To help the informal sector to thrive, municipalities should craft better policies, and create more effective urban spaces, an expert argues.
Sustainable Livelihoods Foundation co-director Leif Petersen says city authorities need to accept that the sector is here to stay and make it easier for traders to register a business.
The informal sector is essentially a safety net for the unemployed, he says.
A City of Cape Town report last year showed that informal-sector income helped to lower the city’s poverty rate from 25.1% to 20.6% — equivalent to pulling 186,000 people out of poverty. The city estimates that informal trading contributes 12% to Cape Town’s economy.
Petersen reckons the authorities should adopt a mix of enforcement and incentives to make it easier for informal traders to grow into formal business people.
Providing residents in informal settlements with the title deeds to their dwellings, or security of tenure, would also aid in growing informal-sector businesses, he says.
In 2014, the City of Cape Town developed trading zones in townships and introduced an incremental zoning scheme. It allows home-based and spaza businesses to operate legally in the townships.
In 2015, after consultations, the city allowed new land-use rights in the Langa Quarter, which had previously been zoned a residential area.
Petersen says cities could, for example, create container business parks on the fringes of townships to allow for welding and other light manufacturing activities. The cities could provide electricity and charge a small rental fee, giving artisans an opportunity to club together to create the economies of scale necessary to tackle larger contracts.
To tackle the challenge of townships being situated far from urban centres, Petersen says authorities could consider creating new central business districts. He cites a proposed off-ramp near the airport linking the N2 in Cape Town with Japhta K Masemola Road (formerly Lansdowne Rd).
"This is about getting the economy into the township as much as it is about getting the township into the economy," Petersen says.
'City working with traders'
City of Cape Town councillor Garreth Bloor says the city acknowledges the need to adopt a developmental approach to the informal trading sector, and provides support to enable such businesses to grow and survive.
For example, the city contributed R401,300 to give 46 entrepreneurs access to fibre-optic connections at the Philippi Village hub, where more than 5,700 people access the internet.
Bloor says the city’s economic development department is working with informal traders to create a more conducive environment for trading in the city centre, and is researching the provision of trading infrastructure.
The city is also working on a markets policy which, if approved, would allow additional access to markets for the informal sector.
The city uses an online permit system, and has about 3,700 traders registered on its database. "Our estimate is that less than 1% of permits were revoked in the last year for infringements," Bloor says.
Providing trading facilities
In Durban, eThekwini municipality spokesman Thulani Mbatha says the metro has built trading facilities worth R150m that are provided with free security, water, refuse-removal and electricity.
The city has issued 42,000 permits for informal traders, he says.
In Pretoria, informal traders are still waiting for promised infrastructure, including a new market to be delivered by the city, says Vincent Manganye, the secretary-general of the Tshwane Informal Traders Steering Committee.
City of Tshwane spokesman Blessing Manale says spending in Cullinan and Pretoria North was deferred to 2016-17, due to "internal factors".
While the construction of stalls in Rosslyn, in partnership with Nissan SA, will be completed this financial year by the city’s Tshepo 10,000 Co-operative, an informal traders’ inner-city market would be ready in the next two financial years, Manale says.
He says the city needs R7.5m to develop the Marabastad area, making it conducive to doing business.
Strike Sebake, the president of the Tshwane Micro Entrepreneurs’ League, says the establishment of satellite fresh produce markets could help traders save about R150m a year through discounts.
New permitting system
Johannesburg mayor Parks Tau announced in May that an improved street trading management system for the inner city would be introduced. This followed the Constitutional Court’s ruling in 2013 that the removal of 7,000 street traders during Operation Clean Sweep was illegal.
The city has now produced an inner-city informal trading plan, allowing informal-sector trading on certain streets.
City of Johannesburg spokesman Virgil James says this came after almost two years of consultations with stakeholders, and allowed for the creation of new trading spaces and an efficient management system that does not rely on by-law enforcement only.
The city will deploy street ambassadors to introduce new smart cards to informal traders. It also plans to create new trading spaces including inside buildings in the central business district.
Brian Phalo, the general secretary of the South African Informal Traders Forum, says the City of Johannesburg should also provide toilets and other infrastructure for traders, who are instead directed to trade at taxi ranks.
Socio-Economic Rights Institute of SA researcher Dennis Webster says the City of Johannesburg’s new computerised system is often at odds with how informal traders take ownership of their sites — often through their networks or inheritance. He says while many traders pay rent for trading spaces, several have indicated that they do not sign lease agreements.
This story originally appeared in Business Day (go here for the original version). Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a