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LOCAL GOVERNMENT INTERVENTION IN THE

INFORMAL SECTOR: A CASE STUDY OF THE

YEOVILLE MARKET '

H.MUSHONGA

LOCAL GOVERNMENT INTERVENTION IN THE

INFORMAL SECTOR: A CASE STUDY OF

THE YEOVILLE MARKET

BY

HENRY MUSHONGA

MINI-DISSERTATION

Submitted in partial fulfilment of the requirementsfor the degree

MASTER OF ARTS

In

DEVELOPMENT STUDIES

In the

Faculty of Arts

at the

RAND AFRIKAANS UNIVERSITY

SUPERVISOR: DR M.S. MOTEBANG

CO-SUPERVISOR: PROF C.S. VAN DER WML .

OCTOBER 2000

ACKNOWLEDGEMENTS

My thanks and gratitude to the people who have supported me in this venture,

who have patiently guided me with patience and understanding.

To my supervisor Dr M.S. Motebang for her guidance and patience.

To my co-supervisor Prof. e.s. Van der Waal for his inspiration and

encouragement.

To all the Street Hawkers and Officials for their co-operation and time during

interviews.

To Mrs evan Brakel who eventually became a mother and friend in typing this

script and her husband Mr G van Brakel for allowing me to utilise their modest

house during the typing.

A special thank-you to Phili and the children, Munya, Migie, and Mimie who

had to contend with the long hours I spent away from them whilst working on

this mini-dissertation and to special friends who showed understanding and

appreciation in my ability to explore my potential. They formed a great source

of inspiration that kept me going despite the difficulties I met throughout the

year.

Most of all thanks to God through whom all things are possible.

Dedicated to my late father and sister.

ii

ABSTRACT

With the ever-increasing rate of urbanisation, developing countries are faced

with a new problem - that is, the decline in the urban environment and living

conditions. This scenario is likely to further deteriorate due to unprecedented

levels of population growth and rural-urban and international migration. The

employment-carrying capacity of urban areas is eroded by these trends,

resulting in an influx of labour, which cannot be absorbed by the formal sector.-")

As a way of circumventing poverty, the urban unemployed population resort to

informal activities for survival, regardless of the legal consequences.

The literature on the informal sector is very controversial. This is partly

because the nature of the sector itself is contradictory and defies precise_i

definition. More importantly, various analysts and policy-makers approach the

informal sector with different expectations. These different expectations of the

informal sector are, in turn, related to the preconceived points of view of the

analysts as to what constitutes the proper dynamics of the informal sector and

what the role of the sector is in alleviating urban poverty. Central to the views

on the role of the informal sector in urban poverty alleviation have been the

concerns of governments of developing countries on whether to support it or

control its activities.

The realisation by governments of the need for expansion of the informal

sector has resulted in their intervention in this sector by means of regulations,

programmes and frameworks to define how the business activities should be

carried out. Interventions in the informal sector have resulted in a distortion of

the production structure in favour of the formal sector. On the other hand, the

very nature of informality and its inherent characteristics stimulate profitability

for the hawkers (peddlers) or the small business entrepreneurs. The

formalisation of the informal sector eradicates the economic dynamics, which

necessitate the viability of the activities being undertaken. The consequences

have been the further impoverishment of the small-scale entrepreneurs.

iii

This study attempts to explore the dynamics pertaining to the informal sector

and to give attention to the definitional complexity of this sector. The

adversarial, conflictual viewpoints regarding this sector will also be

investigated. The role of government intervention, through its policy

instruments and institutional frameworks, has been met with a deluge of

dissatisfaction from the informal sector itself, interested parties like trade

unions, non-governmental organisations (NGOs) and other community-based

organisations (CBOs). This resistance and uproar will form the central theme

in analysing the features of the Yeoville hawkers' market.

iv

TABLE OF CONTENTS

ACKNOWLEDGEMENTS

ABSTRACT

LIST OF FIGURES

LIST OF TABLES

PAGE

ii

x

x

CHAPTER 1: ORIENTATION OF THE STUDY 1

'\ 1.1 Introduction

\1,.2 Urban Poverty and the Informal Sector

1.3 Genesis of the Informal Sector

1.4 Contemporary Focus on the Informal Sector

1.5 Motivation for the Study

\ 1.6 Scope of the Study

'{'1:~ Problem Statement and Objectives of the study

~8 ) Methodology

1.8.1 Literature Review

1.8.2 Qualitative Case Study Approach

~ Data Collection Techniques

1.8.3.1 Observation

1.8.3.2 Interviews

1.8.3.3 Field Notes

1.8.3.4 Quantitative Method

~Selection of Interviewees

0~~_0Informed Consent

1.9 Structure and Overview of the Study

1.10 Conclusion

1

2

2

3

4

7

9

11

11

12

13

13

14

15

15

15

16

17

18

CHAPTER 2:

