Edge 17th Edition Microbusiness in the Informal Economy

17TH ISSUE SEPTEMBER 2016 

ECONOMIC DEVELOPMENT AND GROWTH IN ETHEKWINI 

SPECIAL FEATURE EDITION: 

EMBRACING MICRO 

BUSINESS IN THE 

INFORMAL ECONOMY

CONTENTS 

Welcome to the EDGE 

Foreword by City Mayor, Zandile Gumede 

Note from the Editor 

Defining The Informal Economy 

The Current State of the Informal Economy in eThekwini: 

Opportunities and Constraints to Growth 

Q&A: Profiling Businesses in the Informal Space 

Informal Economy 

Looking Ahead to the Next Edition 

2 

3 

4 

5 

7 

19 

24 

27

EDGE CONTRIBUTORS 

Editor: Tshegang Chipeya 

Policy, Strategy, Information and Research Dept, eThekwini Municipality 

Co-Editor: Aurelia Albert 


CONTRIBUTORS 

Ajiv Maharaj 

Pumla Jali 

Denny Thaver 

Thobeka Ngcobo 

Shivani Singh 

Michael Hlangu 

Pat Horne 

Tanya Dayaram 

Leon Katambwe 

Nonhlanhla Joye 

Ndumiso Myeni 

Andre Katambwe 






Business Services, Markets and Tourism Unit 

International Co-ordinator, StreetNet 

Project Preparation Trust 

Senior Development Economist, Urban-Econ Development Economists 

Umgibe® Farming and Organics Training Institute 

Umgibe® Youth Network 

Bhemma Auto 

ETHEKWINI EDGE • 17TH ISSUE SEPTEMBER 2016 1

WELCOME 

TO THE EDGE 

WELCOME TO THE 17TH EDITION OF THE EDGE, A QUARTERLY 

ECONOMIC BULLETIN THAT LOOKS AT THE ETHEKWINI ECONOMY, 

WITH A BRIEF OVERVIEW OF THE GLOBAL AND NATIONAL CONTEXT. 

Published by the Policy, Strategy, Information and Research Department of eThekwini’s 

Economic Development and Investment Promotion Unit, The EDGE aims to inform 

stakeholders of the latest developments and trends in eThekwini. The theme of this 

edition centres on the Informal Economy within eThekwini.

FOREWORD BY HER WORSHIP THE MAYOR, 

COUNCILLOR ZANDILE GUMEDE, ETHEKWINI 

MUNICIPALITY 

WELCOME TO THE 17TH EDITION. IN MANY DEVELOPING COUNTRIES, A THRIVING 

INFORMAL SECTOR PLAYS AN IMPORTANT ROLE IN CREATING EMPLOYMENT. A 

VIBRANT AND DIVERSE INFORMAL ECONOMY ENCOMPASSES MUCH MORE THAN 

STREET TRADING. BUT IT FOSTERS A CULTURE OF INNOVATION AND INGENUITY 

AMONG PEOPLE AND COMMUNITIES, TO FIND NEW WAYS OF PRODUCING GOODS 

AND SERVICES AND TAKING THESE TO MARKET. 

BRICS is the acronym for an 

association of five major emerging 

national economies: Brazil, Russia, 

India, China and South Africa. All 

the BRICS nations have vibrant 

informal economies and there is no 

reason why South Africa should be 

any different. 

The informal economy sector is 

an important part of the Durban 

economy and contributes 

significantly to informal job 

creation and the sustainability of 

livelihoods. However, a challenge 

of measuring the sectors economic 

contribution remains. Our City 

must be able to provide an 

environment where the formal and 

informal sectors can co-exist and 

thrive. 

There are many stakeholders 

involved in the support of the 

informal economy such as the 

city’s Business Support, Markets 

and Tourism Unit and Economic 

Development and Investment 

Promotion, The Project Preparation 

Trust of KwaZulu-Natal and Asiye 

eTafuleni, to name a few. 

As the City grows it is vital to 

include this sector within its 

infrastructure plans such as the 

Integrated Rapid Public Transport 

Network, improvements to town 

centers and beachfront upgrades 

among others. 

The formation of the EThekwini 

Municipality Informal Economy 

Forum is one such structure 

allowing for the voices of the 

sector to be heard and needs of 

the informal businesses and 

traders to be met. 

Although this sector is full of 

possibilities it is also riddled 

with challenges. Adherence to 

Municipal by-laws and other 

regulations are often not followed. 

In order to foster the growth of 

the informal sector, the spirit 

of competition is important 

as it encourages new ways of 

doing business and develops 

entrepreneurship. 

If Durban is to be a truly resilient 

City, it has to respect the role of 

the informal economy and allow 

for informal and micro business 

to access new opportunities that 

would see them move into the 

formal economic sector. 

This edition encourages the 

reader to embrace the informal 

economy and its contribution to 

the eThekwini economy. 

WE ACKNOWLEDGE 

THAT WORKING 

TOGETHER, BOTH THE 

FORMAL AND INFORMAL 

SECTOR CAN CO-EXIST 

AND BE THE ENGINES OF 

GROWTH IN A PERIOD 

CHARACTERISED BY 

HIGH UNEMPLOYMENT 

AND LOW ECONOMIC 

GROWTH. 

ETHEKWINI EDGE 17TH ISSUE SEPTEMBER 2016 3

NOTE FROM THE EDITOR 

THIS EDITION FOCUSES ON THE INFORMAL ECONOMY IN ETHEKWINI. THE INFORMAL 

ECONOMY HAS GROWN IN SIGNIFICANCE OVER THE PAST DECADE, WITH THE 

SECTOR CONTRIBUTING A GREAT DEAL IN TERMS OF EMPLOYMENT OPPORTUNITIES 

AND CONSTANTLY GROWING AND CHANGING THE WAY IN WHICH IT AND EVEN THE 

FORMAL ECONOMY OPERATES. 

There has always been a shadow 

cast over the informal economy 

due to its nature of operating 

outside of the regulatory 

framework but in recent years 

there has been more of an 

appreciation and acceptance 

of the sector as one that has 

changed the landscape of 

business. 

This edition firstly looks at the 

eThekwini economy as a whole 

and then delves deeper into the 

Informal Economy in eThekwini. 

The transformation of the informal 

economy is evident in this edition, 

showing how cities grow when 

both the formal and informal 

economies integrate. However, 

challenges still exist in terms of 

data collection on the informal 

economy at a regional level, where 

a limited amount of accurate data 

is available. 

This edition looks at work that 

the eThekwini Municipality has 

been doing in partnership with 

organisations that are working 

with various sectors in the informal 

economy. It also looks at informal 

trading, with a specific focus on 

Warwick Junction. 

It is interesting to see how informal 

markets operate in other cities, 

with support from government and 

private sector, allowing the markets 

to flourish. 

Finally, the edition includes some 

opinion pieces from people that 

have conducted much research on 

the informal economy and have 

studied the eThekwini informal 

economy and other models from 

around the world. 

Key questions which arise during 

the course of this publication 

include: 

• Has the informal economy in 

eThekwini integrated much with 

the formal economy? 

• Is government doing enough to 

ensure this integration? 

• How can the informal economy 

be positioned better in 

eThekwini in relation to policy 

and support? 

• Instead of transitioning from the 

informal to formal economy, 

is this transition the other way 

around in recent years? 

This edition is designed to help 

the reader think critically, while 

providing a balanced view of key 

issues.

DEFINING THE INFORMAL ECONOMY 

AUTHOR: LEON KATAMBWE, SENIOR DEVELOPMENT ECONOMIST, URBAN-ECON 

DEVELOPMENT ECONOMISTS 

UNEMPLOYMENT IS UNDENIABLY ONE OF SOUTH AFRICA’S MAJOR MACROECONOMIC 

CHALLENGES. MANY WORKERS WHO ARE UNABLE TO FIND EMPLOYMENT IN THE 

FORMAL ECONOMY SEEK OPPORTUNITIES FOR INCOME GENERATION FROM THE 

INFORMAL ECONOMY. 

People who face long term 

unemployment often do not 

have any other choice but to 

either venture into the informal 

economy to raise income- or 

be dependent on other income 

earners for survival. 

The informal economy in South 

Africa, as well as in the rest of the 

world, comprises diverse activities, 

which fall into different sectors. 

Obvious examples include street 

trading and hawking, the provision 

of ‘street services’ such as shoe 

repair and hairdressing, and the 

provision of transport services such 

as taxis. These services have now 

also been extended to include 

car guard services at shopping 

centres and other public places 

in the central business districts of 

metropolitan areas. 

