and landBasic infrastructure is necessary for any business activity. A lack of adequate basic services and quality infrastructure is a major systemic block to the creation of livelihoods. This is particularly true of disadvantaged and deprived neighbourhoods including many black townships.

Traders need shelter from the elements and places to store their goods. They need water, toilets and rubbish removal. Access to electricity will allow greater value addition.

Waste collectors need access to waste but also places to sort their waste.

Educare providers need space and water and toilets as well as access to educational play equipment.

Homes are frequently also work places. Informal settlement upgrading processes and green field development need to factor that homes are work places into their plans.

It is local government’s responsibility to enable access to infrastructure and services for the sound operation of the economy, including the informal economy. This includes enabling access to adequate road infrastructure, to water, sanitation, electricity, and waste disposal services. In the case of South Africa’s urban areas, it often also includes access to land on which to conduct business and access to public space which is well located for visibility of trade and services. But at broad level of various informal enterprises it includes access to spaces for manufacture, production or agriculture.

Fostering a close and dynamic relationship between the informal sector and its customers does require that municipalities consciously ensure that informal trade is able to operate in high transit areas such as tai stops, bus stops, train stations and retail nodes.

7.5. Enhancing the productivity of and returns to the informal sector

Threats against certain groups including foreign businesses are born in a context of high unemployment and inequality levels coupled with inadequate service delivery. The delivery of services more broadly supports the productivity of micro and informal business.

Job creation in the informal sector- not only in trade but also in other industries including waste, manufacturing and services, should be actively promoted.

Local government will orientate its resources towards addressing the real economic threats facing informal and micro business. For instance, South African informal business is under threat from a monopolised retail sector. It is big chain stores and formal business that has controlling interests in retail that squeeze out opportunity for micro and informal business. This threat exists for local and for foreign traders.

The development of skills for informal workers and economic units may include basic literacy and numeracy training as well as business training. In this case local government can usefully

connect up to national SETA initiatives as well as DSDB and ABET training. Municipalities should assess the gaps in these programmes that might make them unsuitable for the informal economy, and proactively fill them.

The formation of Informal Economy Forums, which represent informal business across various sectors regardless of ethnicity of the business owners, is important for allowing the voices of the sector to be heard and needs of the informal businesses and traders to be met. It is also important for allowing informal business operators to work together to solve their common problems. Skills transfer could be a component of joint dialogues.

7.6. Improving Social inclusion

Many of those working in this economy are women, the young, disabled, and/or migrants. Many reside in informal settlements or experience other locational disadvantages and scarcity of services where they live and/or work. Reducing inequity and actively promoting inclusion at the level of service provision as well as at the level of dedicated programs that target the employability and productivity and economic integration of youth, women and migrants for instance are central to improving productivity in the informal economy. And programmes that promote social inclusion more generally of these groups through dialogues, through welfare and social programmes and through priority access to training and resources are essential.

In a bid to grow the productivity and employment creation within informal business, it is imperative that local government takes a broad view of all informal businesses that have the potential for growth and for contributing to the economy. Local government should reduce the impediments facing these businesses and to create further opportunities for growth where possible. This requires that local government pay attention to the constraints facing various businesses and business owners. Local governments approach must treat all informal workers and economic units equally. This also means giving special attention to the needs of marginalised informal workers and economic units. Given the particular challenges of marginalisation facing migrant entrepreneurs it is necessary for local government to address these particular needs.

8. Resolutions: Local government position on the informal economy

Local government must embrace and nurture informal economy as a regular, productive segment of each sector of the local economy. It is an economic reality and a potentially productive urban asset. The informal economy is increasing in the face of economic growth and remains the main source of employment for a multitude of people in the global south. This economy requires governance support and management. The inclusion of the informal economy in government plans must be the ultimate goal of all local governments. This will enable the direction of appropriate resources and tools for the development of the informal economy in meaningful ways. The starting point for local government to carve out an enabling environment is an understanding of the size and scope of the informal economy. The informal and the formal economy are integrally linked through backward and forward linkages. The linkages between the formal and informal should be better understood in order to develop appropriate regulation and adopt developmental approaches towards the informal economy. In addition, the innovation that takes place within the informal economy should be supported and encouraged. In cases where formalisation is strongly advocated as way forward for some informal economy activities, existing livelihoods should be protected and preserved. Support and governance strategies should be developed and tailored at local level. A forum/representative body in each local government should be established to find area-based solutions towards the informal

economy. This forum should undertake the development of an overarching policy, and of strategies that address regulation, spatial development, infrastructure provision, representation, entrepreneurial support, and social inclusion of the informal sector in local areas.