v

THEORETICAL GROUNDING AND

PERSPECTIVES ON THE INFORMAL

SECTOR 19

2.1 Introduction 19

\~.2 Development and the Informal Sector 20

'--2.3 Theoretical Perspectives on the Formal and

~.4Informal Sectors 22

The Definitional Problem 24

'--2.5 Clarifying the Concept of the Informal Sector 25

2.5.1 International Labour Organisation (ILO) 1972 25

2.6 A Combination of Approaches to Defining the

Informal Sector 26

2.6.1 Complementary Approaches 27

2.6.2 Continuous Approaches 27

':1-.7 Choices and Decisions 28

2.8 Definition of the Informal Sector as a Safety Net 29

2.9 Income Opportunity and Activities Definition 29

2.9.1 Informal Income Opportunities-Legitimate 29

2.9.2 Informal Income Opportunities-Illegitimate 30

2.10 Defining the Informal Sector in Terms of Statistics 31

2.11 Different Literature Definitions 31

~.12 Synthesis of Definitions 32

.13 Definition for this Study 33

~.14 Social Characteristics 33

~.15 Spatial Characteristics 34

~.16 Political Characteristics 34

.17 Economic Characteristics 35

2.18 Conclusion 35

CHAPTER 3

vi

GENERAL POLICY INTERVENTIONS IN

THE INFORMAL SECTOR 37

3.1 Introduction 37

3.2 Development Policy and the Informal Sector 38

3.2.1 Role of Government 38

3.2.2 Regulations: A Major Constraint 39

3.3 Implications of Regulatory Applications 40

3.3.1 Reasons for Non-Compliance with Regulations 42

3.4 Supply and Demand Regulatory Factors 43

3.5 Pro-Informal Sector Growth Intervention 44

3.5.1 Historical Background 44

3.5.2 Target Group Oriented Development Approach 44

3.5.3 Current Policy Interventions 45

3.6 Modalities of Intervention 46

3.6.1 Easing Access to Credit 46

3.6.2 Easing Access to Training and Technology 46

3.6.3 Easing Access to Land and Infrastructure 47

3.7 Intervention by NGOs 48

3.7.1 Policy Level Interventions 48

3.7.2 Organisational Level Intervention 49

3.7.3 Resource Mobilisation 49

3.7.4 Education 50

3.8 Regulatory and Policy Intervention Frameworks:

A Critique 50

3.8.1 Regulatory Framework 50

3.8.2 Policy Framework 50

3.9 Critique of Modalities of Interventions 51

3.9.1 Credit 51

3.9.2 Training and Other Forms of Assistance 52

3.9.3 Land and Infrastructure 53

3.10 Conclusion 53

CHAPTER 4:

vii

POVERTY, INEQUALITY AND POLICY

DIMENSIONS IN THE INFORMAL SECTOR

IN SOUTH AFRICA 55

4.1 Introduction 55

4.2 Historical Background: the Apartheid System 55

4.3 Street Trading 56

4.4 Profile of the Informal Sector 57

4.4.1 Size 58

4.4.2 The October Household Survey of Statistics South Africa

(OHS) 59

4.5 The Informal Sector: Poverty and Inequality 62

4.6 The Informal Sector in Gauteng 63

4.6.1 Locational Characteristics 64

4.6.2 Types of Goods sold 65

4.6.3 Demographic Profile 65

4.7 Policy Dimensions 66

4.7.1 Background 66

4.8 Intervention through Legislation 67

4.8.1 Business Act No 71 of 1991 68

4.8.2 Implementation of the Act 68

4.8.3 Powers of Local Authorities 68

4.8.4 Compliance 69

4.8.5 Trading Site 69

4.8.6 Enforcement 70

4.9 Reconstruction and Development Programme (RDP) 71

4.10 GEAR Policy 72

4.11 1998 Job Summit (Presidential Jobs Summit) 72

4.12 Small, Micro and Medium Enterprises (SMMEs) Policies 73

4.13 Social Plan Policy 74

4.14 iGoli 2002 Plan 75

4.15 Conclusion 76

CHAPTERS:

viii

A CASE STUDY OF THE YEOVILLE

MARKET

5.1 Introduction 77

5.2 The History of Yeoville 77

5.3 Intervention by the Local Metropolitan Council 80

5.3.1 Profile of Yeoville Traders 80

5.3.2 Hawkers' Involvement in Relocation 82

5.4 Yeoville Market: Location 83

5.4.1 Structural Layout of the Market 83

5.5 The Yeoville Market Demographic Profile 85

5.5.1 Men-Women Ratio 85

5.5.2 Age Structure 86

5.5.3 The Educational Profile 86

5.6 Management of the Market 88

5.6.1 Yeoville Hawkers Market Committee (YHMC) 88

rl The Hawkers' Views of the Market 89

Summary of Findings from Hawkers'" 91"~~5.9 Reasons for Low Levels of Income 92

5.1c! Views of the Foreign Hawkers 93

5.11 Yeoville Hawkers Market Committee Perspective 95

5.12 Gauteng Hawkers Association (GHA) 95

5.13 MTC and Local Council Perspective 97

5.14 Free Market Foundation (FMF) 98

5.15 Views of Customers 100

5.16 Views of Security Personnel 101

5.17 Conclusion 101

CHAPTER 6: SUMMARY AND CONCLUSIONS 107

6.1

\.~)6:2.1

Introduction

Summary of Results

Form of Intervention

107

107

107

6.2.2

6.2.3

6.2.4

6.3

ix

Livelihoods of Hawkers

Viability of the Market

Relationships between Local Council and its Constituency

Conclusion

109

110

111

112

REFERENCES 116

x

PAGE

LIST OF FIGURES

Figure 2.1 Consolidating the definitions of the informal sector 26

Figure 4.1 SouthAfrica's Informal Sector: Where the jobs are 61

Figure 5.1 The Morphology of Yeoville Market 87

LIST OF TABLES

Table 4.1 Persons Involved in the Informal Sector October1997 60

Table 5.1 Income Levels Differentiation 1998 and 2000 92

1

CHAPTER ONE: ORIENTATION OF THE STUDY

1.1 Introduction

Poverty is an urban scourge that is giving rise to a multiplicity of problems.

The situation is further exacerbated by the advent of globalisation, which has

manifested itself in an increase in migration to the urban centres. The rapid

population growth in urban areas has created problems for urban authorities:

providing basic services like housing, sanitation and other amenities has

become more and more difficult. The increase in population has also put

pressure on formal employment opportunities, and has led to the

mushrooming of the informal.sector. The unchecked.growth of the informal1- . - (

sector has given rise to pavement hawking, peddling at traffic co~~

intersections and a general urban uglification and decay.

In most developing countries today a large number of economic activities are

carried out by large numbers of people who generally go unrecorded in the

official accounts. According to various estimates the informal sector employs

anything from 40 to 60 per cent of the urban labour force in developing

countries and contributes between a quarter to a third of urban incomes

(International Labour Organisation, 1985:11). In support of this, the ILO

(1997) reports that the informal sector in Latin America accounted for about a

quarter of urban jobs in 1990. In sub-Saharan Africa in 1990 the share of the

informal sector in the urban labour force was estimated to be 61 per cent and

it showed little variation across countries. In Asia it ranges from 40 to 60 per

cent. There is also evidence from the same report that informal employment

expanded at an annual rate of 6.7 per cent. This high expansion rate of the

informal sector is being influenced not only by new entrants to the labour

force, but also by the ageing population and massive retrenchments by

government and the formal private sector.

2

1.2 Urban Poverty and the Informal Sector

According to the ILO (1997:11), there is overwhelming evidence to suggest

that urban poverty and informal employment are closely related. In Latin

America, the proportion of urban poor (that is, the bottom 20 per cent ranked

by per capita income) working in the informal sector was estimated to be as

follows: Bolivia 66,2 per cent, Brazil 66,4 per cent, Costa Rica 63,5 per cent,

Honduras 84,9 per cent (ILO, 1997:11). According to a related source of the

ILO (1992:8), 46,7 per cent of the "extremely poor" in urban areas in 1987

were in the informal sector. Scattered evidence from Asia and Africa also

supports the notion that there is a strong association between incidence of

poverty and participation in the informal sector (ILO, 1992 and 1991).

The above trends mean that urban employment creation in these countries

must grow faster in order to reduce unemployment. The scope for enhancing

the rate of growth of employment in the formal sector, which is essential,.

seems rather limited. For these and other reasons it is almost certain that the

burden of employment 9~11E![ation wiJJJ~JI on the informal sector.----

1.3 Genesis of the Informal Sector (f~

The term "informal sector" is only 30 years old and has come into vogue as a- ),

result of the ILO's employment mission to Kenya in 1970 (ILO, 1985:11). It is

also important to point out that the informal sector has existed for a much

longer time in most African and other developing countries and indeed in all

other countries at various stages of their development.

The informal sector is viewed by the ILO as a consequence of the universal\

drive of human beings to stay alive in a world that is becoming increaSingly.J

economically competitive (ILO, 1985:11). In rural areas people till the land to

make a living, but some have to leave for the towns and cities in order to get

into urban wage jobs. Most of them fail to realise their dreams in the urban

areas and are forced to rely on their own devices to make a living. They

3

resort to selling cigarettes and vegetables, hair cutting, street peddling of

different wares, auto-body workshops, itinerant manufacturing and even

setting up informal schools. They construct their own makeshift premises all

over the inner city, in contrast to modern urban life which is more formal and

structured. Due to political instability in many African countries, a trend of

migration to the urban centres has developed. This .. is the case even in

relatively stable countries and has led to an increase in the magnitude of

trading in basically any commodity which is perceived to alleviate poverty and-----------,g~.~~r~te a livelihood.