There are also waste collectors, 

home-based workers, informal 

transport providers and agricultural 

workers. Less prominent examples 

of the informal economy are often 

found in productive sectors such 

as manufacturing, as well as in 

high value services in ICT (some 

mobile apps, software services) 

and (often unregulated) finance. 

Some activities, for example car 

guarding, are merely survivalist in 

nature, yielding very low income. 

Other activities may offer the 

potential to earn very high returns. 

In some cases, these returns might 

even be higher than the average 

earnings from normal formal 

sector employment. 

Generally, a precise definition of 

the term “informal economy” is 

hard to pin down, though there 

have been numerous attempts 

over the years to arrive at a 

working definition. The term seeks 

to capture the reality of the large 

share of the global workforce that 

remains outside the world of fulltime, 

secure stable and protected 

jobs and in many cases with no 

form of social protection. Without 

a common definition, however, it 

is important to bear in mind that 

measurements will vary according 

to the way the term is defined. 

Essentially, the informal economy 

can be described in terms of those 

who work in it (employment status 

of population) otherwise referred 

to as “informal employment”. 


DEFINING THE INFORMAL ECONOMY 

(continued) 

It includes informal wage 

employment outside informal 

sector. To be precise, it includes 

casual workers in the formal sector, 

employers in informal enterprises, 

own account workers in informal 

enterprises, unpaid family workers 

both in formal as well as informal 

enterprises. The informal economy 

can also be given a productionbased 

definition, and described 

in terms of the activities that take 

place in it; otherwise referred 

to as the “informal sector”. The 

informal sector typically includes 

employment and production 

that take place in small and 

unregistered enterprises. 

Further, the informal economy, in 

reference to the informal sector, 

can be defined by approach, 

for which a three pronged 

definition should be kept in mind 

(uMgungundlovu SMMEs 

Plan, 2007): 

- Legal approach: this includes 

all unregistered businesses. 

- Social approach: this consists of 

all disenfranchised and socially 

unprotected businesses. 

- Economic approach: here this 

concerns all micro businesses 

in all sectors as defined by the 

National Small Business Act, 

No. 102 of 1996. 

Ultimately, it is important to 

note that people in the informal 

economy are often excluded 

from various legal protections 

and they are unable to access 

the basic benefits or enjoy the 

fundamental rights granted to 

those in the formal economy. 

These unprotected conditions 

often include unsafe and 

unhealthy working conditions; long 

working hours with insufficient 

and unsteady compensation; 

low skill and productivity levels; 

and a general lack of access to 

information, markets, finance, 

training and technology (footnote). 

One of the challenges that 

often keeps informal business in 

transition from being informal to 

becoming formal despite known 

challenges of informality; is the 

lengthy formalisation process. 

To formalise their businesses, 

companies are required to register 

with the CIPC. However, with the 

centralisation of the CIPC in one 

location (Pretoria), many informal 

businesses- especially those 

from rural areas- face a challenge 

in registering their companies. 

As a result, they have two 

choices, either 1: losing business 

opportunities while waiting 

through the registration process; or 

2: continuing to operate informally 

while sometimes generating higher 

incomes than formal businesses. 

There are also often ‘grown up’ 

businesses that choose to operate 

informally (without registering) and 

operate in a transitional space. 

These include informal businesses 

that have grown and are currently 

operating in commercial well 

established buildings; some 

renting the trading premises, while 

others even own them. 

These typically include panel 

beaters, internet café and copy 

centres, hair salons, car washes, 

upholstery, welders’ workshops, 

appliance repairers, professional 

tailors, minibus owners; etc. 

Informal businesses in transition, 

often operate in formal structures 

and are characterized by having 

valued assets including high 

value machinery and equipment; 

paying high rental fees; owning 

the properties; having access to 

their own facilities such as water, 

electricity and toilets; having access 

to their own storage facilities; 

having more than ten employees; 

sometimes generating an annual 

turnover above R500 000; and 

sometime paying high wages to 

their employees. 

Overall, the informal economy 

is more flexible than the formal 

economy, has lower barriers to 

entry; and therefore plays a vital 

role in sustaining a country’s 

population in times of economic 

decline and recession, and high 

unemployment. As a result, it is 

important for government and 

governing bodies responsible 

for managing the informal 

economy, to understand the 

various definitions and approaches 

most relevant for that within their 

particular jurisdictions, in order 

to know how best to support, 

manage and grow it. 

Leon Katambwe is a lecturer at 

Durban University of Technology 

and a Senior Development 

Economist at Urban-Econ, 

dealing with small business 

development (including 

informal trading, cooperatives, 

SMMEs and entrepreneurship 

development). He is a member 

of the Southern African Research 

& Innovation Management 

Association (SARIMA) and has 

undertaken over 18 studies, 

strategies and policies related 

to the informal economy 

and entrepreneurship locally, 

provincially, nationally and 

internationally. Leon has recently 

published a book titled: 

“DEVELOPMENT IN 

PRACTICE: A READER 

FRIENDLY MANUAL 

FOR PUBLIC AND 

PRIVATE DEVELOPMENT 

PRACTITIONERS”.

THE CURRENT STATE OF THE INFORMAL 

ECONOMY IN ETHEKWINI: 

OPPORTUNITIES AND CONSTRAINTS TO GROWTH 

THE INFORMAL ECONOMY 1 (OR INFORMAL SECTOR) IS THE COMPONENT OF AN 

ECONOMY THAT IS NEITHER TAXED, NOR MONITORED IN THE CONVENTIONAL SENSE 

BY GOVERNMENT. WHILE ITS ACTIVITIES ARE NOT INCLUDED IN THE GROSS DOMESTIC 

PRODUCT (GDP), THE SECTOR MAKES UP A SIGNIFICANT PORTION OF THE ECONOMIES 

IN DEVELOPING COUNTRIES AS IT PROVIDES A QUICK OR EASY ENTRY FOR THOSE 

ISOLATED FROM THE MAINSTREAM ECONOMY. 

According to the National 

Development Plan, these 

businesses include (amongst 

other economic activities) 

taxi operators, spaza shops, 

taverns, casual construction 

workers, hawkers and informal 

subcontractors. 

Historically, the informal economy 

has been viewed as a social ill, 

and has been perceived as being 

synonymous with informal traders. 

However, some are of the 

view that the modern or new 

informal sector is led by creative 

professionals such as artists, 

architects, designers, musicians 

and software developers. 

Although it is often stigmatized as 

problematic and unmanageable, 

it provides significant economic 

opportunities for the poor and 

the unemployed, and has been 

expanding rapidly in the last five 

decades. 

It includes large numbers of 

micromanufacturers, retailers, 

street traders, micro farmers, 

contractors and crafters. The 

formal economy on its own cannot 

address 

joblessness, especially within the 

current context of slow economic 

growth and high structural 

unemployment. Without effective 

informal economy support, 

holistic economic growth, poverty, 

inequality and joblessness cannot 

be addressed. 

The informal economy is an 

important long-term driver 

of economic growth. It offers 

significant job creation potential 

and supports large numbers of 

livelihoods which are critical for the 

poorest of the poor. All spheres 

of government acknowledge the 

vital role played by the sector and 

the ongoing policy challenge has 

been to integrate the informal 

economy into the formal sector 

through various support platforms 

and linkages with big businesses. 

Greater detail on these aspects 

from a local perspective are 

described elsewhere in this 

publication. Global Insight’s data 

in the graph below shows that the 

total employment in the informal 

sector during 2014/15 was 

approximately 2, 4-million people 

nationally, comprising 16% of 

the overall total employment in 

the country. 

1 

The International Labour Organisation (ILO) defines informal employment as private unincorporated enterprises, i.e., enterprises owned by individuals 

or households that are not constituted as separate legal entities independently of their owners, and for which no complete accounts are available 

that would permit a financial separation of the production activities of the enterprise from the other activities of its owner(s). Private unincorporated 

enterprises include unincorporated enterprises owned and operated by individual household members or by several members of the household, as 

well as unincorporated partnerships and co-operatives formed by members of different households, if they lack complete sets of accounts. Ocampo, 

A.J. 2005 “The Inequality Predicament: Report on the World Social Situation 2005”, Produced by the United Nations Department of Public Information, 

United Nations publication -New York. 