8.1. A Local Government Declaration on Enabling the Informal Economy

GIVEN THAT

The informal economy employs around one third of South Africa’s workforce; And that the informal sector contributes 6% of GDP; And that 44% of the workforce in informal employment is female; And that the informal sector contributes significantly to poverty reduction; And that informal work is prevalent across the country but most prevalent in urban

informal settlements, townships but also rural and tribal areas

AND GIVEN THAT:

Several functions of local government have direct impact on how well or badly the informal economy performs;

And that local government is mandated to govern, plan for, provide services to, protect the rights of and regulate the impacts of the activities of informal workers and economic units;

Local government recognises that: o The informal economy is worko The informal economy is a crucial component of the local economy in South

African cities, towns and rural areas.o Informal economic activity creates jobs and opportunities, especially for

vulnerable populations.o Local government has an important role in enabling the informal economyo Local government must provide a conducive environment for the informal

economy through the way in which it governs, plans, regulates, invests in infrastructure that supports productivity, enhances income earning potential and furthers social inclusion

To this end local government RESOLVES THAT:

Each municipality must align its own structures, plans, budgets and programming to achieve the benefits of inclusive economic development

Each municipality must proactively create the conditions conducive to the productivity of informal work so that the sector can grow the quality and quantity of jobs it generates and can contribute to sustainable economic development and improving quality of life

Each municipality must provide the space and opportunity for informal workers and enterprises to thrive and grow.

AND LOCAL GOVERNMENT COMMITS TO THE FOLLOWING APPROACHES TO ENABLING THE INFORMAL ECONOMY:

An economically informed approach that mainstreams the informal economy within an inclusive economy

A participatory approach

A Constitutionally aligned and rights-based regulatory approach

A strategic and area-based approach to planning and infrastructure development

An approach that supports the growth and productivity of the informal economy

A knowledge based and knowledge sharing approach

8.2. Detailing the approaches

Local authorities commit to:

An economically informed approach that mainstreams the informal economy within an inclusive economy. This entails:

Aligning their own structures and human resources to further the aims of inclusionary economic development

Developing overarching policy, and strategies that address regulation, spatial development, infrastructure provision, representation, entrepreneurial support, and social inclusion of the informal sector in local areas.

Mainstreaming the planning for, and support of, the informal economy in all relevant departments and coordinating informal economy policy, strategies and plans across departments

Locating the primary responsibility for the informal economy the departments responsible economic development and planning with management and enforcement under guidance from these imperatives

Factoring the informal economy into planning for and enablement of the informal economy within every industry of the local economy be developed in municipal IDPs and SDFs

Proactively recognising promoting and celebrating local economic benefits for youth, women, disabled and migrant entrepreneurs from the rest of South Africa and from other countries in the informal sector

Acting decisively against municipal employees who are found to be perpetrators of corruption, violence, xenophobia and abuse of power in relation to informal sector operators.

A participatory approach

Including the informal components of each economic sector in deliberations, plan making and engagements on any economic sectors.

Ensuring representation of informal sector workers and economic units in relevant plans and dialogues

A Constitutionally aligned and rights-based regulatory approach. This entails:

Upholding the rights of those who work in the informal economy, as workers Reviewing all regulations and bylaws that impact on informal livelihoods to ensure that it enables work

Aligning the existing legislation, most notably street trading bylaws, with the Constitution and relevant court rulings

Adhering to administrative law – that government decisions and action are lawful, reasonable and procedurally fair - in all engagements with the informal economy

Devising accessible registration and legitimation processes for informal workers to operate within local jurisdictions

Providing user friendly information and training on relevant local level bylaws Investigating claims against any local government officials of corruption in general and

hostility towards those in the informal economy, including migrant entrepreneurs, and dealing with this decisively.

Providing straightforward information and training on relevant local level bylaws

A strategic and area based approach to planning and infrastructure development

Incorporating informal economic activity in local and strategic spatial, social and economic plans

Developing strategies and implementation plans to manage the location, allocation of rights to trade and the provision and management of services that support informal sector operations

Developing partnership approaches to management with private operators and with informal sector workers and economic units

Tailoring contextually appropriate solutions for the specific needs of informal workers and economic units by developing area-based responses to the operations of the informal sector in their areas of jurisdiction

Providing or facilitating access for informal sector operators to resources including where possible access to space, energy and credit to undertake, grow and improve their operations

Actively allocating and designing places and spatial infrastructure to encourage and support the business activities of informal sector workers and economic units in economic nodes

Actively prioritising service delivery to deprived township areas to support the sound operation of informal enterprise

An approach that supports the growth and productivity of the informal sector

Promoting and facilitating linkages between the formal and informal economy, as well as access to appropriate training, mentorship and skills development for informal sector workers in the various economic sectors of their local economy

Actively supporting vulnerable informal firms through partnering with organisations that provide access to business and management training and relevant skills development

Supporting micro, small and medium enterprises to transition towards formality, by providing access to resources as well as by addressing the local level inhibitors to formalisation of these businesses. This will be done in a way that ensures that no livelihood is destroyed in the process of formalisation

Facilitating access to entrepreneurial skills development Actively facilitating the linkage of informal sector operators with formal sector

operators and opportunities

A knowledge based and knowledge sharing approach:

Actively collecting data and deepen knowledge of the diversity of the local economy in their areas of jurisdiction

Improving their monitoring and evaluation of the performance of the informal sector and of their own performance in supporting the sector

Developing opportunities for informal firms to share knowledge and learning with one another

Municipalities will develop opportunities to share knowledge with other municipalities on the support and management of informal sector operations local governments

Municipalities will communicate research findings, plans and evaluation results with stakeholders, end users and decision-makers

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