During the past 30 years, academics, development practitioners and policy­

makers have reached a considerable degree of consensus regarding the

importance of the informal sector even though its definition continues to be the

subject of disagreement. This may be the reason that it is assigned so many

different names. Jenkins (1988:5) concludes that, in addition to thIT

designation 'informal', other names given for this sector include 'underqround'i]

'shadow', 'parallel', 'black market', 'second', 'off the books', 'submerged' a-;;a

'hidden'. These names frequently precede the term 'economy', although the

term 'informal' is perhaps more typically followed by the word 'sector'. In this

study the term 'informal sector' will be used frequently.

1.4 Contemporary Focus on the Informal Sector

According to Hart (1973:61-89) in an ILO study of the Accra (Ghana) urban

poor, the failure of the accelerated growth model to generate adequate

employment resulted in the emergence of the informal sector as a distinct

socio-economic phenomenon with the capacity to absorb labour and increase

income generation. In this perspective, informal sector activities came to be

seen as economically efficient, technologically adaptable and socially useful inI

the provision of services, especially to the large sections of the urban\

population that had no access to the benefits of formal development.

4

This recognition has given rise to an interest in the study of the informal

sector's size, nature and scope by social scientists and governments whohad

often neglected it, or tried to marginalise it by a panoply of regulations and

laws.

According to the ILO (1985:11), the result of government's attention remains

ambiguous. In many cases restrictive policies continue to be followed which

have the effect of impeding the sector, ostensibly out of concern for public

health, the risk of fire, traffic congestion or general urban aesthetics. These

Dpolicies often include relocating hawkers to zoned markets, or forcibly

removing them from central business districts and confiscating their ware.

Hawkers h..ave also been vulnerable to corrupt o.f1icjals~whoseek bribe:J'.

protection fees and other benefits in order to allow. them trading in t e. .

prohibited areas.

The sector also continues to be discriminated against in indirect ways through-7I

measures which favour formal industries, such as licensing, zoning-laws, tariff iprotection, import quotas, tax holidays and depreciation allowances (ILO, \"",j1985). The irony is that in the name of employment creation, economic

structures are created - for example, markets - and nurtured at great cost.

These often have a limited impact on employment and, indeed, stifle other

structures that have in the past provided employment to the urban population

and contributed to reducing urban poverty.

1.5 Motivation for the Study

According to de Soto in Jenkins (1988:108), the intormaljsectotnften

p'ossesses a bad reputation. Its members are often viewed as being selfish----.....__.-~._--

and heedless of the consequences of their actions on others. ,They are see:]

as lacking a regard for the public impact of their activities, and causing

externalities which people do not like - such as foul air, dirty streets, noise

pollution and general urban decay. According to Jenkins (1988:2-14), this

image of the informal sector has led to government intervention and controls.

5

---_.Another school ofJhought argues that the informal sector conserves scarce

~......_--~~ ..-

resources (such as capital) and makes intensive use of factors that are

relatively abundant (such as labour) and therefore generates income among

those excluded from the benefits provided by official programmes (de Soto,

1988:111).

It is this ambivalent view of the informal sector that I intend to pursue by

exploring some of these perceptions of the Yeoville hawkers' market. This

market has been a local government initiative aimed at streamlining the

activities of hawkers in Yeoville.

Studies and research carried out on government intervention into the informal

sector come to contrasting conclusions, especially with regard to the costs

and benefits of such endeavours. The Yeoville hawkers' market project

initiated by the Johannesburg MetropolitanCouncil provides an opportunity to

test the findings of some of these studies. There is ready access to the

relevant literature and information on the subject, and the proximity of the

market allows for a greater depth of exploration and understanding of the

intricacies and complexities inherent in the project. .::::::

Tendler (1990:90) supports the notion that the results and validity of studies

that have previously been undertaken on the informal sector need to be

tested. The fact that this field of study is still relatively new means that there

is a great deal of scope to explore in depth the intricacies and complexities

inherent in it. Studies carried out in different countries have come up with

conclusions that are relevant to their own contexts, and the South African

situation must also generate ideas and solutions that are appropriate to it.

The different governmental interventions in the informal sector have also had

a variety of consequences. This is due to dissimilarities in the nature of

intervention, the socio-economic context, and the political profile of the

hawkers in each situation. It will also be of interest to determine whether the

South African scenario is conducive to the strategy of formalising the informal

sector.

6

A review of the primary and secondary literature reveals a preponderance of

studies which have been carried out in South Africa on local government

interventions in the informal sectors of Durban (KwaZulu-Natal), Port

Elizabeth (Eastern Cape) and Cape Town (Western Cape). In Johannesburg,

intervention was mainly aimed at relocating the Indian community to the....--....~_---'"-

Fordsburg-Maytair area, into what is commonly referred to as the Oriental

Plaza (markettradingmalls). Trading activities in the Johannesburg central

business district (CBD) and Braamfontein by black South Africans have been

allowed to grow unimpeded and the influx of foreigners has exacerbated the

problem of street trading. This flagrant activity has directly influenced

corporate business to relocate to other areas, leaving the CBO economically

unviable. As a way of reviving the city, the Gauteng provincial government in

conjunction with the local municipality mooted the iGoli 2002 revival plan.