THE CURRENT STATE OF THE INFORMAL 

ECONOMY IN ETHEKWINI: 

OPPORTUNITIES AND CONSTRAINTS TO GROWTH (continued) 

KwaZulu-Natal and eThekwini had 

446 000 and 197 000 people in 

the same period, making up 18% 

and 16% of the provincial and local 

employment respectively. 

In eThekwini, the biggest employer 

in the informal sector appears to 

be trade, followed by construction, 

community services and transport. 

NATIONAL INFORMAL ECONOMY EMPLOYMENT: 

2014/15 

Community 

Services 

Finance 

Transport 

Trade 

Construction 

Manufacturing 

- 

0 200 000 400 000 600 000 800 000 1 000 000 1 200 000 

Manufacturing Construction Trade Transport Finance Community 

Service 

EThekwini 14 843 30 426 88 833 24 925 12 060 25 849 

KwaZulu-Natal 33 652 72 360 197 751 51 644 24 866 66 355 

National 209 542 369 514 1 014 058 217 019 169 443 373 087 

Source: IHS Global Insight 

According to Statistics South Africa, the informal sector’s contribution to gross domestic product nationally 

averages less than 1% per year and its contribution to employment has averaged 16% per year – based on a 

survey undertaken for the period 2001-2013. The survey showed only 17% had entered the informal sector out of 

choice as the rest had no other option due to unemployment.

COMPOUND GROWTH RATES FOR ETHEKWINI’S INFORMAL SECTORS: 

2010-2014 

Community Services 

Finance 

Transport 

Trade 

Construction 


-5 -4 -3 -2 -1 0 1 2 3 4 5 6 

Source: Statistics South Africa 

The above graph shows the growth of the subsectors in the eThekwini informal economy for the period 2010-2014. 

The fastest-growing sector was construction at 5,4%, followed by community services (5,1%), transport (2,5%) and 

finance (1,3%). The manufacturing sector had negative growth (-3,6%) during this period. 

It is important to note that, by 

definition, none of the economic 

activities that fall under the 

agriculture and mining sectors 

are considered part of informal 

employment. Mining is excluded 

because unregistered mining 

activity is illegal. 

Agriculture is excluded because, 

although there may be many 

types of informal agricultural 

employment, the way the data 

is collected makes it difficult to 

isolate formal and informal activity. 

While the informal economy may 

not be strictly legal, the sector 

produces and distributes legal 

goods and services and according 

to the ILO definition, it does not 

include the criminal economy. 

It is therefore accepted as part of 

the market economy since it entails 

activities for sale and profit. 

As long as the formal business 

environment is encumbered with 

numerous regulations, the informal 

sector may always exist as an 

attempt to evade them. 

The eThekwini Municipality, 

together with a host of external 

entities that support the sector 

is therefore faced with ongoing 

challenges to ensure the sector 

is allowed to thrive in times of 

abject poverty, unemployment, 

job losses, lack of adequate skills 

and marginalisation from the mainstream 

economy. 

The global urban population is 

expected to double by 2050 and 

the United Nations estimates 

71,3% of the South African 

population will live in urban areas 

by 2030, reaching 80% by 2050. 

With the city’s vulnerability to the 

globalised economy and largescale 

unemployment, the informal 

economy acts as a lifeline for 

employment creation. 


THE LED PLAN DEVELOPMENT IN INFORMAL 

SETTLEMENT PRECINCTS AND SUB-PRECINCTS 

PROJECT - PARTICIPATIVE ECONOMIC ACTION PLANNING (PEAP) 

ETHEKWINI MUNICIPALITY IS IN THE PROCESS OF EXPANDING THE ROLL OUT OF ITS 

PROCESS OF LED PLANNING USING THE PARTICIPATIVE (LOCAL) ECONOMIC ACTION 

PLANNING (PEAP) APPROACH WITHIN INFORMAL SETTLEMENT PRECINCTS. 

The main objectives of PEAPs is 

the development of empowering 

LED plans which build on local 

assets and resources and can be 

implemented principally by local 

economic actors (especially those 

in the informal economy) with 

limited outside intervention and 

support. 

A key principle is to move to a 

different ‘mode’ of LED which is 

not primarily focused on ‘projects’ 

and government funding but 

instead on creating a more 

enabling environment for local 

LED actors to ‘do it for themselves’ 

(typically focusing on removing 

obstacles and improving access to 

opportunities). 

The following sub precincts have undergone PEAP planning in the current financial year. 

Precinct -Region 

Sub-Precinct 

Central 

Greater Hammarsdale - Mpumalanga 

North 

Umlazi 

Greater INK 

Puntan’s Hill (Ward 25) 

Kennedy Road (Ward 22) 

Zibuse (Ward 4) 

Mophela (Ward 5) 

Blackburn (Ward 102) 

Redcliff (Ward 60) 

Section E (Ward 80) 

Section V (Ward 76) 

KwaDabeka (Ward 20) 

Ntuzuma (Ward 38) 

It is recognized that a zone is too large as a functional unit for meaningful and effective community participation, 

action planning and urban management and that these zones therefore need to be divided into precincts and subprecincts. 

A previous study was undertaken in 2011/2012 which sought to define precincts and sub-precincts and this 

informed the pilot stage of this work.

A series of workshops held for 

the project have showed that 

economic development for local 

township-based micro and informal 

businesses happen better when 

the locals themselves are hands on, 

have a plan and accordingly chart 

their OWN path to development. 

PEAPs workshops focus on three 

main ideas: 

• Taking an asset inventory of 

thelocal area participants are 

living in 

• Having participants suggest 

waysto practically utilise 

such assets toimprove their 

livelihood 

• Writing an action plan that 

participants themselves 

willimplement with as little 

help as possible. 

These facilitated workshops 

take a period of about four (4) 

months to complete including 

initial consultations with relevant 

stakeholders such as ward 

councillors, amakhosi and or 

traditional leaders. These 

workshops are followed by 

implementation which may take 

another six (6) months. After this 

period, a change in the way locals 

do business is often noticed, 

and their attitude to economic 

development often improves for 

the better. 

At Ntuzuma and KwaDabeka, 

participants have been able to 

arrange agricultural training with 

SEDA, organise themselves into 

formal structures, attend business 

summits to network, and visit 

several government agencies to 

get a sense of what programmes 

they offer to small businesses. 

Participants are encouraged 

to undertake these initiatives 

independently and thus be action 

orientated, as PEAPs moves 

away from having locals wait for 

hand-outs and interventions from 

government or external donors. 

PEAPs, as a form of Asset Based 

Community Development (ABCD), 

is a better micro and informal 

business development approach 

in that it sparks local community’s 

imagination to answer the 

following fundamental question: 

“How best can we, as informal 

business owners, utilise the assets 

located in our community in order 

to improve our livelihood?” 

In putting together the action plan- 

Phase 5 of the PEAPs projectcommunity 

members and 

businesses utilise each other’s skills 

to tackle this question. 

In this regard, the PEAPs approach 

also promotes social cohesion 

which is essential for any 

community‘s wellbeing. 

MICRO AND INFORMAL ENTERPRISES IN THE SPOTLIGHT 

A ground-breaking initiative 

The Informal Economy Support 

Programme (IESP), the first 

of its kind in South Africa, is a 

specialised business support 

initiative. 

The City’s Economic Development 

and Investment Promotions Unit 

has undertaken the IESP jointly 

with an NPO, Project Preparation 

Trust (PPT), who secured the 

funding for the programme from 

the National Treasury’s Jobs Fund 

project. The IESP pilot phase was 

then co-funded by eThekwini 

Municipality and the Jobs Fund. 

IESP reaches micro and informal 

enterprises (MIEs) in innovative, 

and cost-efficient ways. Although 

it is now accepted that MIEs and 

the informal economy are critical 

in addressing joblessness and 

sustainable economic growth 

in South Africa, there remains 

a vacuum of effective support 

and a range of other barriers. 

The IESP unlocks untapped job 

creation and enterprise potential 

through niche-focused services 

and other structured interventions 

across a range of sectors (e.g. 

manufacturing, specialist retail, 

services, contracting and 

agriculture). It also facilitates 

positive change in the local 

business environment (including 

smarter actions and investments 

by government and established 

business). 


HOW ARE THE ENTERPRISES SUPPORTED? 

Targeted support is provided to each 

MIE which meets specific ‘entrance’ 

criteria (e.g. enterprise viability, 

job creation and entrepreneur 

commitment). They may be cooperatives, 

sole proprietors or 

closed corporations but do not 

have to be formally registered. In 

delivering services to MIEs care is 

taken to avoid creating dependency. 

