AN OVERVIEW OF INFORMAL ECONOMY- AN ECONOMIC

PERSPECTIVEPRESENTATION TO THE MSUNDUZI MUNICIPALITY INFORMAL

ECONOMY DAY ON THE 08TH MAY 2015Dumi ka Mzila

mzilad@kznded.gov.za: 082 818 2473

Defining Informal Economy“all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements”.

ILO 2002

“the second economy is a phenomenon that refers to the range of activities that are often marginal, outside the regulatory net and survivalist in character”

KZN IE Policy 2010

According to the International Labour Organisation (ILO), governments must provide the conducive macroeconomic, social, legal and political frameworks for the large-scale creation of sustainable, decent jobs and business opportunities. Governments should adopt a dynamic approach to place decent employment at the centre of economic and social development policies and also to promote well functioning labour markets and labour market institutions, including labour market information systems and credit institutions. To increase job quantity and quality, emphasis should be placed on investing in people, especially the most vulnerable – in their education, skills training, lifelong learning, health and safety – and encouraging their entrepreneurial initiative.

(ILO’s Resolution on Decent Work and the Informal Economy adopted by the 90th session of the International Labour Congress in June 2002 in Geneva)

The Global ContextChina. The informal economy in China should refer to small-

scale units outside the legally established enterprises. According to organisational forms, three types of such enterprises are distinguished as: micro-enterprises, family enterprises and independent service persons. Contributes in excess of 60% to the GDP.

India. According to the Central Statistical Organisation, all unincorporated enterprises and household industries (other than organised ones) which are not regulated by laws and which do not maintain annual accounts or balance sheets constitute the unorganised sector. Enterprises with less than 10 employees. These are not (a) organised systematically, (b) made formal through mandatory registration or licenses, (c) covered by legislation to protect minimum labour standards in employment and development. Contributes about 80% to GDP

Sri Lanka. The informal economy is defined to include enterprises and activities, which employ less than five persons, mainly from family sources.

the ILC to be held in June 2015 for a second discussion with a view towards adoption of an ILO Recommendation on facilitating transition to formality. South Africa has been actively engaged in discussions held on this item as member of the Conference Committee and has made substantive inputs in the drafting of proposals for the Recommendation.

Informal Businesses in South AfricaSurvivalist businesses: Briefly the NDP appears to

regard a survivalist business as essentially a home-based business or one which operates on the streets. Typically businesses of this nature display a manifest lack of the use of any capital equipment and predominantly take the form of cash businesses which do not compile more than the most basic of financial records. These businesses include taxi operators, spaza shops, taverns, casual construction workers, hawkers, informal subcontractors and gardeners.

Davis Tax Commission

Transitioning Informality to formality

The role of GovernmentsThe roles of employers’ and workers’

organizationsDeveloping tripartite policies on informality

(Supporting upgrading and enabling the transition to formality)

Encouraging the transition to formality for informal enterprises

Upgrading informal enterprisesIntegrating enterprise development into local

development strategies

The Vuvuzela Model

INFORMAL BUSINESS: VUVUZELA GRADUATING LEVELS

INFORMALTRADER Support up to R30 000 Mostly women

/single headed households

Mostly informal/street traders

Trades on the streets, pavements, pedestrian traffic area

No formal

SURVIVALIST Support up to R70 000 Mostly owner

operated employing 2-5 persons

Enterprises across the five focus areas

Businesses operating in both home and rented premises

Businesses registered with

MICRO ENTREPRENEUR Support up to R100 000 Fully

established and registered

Employs more than 5 persons

Owner, staff and experts involvement

Complying with dti, SARS and other policy requirements

Operations and capital funded by financiers

SUPPORT FOCUS

SERVICES

MANUFACTURING

AGRI& AGRD

CONSTRUCTION Graduating to Graduating to Graduating to

TRADE

Graduating to formal small scale entrepreneurs

Table : Employed by sector and industry - South Africa

 

2008 2009 2010 2011 2012

ThousandThousand

Thousand Thousand Thousand

Informal sector (Non-agricultural) 9 193 8 516 8 637 8 686 8 593 Mining 9 9 9 9 6 Manufacturing 949 806 847 853 741 Utilities 17 10 7 7 7 Construction 1 296 1 141 1 210 1 230 1 260 Trade 4 294 3 998 4 045 4 063 4 036 Transport 841 794 811 777 801 Finance 598 555 581 572 539 Community and social services 1 190 1 202 1 127 1 173 1 205 Other 1 2

Table : Employed in the informal sector by gender

 2008 2009 2010 2011 2012Thousand Thousand Thousand Thousand Thousand

Women           Informal sector (Non-agricultural) 4 121 3 779 3 637 3 592 3 464Men           Informal sector (Non-agricultural) 5 072 4 738 5 000 5 094 5 129

Thank you