One of its principal thrusts is the relocation of street traders and hawkers to .

designated municipal areas (for example Yeoville). The iGoli 2002 plan

envisages the construction of five hawkers' markets in Gauteng: in Hillbrow, in

the Johannesburg central business district, and on the East and West Rand.

The Yeoville market is the first pilot project of this venture.

The attempts to 'formalise' the informal sector present an intellectual ,/

opportunity and a laboratory to explore the dynamics in this sector and the

consequent linkages and relationships with other role-players. As a post­

apartheid local economic development initiative by government, the Yeoville

hawkers' market could possibly provide some pointers that would assist city

planners in dealing with the urban phenomenon of street trading. The

uniqueness of the Yeoville hawker's market profile in terms of ethnic

composition, type of activities carried out and the range of products being sold

calls for a deeper and broader understanding of the general urban topography

of the informal sector in South Africa.

The study will also explore the relationships between local government

economic initiatives and the livelihoods of the urban poor. The attitude of the

7

formal sector towards the informal sector is an important element that has

often eluded development practitioners. This is so probably because of the

rivalry between the two sectors. It is also important to understand how this

relationship is conducted and what influence it has on the livelihoods of

traders and hawkers.

The findings of this study could add a~p-ortant dimension to the outlook of

the informal sector and also pr ide possible guidelines for the

implementation of further hawkers' markets planned for the Gauteng area.

The Yeoville hawkers' market thus presents an ideal pilot study for further

similar ventures.

1.6 Scope of the Study

As already mentioned in the introduction, the influx of diverse populations into

urban areas has led to a high rate of unemployment. This phenomenon has

been exacerbated by the massive retrenchment of workers by government

and the private-sectorthrough the processes of rightsizing and downsizing.

The scope of this study is an investigation of the intervention by local

governmentJnJhe.activities Ofth~~~;~t!r.~~~rS:li1the-process, (in-attempt

was made to determine whether this intervention has been beneficial to

changing the conditions of living of the street traders and hawkers. The

rationale and logistics in the implementation of this intervention were also

addressed by an analysis of the external steps taken - that is, the involvement

of the community of the affected street traders, the role of the Metropolitan

Trade Company which was tasked to formalise this sector, and the position of

the formal sector vis-a-vis this process. This analysis of government

intervention was broadened by the inclusion of opinions from the bodies that

represent the hawkers' rights. The divergent views of local government were

also taken account of. The importance of this sector to the local government

formed part of the scope of the study. Government officials often offer

8

divergent views on the informal sector and it is important to take account of

these in a study of this sort.

According to Sanyal (1987:3), the governments of the many countries that ar

experiencing severe economic dislocations are concerned about the political

consequences of economic crises and are looking to the promotion of the

informal sector as one way to increase employment opportunities for poor/

people. These governments are often inclined to view the informal sector with

suspicion and distrust but are increasingly reliant on it to alleviate poverty.

Their attitude to the informal sector is therefore highly ambivalent. This

ambivalence has not escaped the notice of those involved in the informal

sector.I~!Sectortra~verJhatthereismore to street trading th~P

_the mere creation of employment opportunities. This study will explore some

of!~e§ecomplexities.

The Yeoville hawkers' market (also known as the Rockey Street Market) was

a direct consequence of local government's attempt to formalise the informal

sector. Since the official opening of the market by the Gauteng Premier, Mr

Mbhazima Shilowa in December 1999, this venture has been engulfed in

controversy. A public debate on the developmental role and viability of the

market has been raging on. The rationale behind the privatisation of the

activities of the street traders and hawkers has been questioned. The

consequent implementation procedures have also been placed under scrutiny.

These include the institutions formed to serve as forums for discussion and

the implementation of the city by-laws that were enforced by evictions and

confiscations. The latter in particular have been a bone of contention.

A war of words erupted and legal action was even threatened by both the

local government and the proponents of the informal sector in order to achieve

clarity. The seriousness of the situation is illustrated by the following

viewpoints from both sides. The local government representative, Adam

Goldsmith (2000:1), had this to say: "The inner city is Johannesburg's rates

base, but the place has become a pigsty. Many people don't even want to get

9

there any more. Unless we get the traders off the streets and into our new

markets, we might as well close Johannesburg down."

However, the Free Market Foundation proponent Leon Louw (2000:1)

defended the hawkers' right to trade on the streets by arguing: "The council's

options are not options at all. Hawkers are willing to rathermake.a..J~~

under fhe-adverse-conditions than to use the alternatives provided by the•· .............,,_1

council."