Entrepreneurs are required to 

take full responsibility for driving 

their own business development. 

Targeted support may include: 

· Profitability and cash-flow 

analysis; 

· Record and book-keeping; 

· Workspace access and 

optimisation (e.g. layout); 

· Accessing finance for working 

capital or capital acquisitions; 

· Markets and selling: e.g. 

identifying and accessing new 

markets, establishing new 

business collaborations; 

· Human resources management 

and compliance; 

· Product/service and production: 

e.g. refinement, re-development, 

differentiation, improved 

manufacturing methods; 

· Logistics e.g. bulk ordering 

direct from wholesalers, shared 

transport to market; 

· Legal and compliance: e.g. 

income tax, VAT, health safety 

etc.; 

· Procurement e.g. of raw 

materials or input services; 

· Training and skills development 

including ‘Isiqalo’ (basic business 

skills) and on-site sector skills 

training (e.g. ‘cut make and 

trim’, machinist training; product 

design; factory layout). 

IMPACTS AND ACHIEVEMENTS 

The IESP is on track to exceed all 

of its target indicators for the threeyear 

pilot phase. Achievements and 

impacts to date include: 

· Creation of 200 new permanent 

jobs within 19 MIEs with a further 

430 jobs in the pipeline; 

· 182 MIEs identified, assessed 

and screened of which 50 have 

been assisted in various ways; 

· 180 people received various 

types of training; 

· Establishment of significant 

delivery capacity and enabling 

collaborations; 

· Development of toolkits and 

knowledge resources; 

· Strengthening of City’s broader 

programme of support for the 

informal economy and MIEs; 

· Greater stakeholder 

understanding of the informal 

economy and MIEs. 

· Substantial refinement of the 

programme method; 

The value of the IESP in respect 

of its contribution to economic 

development extends well beyond 

job creation. The value of the 

programme also lies in other areas 

such as: 

· Strengthening micro-enterprises 

(e.g. in terms of their business 

models and approaches). 

· Strengthening microentrepreneurs 

(in terms of their 

skills and capacities). 

· Helping to create a stronger 

local culture of entrepreneurship. 

· Providing information access to 

MIEs and other stakeholders to. 

IESP table of achievements 

against key project indicators 

No. Targeted 

No. Achieved 

to date (2016) 

% Achieved 

to date 

New permanent jobs 216 200 92% 

Number of enterprises assisted 81 183 225 % 

Number of beneficiaries trained 120 180 150% 

Matrix job created + Potential remaining 

40% 

27% 

15% 

10% 

8% 

0% 


Agriculture 

Construction 

Retail 

Specialised 

Services 

Retail 

Unspecialised

WARWICK JUNCTION: 

DURBAN’S HUB FOR INFORMAL TRADE 

WARWICK JUNCTION LIES ON THE EDGE OF DURBAN’S INNER-CITY AND IS THE 

PRIMARY PUBLIC TRANSPORT INTERCHANGE IN THE CITY. ON AN AVERAGE DAY THE 

AREA ACCOMMODATES APPROXIMATELY 460 000 COMMUTERS, AND AT LEAST 6 000 

STREET TRADERS. 

Given the convergence of rail, 

taxi and bus transport, this area 

has always been a natural market 

for street traders. 

Currently this is the only informally 

structured market in a public 

space of this magnitude, and thus 

establishes itself as the single most 

authentic African market that South 

Africa has to offer. 

The products available vary from 

beadwork, traditional arts and 

crafts, traditional cuisine, fresh 

produce, music and entertainment 

merchandise, clothing, accessories 

and traditional medicine. 

To appreciate the diversity and 

success of the markets today, 

the historical significance of the 

Warwick area is important. 

Steeped in racial discrimination, 

the Warwick area was neglected 

and abandoned by the apartheid 

government. It was initially Indian 

indentured labourers who began 

trading on the street sidewalks in 

this area, and for example, built 

the beautiful Badsha Peer Shrine 

which remains an iconic piece of 

architecture in Brook Street. 

With the gradual influx of black 

African traders into the area, 

Warwick became a central hub 

of commerce and trading activity 

despite constant harassment by 

the apartheid police. 

It was only in the late 1980s that 

traders were given recognition 

for their economic contribution 

and granted permission to remain 

in specifically allocated trading 

locations on the streets. 

Since then trader committees have 

been established to work alongside 

the Municipality and various 

sector support organizations to 

create and maintain an effective 

informal trading location benefiting 

the traders and the people who 

depend on these vendors’ income. 

Business Support Markets and 

Tourism Unit is the custodian of the 

informal economy in the municipal 

region. 

The management and 

development of informal economy, 

especially street trading and 

retail markets, is a task involving 

declaration of management zones, 

demarcation of trading areas, 

issuing of permits, organizing 

traders into area committees that 

feed into citywide forum, and the 

ongoing collection of rentals. 

Coupled with this is the necessary 

enforcement of regulations and 

dispute resolution where the 

interests of residents, traders 

and the formal economy come 

into conflict. The numbers of 

retail and flea markets, business 

incubators/hives have been set up 

to provide entry level for emerging 

entrepreneurs. 

The key Function Areas of the 

Informal Economy are: 

• To provide a management 

service in accordance with 

Council policy and within 

National, Provincial and other 

legislation to trading in public 

spaces. 

• Identify new and existing 

areas for management, 

upgrading and development for 

recommendation to Council and 

their funding sources. 

• Provide community consultation 

service with relevant 

stakeholders on behalf of 

Council. 

• Provide a related public 

enquiries service. 

• Identify, implement and monitor 

support programme and 

opportunities. 

• Initiate and provide policy 

documents related to all street 

trading issues in council. 

Sector Priorities 

• To identify and agree on 

specific trading zones in order 

to ensure effective enforcement 

and regulation with reasonable 

trading opportunities. 

• To develop linkages between 

the first and second economies, 

supporting the “graduation” of 

street traders from the second to 

the first economy. 

• To make business development 

support and capacity building 

services available to traders in 

the informal economy. 

• To find synergies between street 

traders and formal businesses 

through specific programmes, 

such as cleaning and greening 

and formal businesses 

“adopting” traders. 


CASE STUDIES OF INFORMAL TRADE 

MITCHELLS PLAIN: PLANNING INFORMAL TRADE TRANSFORMATION 

IN AN URBAN RENEWAL PROJECT 

BEST PRACTICE CASE STUDIES: 

HOW OTHER CITIES MANAGE 

INFORMALITY 

THE JOURNEY TO 

SUPPORTING THE 

INFORMAL ECONOMY 

IN THE MITCHELL’S 

PLAIN TOWN CENTRE 

(MPTC) URBAN RENEWAL 

PROJECT 

Mitchell’s Plain is an area in the City 

of Cape Town, with a population 

of about 300 000 people. The 

area was developed in the 

1970s, for individuals displaced 

through apartheid laws. Mitchell’s 

Plain is now characterised by 

sprawling, single residential 

units and large desolate areas 

fractured by wide arterial roads. 

It faces a number of challenges, 

including high crime rates, high 

levels of unemployment; limited 

educational opportunities; and 

low monthly household incomes. 

In the heart of Mitchell’s Plain is 

the MPTC, which is the primary 

location for the former township’s 

business activity, and a melting pot 

of formal and informal business. 

By 2003, the MPTC was the thirdbusiest 

nodal public transport 

interchange for rail, bus and taxi 

transportation in the metropolitan 

area. It was also the busiest bus 

station in the Western Cape, and 

had roughly 75 000 people moving 

through the interchange during 

peak morning and afternoon 

periods (SALGA, 2012) 2 . 

Key Challenges 

After conducting an evaluation of 

the area, the City of Cape Town’s 

planners identified the fact that, 

amongst other concerns, trader 

facilities, taxi ranks, sanitation, 

lighting and emergency vehicle 

mobility, were insufficient to 

manage the volume of activities 

occurring in the area. This was 

compounded with frequent and 

violent conflict in the area. This 

provided significant challenges 

for informal trade, and the 

integration of formal and informal 

business activity. In response, 

the City developed the MPTC 

Urban Renewal Project, which 

including, amongst other goals; 

aimed for a safe, convenient, 

seamless environment for public 

transport users; a safe and pleasant 

environment for shoppers; as much 

informal trading as possible in a 

prime location; and opportunities 

for further retail development. The 

project included the upgrade of 

public transport, safety, mobility, 

and formal and informal retail, 

infrastructure. 