The local government's action of removing all the street traders and relocating

them to a designated location was viewed by the hawkers as leading to a loss

of income. This made it difficult for them 10 meet their basic needs of]providing for their families, paying rent for their homes and educating their

children. The hawkers argued that a more organised system of selling on the

pavements and streets presented a better alternative to the local government

position as their businesses depend on passing trade. This study therefore.

examines the' advantages and disadvantages of the local government

intervention strategy in relation to the broader needs of the hawkers. These

n~edSJltajr1IY~IJGomp'ass-the-Hvelihoods of the hawkers.,/

1.7 Problem Statement and Objectives of the Study

There is a divergence of views on how to make the informal sector viable andr,

sustainable as a contributor to better standards of living. Basically mosrt

households are involved in one or other form of informal activity to increase-!

their income. People with permanent employment in the formal sector venture /

into moonlighting or other related activities like owning stalls, money

laundering and other activities to supplement their wages. It is difficult for the

local authorities to control and derive rates from such people, except if they

are directly operating in areas under the jurisdiction of the authorities. Th

people who become vulnerable to government regulations and restrictions are

those whose activities cross the jurisdiction of the local authorities, that is,

street traders and hawkers who use the infrastructure of councils in plying

.,.:-~ "

h.

10

their trade. These traders find themselves in a dilemma: they need to survive,

and therefore trade on the streets, but they are being watched by the 'big

brother' (tha!_ is, the ~overnment) through di~y-laws and~~guIClt~~_ns

that restrain them from free economic activity.

The effects of restructuring and regulating the informal sector are diverse. At

worst these interventions result in a reduction in the income of the

participants. As a way of compensating for the gradual lowering of their

livelihoods, the participants in the informal sector resort to other means to

make a living. Such alternatives could be further activities that contravene

existing laws. This mini-dissertation will explore this issue in relation to the

Yeoville market.

The main source of the adversarial relationship in any intervention emanates

from the failure to constitute institutions that take account of the views of the

people to be affected by change. Interventions by local authorities often adopt

a top-down approach, and this negates participation by the communltlee­

which development seeks to serve. As a result the form of intervention

implemented falters and the victims are often the intended beneficiaries of it.

Most of these interventions assume that economic growth is the sine qua non

to development and they often as a result neglect the human element on

which they are supposedly to be formed. Lack of participation in the needj

analysis formulation, and involving people only in the implementation of

intervention strategies, always results in irrelevant programmes and scheme

being developed. The consequence is a loss of social capital and material

resources used to bring about the intervention. The good intentions of

- development strategies are often lost due to a lack.ot.consultatlon and

involvement of all role-players necessary to effect change.

In the case study of the Yeoville market it was of paramount importance that

the effects of the local government intervention be analysed in the context of

the issues raised in the discussion above.

11

Given the scope, background and problem statement, which has been

discussed, it was my intention to investigate the following:

• The motivation and rationale in selecting the specific form of intervention in

this manifestation of the informal sector.

• The pros and cons of intervention used.

• The extent to which the local government's policy has affected the

livelihoods of the hawkers.

• Exploring the pre-relocation and post-relocation conditions. This entailed

an analysis of different attributes like levels of income, improvement in

working conditions, capacity building through skills development or other

/~~mpowerment strategies./ \

0~~e s~c:~~=~~~~omic viabili~.Of the market from the viewpoints of the

,.hawkers, the Johannesburg local authority, the Yeoville development

forum and the immediate community (customers), that is, business (the-- --- _._-,.~--_ ..."._--

formal sector) and other affected stakeholders.

• The reasons for the adversarial, tenuous and conflictual relationships.

between the local council authorities, the hawkers and the' community

(only with specific reference to this study).

1.8 Methodology

1.8.1 Literature Review

In order to offer a broader understanding of the case study, extensive grey

and secondary literature in the form of local news bulletins and magazines

was used. Also Internet news and short write-ups on diff~rent activities taking

place in Yeoville were consulted. A compilation of minutes and

correspondence between different stakeholders was perused in order to

understand the interactions and the deliberations of different stakeholders with

regard to the new market. In order to understand fully the effects of local

government interventions into the informal sector comparative studies on the

12

~

topic were sought. This assisted in clarifying and attainin a deeper]L--- __

understanding of different vantage-points with regard to informal sector

interventions. Much of this literature concerned interventions carried out in

developing countries and primarily ~(;lstAfrica, where this trend has been

prevalent for quite some time. In addition, archives containing the historical

background to past government policies vis-a-vis the informal sector and that

of Yeoville offered some indications as to why this place has been lucrative for

the hawkers plying their trade there.

This study uses a qualitative case study approach and a quantitative method.

1.8.2 Qualitative Case Study Approach

The motivation for a case study research approach is explained by Neuman

(1997:29), who argues that the case study approach demonstrates how

general social forces shape and produce results in particular settings. In this

instance the enfor b -laws by the local co Gi~

had a directYlf~~UPo.sitive_Q~~tive) on ,..the li~s of the~traders. It is therefore important to investigate local council intervention and-------.,.the effect it has had on street traders.

Vaughan (Neuman (1997) supports this methodological approach by arguing

that case studies help researchers connect the micro level, or the actions of

individual people, to the macro level or large-scale structures or processes. It

was appropriate to use the qualitative case study approach in this study as it

provided a platform for the investigation of the costs and benefits of the

intervention by local council in the activities of the street traders.

Vaughan (Neuman 1997) further stipulates the logic for the suitability of this

approach. He argues that a case study raises questions about the boundaries

and defining characteristics of a case. Such questions help in the generation

of new thinking and theory. One of the objectives of this study is to explore

new avenues in terms of policy formulation which should seek to minimise the ''-,

13

damage wrought on the informal sector participants by ill-conceived legislation

or interventions. This is intended to bring about possible better forms of

intervention for future similar projects.

A case study research approach also allows for a variety of methods of data

collection over an extended period of time. This flexibility in approach

promotes wider data collection. The fact that the information from the

respondents could not all be collected in one field visit meant that it was

necessary to schedule further visits. As this pilot market is still undergoing

changes, it was also necessary to keep track of new developments ­

especially the relationship between the Metropolitan Trading Company and

the Yeoville hawkers' market and also the views of the Gauteng Hawkers'

Association and the hawkers themselves. Another important aspect was the

verification of income levels: it was necessary to continually ascertain the

reliability of previous figures provided. Other issues like drop-outs from the

market could not be determined in a once-off visit; it was therefore necessary

to make follow-up visits to check on the levels of membership at the market.

1.8.3 Data-Collection Techniques

1.8.3.1 Observation

Johnson (1975:187) remarked that people express social information, feeling~

and attitudes through verbal and non-verbal communication. The observation

method was useful during this study as it allowed for more data to be gathere

during research visits. The environment of the market requires a researcher

who is highly observant, because the activities taking place are so many and

varied. In most cases it becomes difficult to continue taking notes, as this is

often interrupted by customers buying, or the trader wooing the customers to

his/her stand. In the study, observation became an important data-collection

technique during business peak periods, especially weekends and the end of

the month, because it was easy to monitor the traffic trends and customer

buying patterns.

14

Observation qualifies as scientific inquiry when it is specifically designed to

answer a research question, is systematically planned and executed, uses

proper controls and provides a reliable and valid account of what happened.

The versatility of observation makes it an indispensable primary source

method and a supplement for other methods. Cooper and Schindler

(1998:363) acknowledge the importance of observation by emphasising that it

plays an important role as a creative means of obtaining data in different

circumstances.

Given the amorphous nature of the situation in the market, it was necessary to

use this method in this study. One-to-one interviews supplemented by note

taking became difficult because the subjects of the interviews were customers

engaged in buying. The frenetic nature of activities during weekends

necessitated the use of the observation technique rather than the formal

interview.

1.8.3.2 Interviews

Interviews were conducted both informally and formally depending on the

interviewer's circumstances and role within the market place. Personal

interviews (face-to-face) were conducted for the most part. For people in the

management functions of the market - i.e, those holding positions in the

Yeoville development forum, Metropolitan Trading Company management,

Yeoville hawkers' market committee, the Gauteng Hawkers Association and

the Local Council Authorities - formal interviews were used, as these were

aimed at unearthing specific issues.

Informal, unstructured interviews were used for soliciting answers pertaining

to changes in lifestyle, and costs/benefits of the new market site. These forms

of interview were directed at some of the hawkers who were cautious or did

not want to attract attention and felt insecure about answering questions in a

formal manner. These entailed some of the hawkers, customers, council

police and some adjacent shop-owners and workers.

15

The telephonic method was used to arrange meetings and to conduct

interviews, especially with the Free Market Foundation.

1.8.3.3 Field Notes

During fieldwork visits much information was collated through note taking'l

The research diary assisted in following up loose ends and also reflecting on Jthe information being supplied. The diary actually acted as an important tool

of planning for the forthcoming interviews and giving direction on what

approach to follow for the next information-gathering session.

1.8.3.4 Quantitative Method

Quantitative data techniques are data condensers. They condense data in

order to see the big picture (Neuman, 1997:24). In the process of attempting

to explain how the intervention by Local Council has changed the livelihoods

of the hawkers, it became apparent that the income levels needed to be

analysed. This analysis concerned determining previous income levels and

comparing previous income levels before the intervention and after. The

quantitative approach was suitable for this purpose because the interpretation

of the income statistics was able to give meaning to the hawker's levels of

livelihood. Other valuable information concerning male-female ratios, levels

of education and age were also collected through this method.

1.8.4 Selection of Interviewees

The original idea of only targeting the hawkers involved in the market and

council officials tasked with the intervention proved to be a non-starter as I

became aware that there were other stakeholders linked to this context who

were vital to understanding the dynamics of this project.

16

The current population of the hawkers in the market stands at 160, and

of this number, a sample size of 20 was actually interviewed.