The process of supporting and 

managing informal trade 

A key component of the MTPC 

projects was the informal trade 

infrastructure upgrade. At the 

project’s inception, there were 

more than 1 000 active traders in 

the area, which belonged to six 

independent trader associations. 

Significant conflict existed amongst 

these associations. Formal 

businesses in the area had also 

recorded several grievances as a 

result of the traders reducing the 

ease of movement in trade areas 

and walkways. They also raised 

concerns about the decline in 

their business activity, which may 

have been attributable to the high 

crime rate and mismanagement of 

informal trade activities. 

The relationship between traders 

and law enforcement was 

particularly strained, and reached 

a climax in March 2008, when 

police confiscated and destroyed 

the traders’ goods. Within the 

same month, the City of Cape 

Town issued a press release 

condemning the excessive force 

issued by the police. A decisive 

moment in the City of Cape Town’s 

management of informal traders 

was in December 2008, when 

the City’s Full Council, in terms 

of the Businesses Act 71 of 1991, 

resolved to create 1 107 trading 

opportunities in the town centre, 

in squares and in market areas. 

The resolution also stated that 

informal trading would no longer 

be allowed to take place outside 

of designated market areas. It was 

also decided that a trading permit 

would cost R80,00. 

A key challenge encountered by 

the City’s area managers, was 

that informal traders continued 

to trade in areas where informal 

trade was now illegal, resulting in 

increased conflict between formal 

businesses and informal traders. 

The traders felt strongly about the 

fact that they were now forced 

to trade on unsafe vacant land, 

with significantly less foot traffic. 

City officials then decided that a 

compromise had to be reached, 

and it was decided that a trading 

plan 3 would be created, which 

would require the City to create 

adequate and attractive market 

facilities in strategic locations, 

large enough to accommodate all 

traders. These areas would also be 

well-managed in terms of storage, 

waste disposal and logistics. In 

order to reach this consensus, the 

City began negotiating a trading 

plan with roughly 1 000 traders. 

This plan would dictate where 

informal trading could take place in 

the town centre, and would specify 

how the trading bays would be 

allocated 4 . 

Extensive consultation was planned 

to ensure that the trading plan

had the buy-in and support of all 

relevant stakeholders. During this 

process, several objections were 

raised by a traders’ association, 

Concerned Hawkers and Traders 

Association (CHATA), which 

objected to the relocation of 

traders, as they felt this would have 

a significant negative impact on 

their businesses. In response, the 

City extended their consultation 

process, gathering evidence that 

stakeholders felt the allocations, as 

well as the process to grant them, 

were procedurally fair. 

Outcomes 

Outcomes of the town 

upgrades included easing 

of traffic congestion and 

pedestrianisation of key areas; 

security enhancements through 

street lighting and CCTV cameras, 

enhanced public open spaces 

through planting of tress, improved 

paving and the installation of 

play equipment and public art. 

Specifically, informal traders 

benefited from the covering of 

the central market square, which 

is home to some 1 200 informal 

traders. Due to the upgrade, 

the traders are now able to take 

advantage of the thoroughfare 

between the bus terminal and 

surrounding taxi ranks, and trade 

in a safer and more dignified 

environment. The City of Cape 

Town is adamant that it sees 

the informal trading sector as 

a vital part of its economy, and 

that it encourages and supports 

entrepreneurship. 

Lessons learnt 

To date, the MPTC project (the 

physical upgrades) has been 

lauded as a best practice case 

study by National Treasury. Of 

equal value to the final upgrades 

however, is the process of open 

consultation and continuous 

communication with stakeholders 

on the ground, in particular, the 

informal traders. This provides 

a key lesson: the informal 

economy (including informal 

public transport and informal 

retail), are often the life blood of 

any town centre. Any solution 

directed at upgrading a town 

centre must make provision for 

open consultation and negotiation 

processes with stakeholders in the 

informal economy. The process for 

developing the informal economy 

must make provision for, welcome 

and allow healthy disagreements. 

In response to these, planners 

must be open to new ideas and 

concerns raised by informal 

businesses, and be flexible in 

adapting their planning solutions. 

The MPTC upgrade is an example 

that, consultative planning, 

although difficult, can result in best 

practice, exemplary integrated 

solutions. 

2 SALGA Western Cape: LED Case Study 4, Mitchell’s Plain Town Centre: Planning Informal Trade Transformation in an Urban 

Renewal Project, March 2012 

3 

A trading plan, as stipulated in the by-law, is necessary where there is significant overlap of activities between formal and 

informal businesses. 

4 

“The allocation of bays had to be carefully negotiated with existing traders. Determining the size and location of trading 

bays had to take into consideration the type of trade as well as the length of time a certain trader had been operating in 

the area. Determining the historical claims was especially difficult. As there were 6 different trader associations, the traders 

were encouraged to organize into an umbrella body structure. A number of workshops and monthly meetings were held 

with this body dealing with allocation and facility details. In addition because of conflicts between trader associations direct 

communication was needed, this involved the delivery of letters to different traders as well as face to face communication 

between officials and traders.” (SALGA, 2012) 


INFORMAL WASTE PICKERS AND 

THEIR ROLE IN ETHEKWINI 

THE INFORMAL ECONOMY IN THE CITY CANNOT BE DISCUSSED WITHOUT ATTENTION 

BEING PAID TO INFORMAL WASTE COLLECTORS. 

Much controversy has surrounded 

this sector of society, with many 

advocating for their protection 

and support, because of their 

significant contribution to 

waste recycling in the City, and 

some adamant that they often 

contribute to further litter 

creation, a degeneration of area 

aesthetic and ultimately, business 

flight. 

EThekwini Municipality’s Economic 

Development and Investment 

Promotions Unit, in partnership with 

Durban Solid Waste, contracted 

a service provider to conduct an 

assessment of the City’s waste 

economy. 

The research included a survey of 

informal waste pickers in the City; 

the first of its kind in South Africa. 

The survey was conducted on 153 

informal waste pickers throughout 

eThekwini’s six regional areas, 

with care being taken to ensure 

a geographically representative 

sample. The results of this survey 

address several interesting 

questions on the City’s waste 

pickers, and raise even further 

questions. 

Is it worthwhile recycling? 

What value does this recycling 

provide to them? 

What value does it provide to the 

City? Is there a central coordinator/ 

organisation that oversees this? 

What accountability systems or 

frameworks are there in informal 

recycling?A brief overview of the 

survey’s results, addresses some of 

these questions: 

Firstly, who are the City’s informal 

recycler/ primary wastepickers? 

Informal recyclers in this case, are 

also referred to as landfill pickers, 

or street pickers. They collect 

recyclables door to door on foot 

and neither charge for collection 

nor buy recyclables. 

They often have informal 

relationships with industrial 

and commercial businesses, 

are not currently recognized or 

supported by the municipality for 

their services, and primarily sort 

recyclables on walkways and on 

the side of the road due to lack of 

provision of an allocated space. 

The survey shows that informal 

recyclers are often the most 

vulnerable of the City’s citizens. 

The majority of primary collectors 

interviewed (93%) were South 

African citizens. 62% were female, 

and 61% were 40 years old or 

younger (exactly a third were 30 

years old or younger). 61% either 

lived in informal dwellings, or were 

homeless or lived in a shelter. 

It’s therefore clear that recycling 

provides a form of temporary social 

security, to some of eThekwini’s 

most vulnerable citizens. 

80% of those interviewed indicated 

that this was their primary source

of income. For the majority of 

those supplementing their income 

further, social grants were the 

primary additional source (primary 

recycling therefore assists many 

within this target group). 

86% of them identified themselves 

as the sole breadwinners of their 

households, and on average, 

each of them supported 3,2 

dependants (this is an average, 

as some do not have dependants 

and solely support themselves, 

while some support more than 10 

people on recycling). For the most 

part, however, primary informal 

waste collecting does not appear 

to be a long term livelihood, as 

63% of respondents of primary 

collectors had only been operating 

for 0-3 years. In monetary terms, 

depending on the type of 

recyclables collected, informal 

collectors noted that they make up 

to R140 on a good day, and R50 

on a bad day. 

These are primarily cardboard 

collectors; cardboard being 

the main recyclable collected 

due to its availability and easier 

transportability. Most higher 

income earners within this trade 

are metal collectors who collect 

enough waste metal by hand to 

fill a bakkie or truck load before 

transporting to the scrap yard. 

ON A BAD DAY, THIS 

SAME GROUP EARNED 

ANYWHERE FROM R150 

TO R2 999, WITH THE 

MAJORITY EARNING NO 

LESS THAN R500 5 . 

What is the social and economic 

contribution of informal waste 

picking to recycling in the City? 

The research conducted estimated 

volumes collected throughout the 

City at 12 tons per annum; with 

1 600 people on average recycling 

(as informal waste pickers) as a 

livelihood. 

These recyclables are then 

collected by secondary collectors, 

who include the MPact affiliated 

orange bag collectors, buy-back 

centres/drop-off centres /garden 

sites, independent buyers and 

sellers (e.g. the ‘bakkie brigade’), 

waste management companies, 

scrap dealers and other secondary 

collectors (there are an estimated 

62 role players in this space in the 

City). These secondary collectors 

in total, account for an estimated 

6 400 jobs in the City. Finally, it 

is estimated that 16 companies 

operate as manufacturers (within 

this space). These are companies 

that manufacture recyclables 

to be used as further input into 

manufacturing processes; or that 

utilise recycled inputs in their 

own processes, or do both. This 

activity is estimated to contribute 

to sustaining 4 600 jobs across 

different sectors in the economy 6 . 

Recycling by primary informal 

waste pickers is therefore 

important in the broader economy 

of the City, and steps should be 

taken to ensure that it neither a 

peripheral, nor isolated activity. 

Despite the significant contribution 

by informal waste pickers, it is 

important to note that there are no 

identified formal associations or 

organised representation groups 

by the informal waste pickers 

themselves 7 ; making it hard to 

interact with them effectively as a 

collective. 

This represents a significant gap 

in the recycling system. However, 

active involvement by Asiye 

eTafuleni, an NPO in the industry, 

(Asiye eTafuleni partnered with 

the service provider in conducting 

the survey), goes some way to 

bridging this gap. 

During the survey, about 10% 

of respondents indicated that 

they received support from Asiye 

eTafuleni, through the provision of 

trolleys and other equipment to 

assist in recycling. 

Numerous complaints have 

been received by, particularly, 

businesses in the City, about 

the uncoordinated and ‘messy’ 

manner in which this type of 

recycling is conducted. However 

role players (particularly DSW) 

responsible for this aspect of urban 

management have lamented that 

addressing these issues effectively 

is near impossible, as there are 

no collective bodies comprised of 

recyclers themselves. 

They point out that those buying 

waste from informal waste pickers 

(particularly cardboard) should 

also shoulder the blame, as 

they continue to purchase wet 

cardboard, and purchase the 

cardboard haphazardly throughout 

the City. 

The absence of an association 

for these secondary collectors, or 

tracking mechanisms, also make 

this impossible to regulate. 

Given their valuable contribution 

to the City’s economy, an 

innovative way of incorporating 

this form of recycling into the City 

is required. What may assist in 

addressing these challenges is the 

development of sorting spaces; 

a number of which eThekwini 

Municipality has committed to 

building, to address these issues. 

Recycling in the City is clearly of 

significant value, and informal 

waste collectors are important 

role players which need to be 

acknowledged and included. A 

more sustainable and innovative 

way of inclusion is required 

however, which requires formal 

representation from the recyclers 

themselves, as well as innovative 

urban management by the City. 


INFORMAL 

WASTE PICKERS 

SMALL SECONDARY COLLECTORS 

LARGE SECONDARY COLLECTORS 

RECYCLER 

MANUFACTURING INDUSTRY 

RECYCLED PRODUCT 

**The recycling process varies from product to product, and does not always follow the exact flow as above 

5 

At the time of the survey, informal collectors received on average R1.55/kg for plastic, 69c/kg for cardboard, R1/kg for cans, and 

R1/kg for paper. They did not specify metals prices, but metals recyclers made significantly higher returns. 

6 

It must be noted that recycling at the manufacturing and secondary collector level also includes material received from role 

players other than primary waste pickers. Recyclables received from these collectors are nevertheless significantly important, and 

supplement, and in some cases, are the primary input into all products made from recycled material. 

7 

There was no clear indication of such active bodies identified in the survey.

Q&A: PROFILING BUSINESSES IN 

THE INFORMAL SPACE 

DISCUSSIONS ABOUT BUSINESSES IN THE INFORMAL SPACE COULD NOT BE COMPLETE 

WITHOUT DIRECT DISCUSSIONS AND COMMENTARIES FROM INFORMAL BUSINESS 

OWNERS THEMSELVES. 

The EDGE team met with some informal businesses to find out from them what they do, what value they add to 

the economy, and what support they need, to grow further. The business owners were humble yet dynamic and 

impressive. After listening to their stories, it is clear that the value of the informal economy also lies in its flexibility 

and resilience (more than the formal economy), and its ability to provide business and employment opportunities 

where the formal economy fails to. 

UMGIBE® FARMING 

ORGANICS AND 

TRAINING INSTITUTE 

Business Profile: 

Umgibe® Farming and Organics 

Training Institute, Located in 

Mayville. 

Q: What does the business do? 

A: Umgibe® is an innovative, yet 

simple urban farming method that 

uses plastic bags as a medium of 

growing vegetables and herbs. 

The result is that our food is grown 

organically and uses less space. 

It requires no weeding and no 

pesticides, and uses very little 

water. It also requires minimal 

physical labour, so is ‘accessibilityfriendly’, 

for old people and 

people with disabilities. 

Q: What are the different 

branches of the business? 

A: Umgibe® has three main 

business activities: urban farming, 

agri-processing, and upcycling. 

Apart from growing the crops 

ourselves, we have a network of 

cooperatives who we have trained 

to farm using the Umgibe® 

method, that supply us as well. 

With the vegetables and herbs 

grown with Umgibe® methods, we 

supply hospitals, restaurants and 

12 Shoprite stores in north KZN. 

We also process the vegetables 

and make frozen vegetable mixes 

and bottled vegetable products, 

although we have not yet fully 

launched them on the market. 

These include sauerkraut, organic 

juices, nutritional instant porridges, 

and other processed healthy 

foods, (I’m also a herbologist). 

Just to illustrate the value of 

this food processing; a head of 

cabbage would sell for R6-R8 on 

the informal market. I sell a bottle 

of sauerkraut (processed cabbage 

with probiotics and other valuable 

bacteria) for R50. From one 

cabbage I can get 3 or 4 bottles. 

So one cabbage can fetch about 

R200, as opposed to R6 or R8. In 

this way I’m able to empower the 

businesses in my network to be 

more sustainable. 

Lastly, we also upcycle and make 

bags out of tyre tubes. There 

are plenty of dumped tyres lying 

around where we get them from! 

Business Owner Profile: 

Mrs. Nonhlanhla Joye 1 

Q: How did you come up with 

the business idea? 

A: I used to be involved in 

a farming cooperative in 

1 

071 137 7779; info@umgibe.org 



THE INFORMAL SPACE 

Umbumbulu, but fell very ill, was 

bed ridden, and could not work. I 

was the breadwinner at home so 

I had to find a way to still provide 

food for my family. I decided to 

grow vegetables in my backyard, 

but was devastated when one day, 

I went outside and found them 

all gone. They had been eaten 

by chickens! I became depressed 

and had a pity party. I returned 

outside after two days and looked 

at my ladder leaning against the 

wall. I wondered how I could plant 

crops above the ground, where 

the chickens don’t reach, using 

the ladder. I had an epiphany, 

and after some trial and error, the 

innovation of Umgibe® was born! 

(In isiZulu, “umgibe” is the word 

for a rope on which we would 

hang clothing when we could not 

afford full cupboards.) 

I work with people in my 

community because I’ve noticed 

that many of them do the same 

thing that I do (farm vegetables), 

but we work solo. I wanted to 

promote unity. Also, many of them 

have a passion for farming, but 

do not have sufficient business 

skills, or access to markets. I 

also involved the youth because 

I noticed that ‘oomama’ do 

not work with youth, and it is 

important to transfer the skills to 

them. 

The upcycling came about 

because often, our clients would 

take a long time to pay. We 

had to find a way to wait for 

payments without going hungry. 

So it became a way of bringing in 

supplementary income. 

Q: How long have you been 

operating? 

A: I have been farming for a long 

time, but Umgibe® started in late 

2014. 

Business Impact: 

Q: How many people do you 

employ? 

A: There are 5 people employed 

directly by Umgibe®, but the 

network includes 33 cooperatives 

(each with a minimum of 5 

people). These are the businesses 

who have been trained to farm 

with the Umgibe® method, and 

that supply us with vegetables. 

These cooperatives also make 

the bags and other products 

through upcycling. There is also 

an Umgibe® youth network led 

by Ndumiso Myeni, to encourage 

youth to also get involved with the 

agri-business and upcycling, and 

to ensure sustainability in the long 

term. 

Also, I used to notice that 

‘oomama’ that grow vegetables 

in my community were making 

little returns. They would grow 

the vegetables very well, but 

would not know where or who to 

sell them to. Umgibe® provides 

access to markets and a source 

of income for people in my 

community. 

Reasons for Informality: 

Q: You were initially an informal 

business. Why did you decide to 

become formal? 

A: In 2015 I was asked by the 

KZN Department of Agriculture 

and Rural Development to take 

part in their Female Entrepreneur 

in Agriculture awards, but one 

of their requirements was that I 

register my business. Neither the 

business nor I were ready (it comes 

with expenses!) but I am glad I 

did, because I have had access to 

markets and entities that I would 

not otherwise have been able to 

work with. I would consider the 

business a ‘formalised’ informal

usiness, because it hasn’t reached 

the level and stability that it needs 

to, and still operates in a largely 

informal space, through informal 

networks. For example, I file my 

tax returns but I have not needed 

(and would not be able) to pay tax 

because the business is not at that 

level yet. Everything we do, we do 

right here at home. My business is 

formal only by certificate, so I still 

consider Umgibe® an informal 

business. 

Plans for the Future: 

Q: What are your goals and 

plans for the business in the near 

future? 

A: Our aims are to: 

• build a factory for Umgibe®, 

so that we can provide a larger 

space for the community 

members who grow vegetables 

to be able to grow them in 

much larger quantities. 

• expand our client base by 

having contractual agreements 

with schools, correctional 

services departments, etc. 

• develop an Umgibe® app 

• directly employ 30 people 

by 2017 (excluding the cooperatives 

we work with), 

create a network around the 

processed foods, so that I can 

officially launch them that way. 

(We do not want to rush to put 

them on the shelves, because 

the percentage that the supplier 

gets is often very low, and it will 

not be sustainable.) 

• purchase more vehicle fleet for 

vegetable distribution, as the 

business expands. 

• sell Umgibe® foldable 

structures to retailers such as 

hardware stores (we have found 

a manufacturer in Pinetown who 

can make them out of the used 

plastic bags we use to grow 

the cabbage, so that it is more 

environmentally sustainable). 

We have developed a business 

plan for all of our ambitions, 

and in order to reach these 

goals, we need a R2 million 

investment. This will enable the 

business to get vehicle fleet, 

expand its marketing activities 

(and therefore secure more 

clients), create more foldable 

structures, and build the factory. 

1 

071 137 7779; info@umgibe.org 



THE INFORMAL SPACE (continued) 

BHEMMA AUTO 

Business Profile: 

Business Name: Bhemma Auto, 

Located in South Beach. 

Q: What does the business do? 

A: We panel beat, we are 

mechanics, and I also buy and sell 

cars, and used to hire out cars as 

well. 

Q: Who are your clients, and how 

do you get them? 

A: My clients are mostly South 

Africans, but also non-South 

Africans, who do not have the 

money to get their cars fixed at 

expensive places in the formalised 

environment, but still need 

someone who is highly skilled, 

trustworthy, and professionally 

trained. My clients hear about me 

mainly through word of mouth, and 

other informal marketing. From 

there, they always become regular 

clients! 

Q: How many clients do you 

service a month, on average? 

A: I service about 10 – 15 cars on 

average, every month. 

Business Owner Profile: 

Business Owner: Mr. Andre 

Katambwe 

Q: What made you decide to 

operate in this space? 

A: I did a two year course in 

mechanics at a technical college in 

the DRC, so I had the training 

and skill. 

I left the DRC because of the 

economic and political situation. 

When I got to South Africa, I could 

not find a job, so I became an 

entrepreneur, and fell back on the 

skills I already had. 

Q: How long have you been 

operating? 

A: I have been operating 

since 2010. 

Business Impact: 

Q: How many people do you 

employ? 

A: The business employs four 

youth, but in addition to this, I have 

links with other businesses in the 

area. If I have too much business, I 

give business to them. I also get my 

supplies from businesses in the area. 

Reasons for Informality: 

Q: You were initially an informal 

business. Why did you decide to 

become formal? 

A: I was informal for three years 

from 2010- 2013. I needed to get 

premises to do more work without 

subcontracting too many of the 

services (which I was able to do 

myself), and hire others directly to do. 

I decided to get business papers 

in order to ensure that the police 

did not give me any difficulty at my 

premises. So I have peace of mind 

now that I have business papers, but 

it is still a very informal environment. 

The buying and selling of cars I 

do not need premises for, so I do 

so in my personal capacity, and 

it is informal. I used to informally 

hire out cars as well, but stopped 

because people were not reliable 

with my cars. 

Plans for the Future: 

Q: What are your plans for your 

business? 

A: I would like to expand my 

business and need people like you 

to use our services! 

**The above articles are not for the purpose of marketing the businesses, but for informational and profiling purposes only. 

2 

076 506 7433

FACTS ABOUT THE CITY’S 

STREET TRADERS 

STREET TRADERS ARE BY AND LARGE THE FACE OF THE INFORMAL ECONOMY IN THE 

CITY, BUT RELATIVELY FEW STATISTICS ARE PUBLISHED ON THEIR PROFILE AND THEIR 

VALUE IN THE ECONOMY. ECONOMICALLY, WHO ARE THE CITY’S STREET TRADERS AND 

WHAT VALUE DO THEY ADD TO THE ECONOMY? THE FOLLOWING STATISTICS ARE 

PREPARED BY ETHEKWINI MUNICIPALITY’S BUSINESS SUPPORT, TOURISM AND MARKETS 

UNIT, AND SHED SOME LIGHT ON THE SECTOR. 

O1 

42,700 

IS THE NUMBER OF REGISTERED (OR LEGAL) INFORMAL TRADERS 

IN THE CITY 

O2 

R450 TO R950 

EARNED PER WEEK: THIS IS AN ESTIMATED R1,43 BILLION PER ANNUM IN 

INCOME, GENERATED BY (LEGAL) INFORMAL TRADERS IN THE CITY. 

O3 

R1,43 BILLION 

PER ANNUM, IN DISPOSABLE INCOME, SPENT BY AND LARGE IN 

THE LOCAL ECONOMY 

O4 

1 TO 4 PEOPLE 

EMPLOYED ON AVERAGE BY STREET TRADERS 

O5 

12 HOURS 

OF WORK A DAY IS THE AVERAGE WORK TIME OF A STREET TRADER 

O6 

60% TRADERS 

ARE WOMEN, AND 40% ARE MEN 

O7 

O8 

O9 

90% TRADERS 

NO NEW 

PERMITS 

ETHEKWINI 

MUNICIPALITY INFORMAL 

ECONOMY FORUM 

RESIDE IN DURBAN - AND 10% FROM SURROUNDING AREAS 

THE CITY HAS CURRENTLY PLACED A MORATORIUM ON TRADING 

PERMITS FOR THE NEXT 3 YEARS AS A RECENT STUDY HAS REVEALED 

THAT ETHEKWINI IS CURRENTLY ‘OVERTRADED’ (SEE FOOTNOTE) 

IS WORKING TOGETHER TO DISCOURAGE ILLEGAL TRADING, BY 

ENSURING THAT VENDORS ARE ALLOWED IN DEMARCATED AREAS, 

ONLY IF THEY HAVE PERMITS. 

FOOTNOTE: This is an economic term which indicates that a certain sector has expanded too quickly/ aggressively, 

such that there is more business than can be supported by the market (particularly with regards to product supply) 

or that there are not enough funds or resources available to support the trade. 


INFORMAL ECONOMY: 

RECOGNITION OF ITS CONTRIBUTION TO THE ECONOMY AS A 

WHOLE AND TRANSITION TO SUSTAINABLE FORMALISATION 

AUTHOR: PAT HORN, STREETNET INTERNATIONAL CO-ORDINATOR 

AFTER A LOT OF SPECULATION AND MISUNDERSTANDING ABOUT WHAT WAS FIRST 

CALLED THE “INFORMAL SECTOR” AND ITS “TRADE-OFF” WITH THE “FORMAL 

SECTOR”, IT IS NOW WIDELY ACCEPTED THAT THERE IS JUST ONE ECONOMY, WITH 

ELEMENTS OF INFORMALITY WITHIN IT AND MANY FORMAL-INFORMAL LINKAGES. 

The majority of workers 

worldwide work in the informal 

economy, and most new jobs 

are informal jobs. It is assumed 

that informal work is unlikely 

to completely disappear, and 

that many informal economic 

activities will remain informal or 

semi-formal in the foreseeable 

future. 

Since 2002, the ILO (International 

Labour Organisation) describes 

the informal economy as follows: 

Although there is no universally 

accurate or accepted description 

or definition, there is a broad 

understanding that the 

term “informal economy” 

accommodates considerable 

diversity in terms of workers, 

enterprises and entrepreneurs with 

identifiable characteristics. They 

experience specific disadvantages 

and problems that vary in intensity 

across national, rural, and urban 

contexts. 

The term “informal economy” 

is preferable to “informal 

sector” because the workers 

and enterprises in question do 

not fall within any one sector of 

economic activity, but cut across 

many sectors. However, the term 

“informal economy” tends to 

downplay the linkages, grey areas 

and interdependencies between 

formal and informal activities. 

The term “informal economy” 

refers to all economic activities 

by workers and economic units 

that are - in law or in practice - not 

covered or insufficiently covered by 

formal arrangements. 

Their activities are not included in 

the law, which means that they are 

operating outside the formal reach 

of the law; or they are not covered 

in practice, which means that - 

although they are operating within 

the formal reach of the law, the law 

is not applied or not enforced; or 

the law discourages compliance 

because it is inappropriate, 

burdensome, or imposes excessive 

costs. 7 

How does the informal economy 

contribute to resilience in a 

sustainable economy? 

The informal economy absorbs 

workers who would otherwise be 

without work or income, especially 

in developing countries that

have a large and rapidly growing 

labour force, for example in 

countries where workers are made 

redundant following structural 

adjustment programmes. Most 

people enter the informal economy 

not by choice but out of a need to 

survive. Especially in circumstances 

of high unemployment, underemployment 

and poverty, the 

informal economy has significant 

job and income generation 

potential because of the relative 

ease of entry and low requirements 

for education, skills, technology 

and capital. 8 

Workers in the informal economy, 

such as street traders are an 

important constituency, for 

example because of their big 

numbers. In some countries, there 

are enough traders for them to 

be an important voting bloc in 

elections. 

Evidence can produce the numbers 

if there is a survey of street traders. 

Street traders are hard-working 

people who are trying their best to 

provide for themselves and their 

families, and deliver an important, 

convenient and affordable service 

to other people living in a city. 

COUNTERING THE 

PERCEPTION THAT 

STREET TRADERS ARE 

A NUISANCE, OR EVEN 

CRIMINALS, STREET 

TRADERS’ PRESENCE ON 

THE STREETS MEANS THAT 

THERE ARE MANY EXTRA 

EYES TO DISCOURAGE 

OTHER PEOPLE FROM 

COMMITTING CRIME. 

Workers in the informal economy 

are citizens and residents who 

need services (such as waste 

removal, water, child care facilities), 

including services that help them 

to be successful in earning money. 

Noting that when street traders’ 

business improves, this can 

increase the local government’s 

revenue, for example through 

fees charged. Providing for 

street traders in an organised 

way that meets their needs will 

assist with achieving better, more 

participatory, urban planning. 

Democratic organisations of street 

vendors and informal traders can 

speak with the true “voice” of 

street traders. 

Noting that working with street 

traders and their organisations 

in a regulated way will reduce 

corruption because everyone will 

know what the rules are and how 

they are meant to operate. 

This will, among others, free up 

police to spend time on other 

tasks rather than on policing street 

traders. It will also reduce the 

likelihood of violence among street 

traders. 

An established bargaining forum 

that operates according to good 

rules will result in local government 

having a reliable counterpart that 

provides an effective channel of 

communication. An established 

bargaining forum will increase 

participatory democracy. 

There is a new ILO 

Recommendation 204 on 

“transitions from the informal 

to the formal economy” 9 which 

promotes a people-based 

solution to the above-mentioned 

challenges. 

Recognising that the high 

incidence of the informal 

economy in all its aspects 

is a major challenge for the 

rights of workers, including the 

fundamental principles and rights 

at work, and for social protection, 

decent working conditions, 

inclusive development and the 

rule of law, and has a negative 

impact on the development of 

sustainable enterprises, public 

revenues and governments’ 

scope of action, particularly 

with regard to economic, social 

and environmental policies, the 

soundness of institutions and 

fair competition in national and 

international markets: 

Recommendation (204) provides 

guidance to (Member States) to: 

(a) facilitate the transition of 

workers and economic units 

from the informal to the formal 

economy, while respecting 

workers’ fundamental rights 

and ensuring opportunities for 

income security, livelihoods and 

entrepreneurship; 

(b) promote the creation, 

preservation and sustainability 

of enterprises and decent jobs 

in the formal economy and the 

coherence of macroeconomic, 

employment, social protection 

and other social policies; and 

(c) prevent the informalisation of 

formal economy jobs. 10 

This new ILO Recommendation 

204 recognises that there is no 

single, easy, one-step way to 

formalise informal employment. 

Rather, it should be understood 

as a gradual, ongoing process 

of incrementally incorporating 

informal workers and economic 

units into the formal economy 

through strengthening them and 

extending their rights, protection 

and benefits. 

7 

Clause 3 of the ILO Resolution on Decent Work & the Informal Economy, 2002, 

http://www.ilo.org/public/english/standards/relm/ilc/ilc90/pdf/pr-25res.pdf 

8 

Clause 6 of the ILO Resolution on Decent Work & the Informal Economy, 2002, 

http://www.ilo.org/public/english/standards/relm/ilc/ilc90/pdf/pr-25res.pdf 

9 

ILO Recommendation 204 

http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:R204 

10 

Preamble and Clause 1 of ILO Recommendation 204 

http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:R204 


INFORMAL ECONOMY: 

RECOGNITION OF ITS CONTRIBUTION TO THE ECONOMY AS A 

WHOLE AND TRANSITION TO SUSTAINABLE FORMALISATION 

(continued) 

Summary of a Comprehensive 

Approach for Transitioning from 

Informal to Formal Economy 

1. Formalisation of 

Informal Work 

• legalisation, legal recognition 

and protection as workers 

(for own-account and selfemployed) 

• rights and benefits of being 

formally employed: 

- freedom from discrimination 

- minimum wage 

- occupational health and safety 

measures 

- employer/state contributions 

to health and pensions 

- right to organise and bargain 

collectively 

- membership in recognised 

worker organisations, 

including trade unions 

- inclusion in decision-making 

• benefits of operating formally for 

own-account workers: 

- simplified registration 

procedures and simple 

administration 

- progressive taxation system 

- protection from harassment 

- access to resources and 

facilities 

- workers’ rights 

- support services, such as 

access to financial services 

and training 

- inclusion in participatory 

budgeting processes, 

including at local government 

level 

2. Formalisation of Informal 

Economic Units 

• appropriate legal and regulatory 

frameworks, including: 

- enforceable contracts 

- land-use and property-use 

rights 

- use of public space 

- occupational health and safety 

regulation 

• benefits of operating formally: 

- work security and security of 

working space 

- access to finance and market 

information 

- access to public infrastructure 

and services 

- enforceable commercial 

contracts 

- limited liability 

- clear bankruptcy and default 

rules 

- access to government 

subsidies and incentives 

- membership in trade 

associations 

- access to a formal system of 

social security 

• registration and taxation: 

- simplified registration 

procedures 

- progressive taxation system

LOOKING AHEAD TO THE NEXT EDITION 

THE NEXT EDGE WILL BE ON TOURISM, THE EDGE LOOKS AT TOPICAL AND CURRENT 

ISSUES THAT AFFECT DECISION-MAKERS IN ETHEKWINI. THE LATEST AVAILABLE DATA 

ON KEY ECONOMIC INDICATORS WILL ALSO BE PROVIDED. 

The EDGE is produced by the eThekwini Economic Development and Investment Promotion Unit’s Policy, 

Strategy, Information and Research (PSIR) Department. 

For feedback or queries: 

Tshegang Chipeya 

Email: tshegang.chipeya@durban.gov.za 

Tel: 031 311 4247 

Aurelia Albert 

Email: Aurelia.Albert@durban.gov.za 

Tel: 031 311 4015 


NOTES

Edge 17th Edition Microbusiness in the Informal Economy

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