The total sample size for the study was approximately 40 people.

The rest of the 20 units of analysis entailed either individuals or a group

of 2 or 3 from the following target groups:

(i) Johannesburg Eastern Metropolitan Council (JEMC)

(ii) Greater Johannesburg Metropolitan Council (GJMC)

(iii) Metropolitan Trading Company (PVT) Ltd

(iv) Yeoville Community Developing Forum

(v) Yeoville Hawkers Market Committee

(vi) Gauteng Hawkers Association

(vii) Johannesburg Inner City Official

(viii) Customers (randomly selected) who were either buying or

passing by the market and some shop-owners.

(ix) Free Market Foundation (attorneys of the Hawkers Association).

(x) A metropolitan policeman.

The interviewees included both men and women. Women made up 40% of

the total, as they were under-represented in the management structures.

1.8.5 Informed Consent

As a result of the sensitivity of some of the information and the volatility in the

relationships between the stakeholders in the market, an explicit agreement

was entered into with the interviewees not to use their real names. In the

study pseudonyms have therefore been used to protect the identity of the

interviewees. Mr Leon Louw from the Free Market Foundation and Mr

Edmund Elias from the Gauteng Hawkers Association acceded to the use of

their names.

1.9 Structure and Overview of the Study

17

In Chapter One the focus of the study is laid out in terms of the motivation,

scope, problem statement, objectives and the methodology for the study.

Chapter Two provides a conceptualisation of the informal sector. This section

gives an in-depth analysis of the different theories pertaining to the informal

sector. The historical background and debates on the definitional problems

with regard to the informal sector are presented. This chapter offers a

working definition, which is used throughout the study.

Chapter Three sets out to investigate and analyse the different methods of

intervention by governments and other stakeholders like non-governmental

organisations in the informal sector. Examples of different forms of

interventions in the informal sector on a global context are discussed and their

merits and demerits outlined. This chapter deals centrally with the current

debates on interventions and their subsequent contributions to the

development of the informal sector. South African examples are given where

possible in order to assess the extent and effects of the different forms of

intervention at local level.

Chapter Four presents a synopsis of the historical and spatial issues

concerning the informal sector in South Africa. Attention is given to the pre­

1994 political dispensation and its consequent policies, which led to the

mushrooming of this sector. This socio-political analysis provides a

background against which the contemporary issues pertaining to the

intervention in the informal sector can be understood. The different policies,

which have been aimed at the development of the informal sector, are

discussed in detail and their effects analysed. This Chapter forms the

grounding on which the study is based, in terms of the form of intervention.

Chapter Five forms the core of the study. The different variables under

investigation are discussed by way of an understanding of the spatial,

historical, socio-economic and political activities within the new market.

18

Preliminary findings are presented and evaluated as a basis for giving

substantive conclusions in the final chapter.

Chapter Six concludes the research report. It summarises the contents of the

study by formulating key recommendations from the findings of study with

specific reference to the intervention by local government in the street traders'

activities and the subsequent relocation to Yeoville market.

1.10 Conclusion

The role of the informal sector as a base for employment creation cannot be

underestimated. With the decline of employment opportunities in the form~

sector, governments of most developing countries will have to cease viewin~J

this sector as a backward, unproductive sector. Governments will have to re­

examine their policies and attitudes to this lucrative sector in order to

maximise the opportunities it offers.

The next chapter will consider the complexities of the informal sector in order

to formulate a definition to be used for this study. The issue of developing the

informal sector will also be discussed by considering the different perspectives

and schools of thought contributing to knowledge of this field.

19

CHAPTER TWO: THEORETICAL GROUNDING AND

PERSPECTIVES ON THE INFORMAL SECTOR

2.1 Introduction

There is a wide divergence of views that have emerged in the quest to

understand what the informal sector is all about. This lack of consensus ~.n

conceptualising the phenomenon of the informal sector has led to a myriad of

definitions being formulated and many different names being accorded to ttl

informal sector. In a discussion of this sector it is inevitable that one has to

compare it to the formal sector. The relationship between the formal and

informal sector often brings out the dialectical relationship between the two,

and this is an important aspect of understanding the processes involved.

This chapter attempts to explore the different theoretical discussions

pertaining to the informal sector. These theoretical discussions were mainly

based on the linkage of the informal sector to development. It was therefore

necessary to deploy different development paradigms to contextualise the role

of the informal sector in the improvement of livelihoods. A critique of these

different vantage points was also necessary in order to achieve clarity on the

informal sector.

In summary, then, this chapter attempts a conceptualisation of the informal

sector, with specific reference to issues pertaining to its definitional

complexity, the role of the informal sector in development as expounded from

the different development paradigms, and the complex relationship between

the informal and the formal sectors. An appropriate framework was drawn up

on the basis of the discussion, and this has in turn provided a working

definition for the study.

20

2.2 Development and the Informal Sector

Developing countries have been exposed to different development paradigms,

and these have left in their wake a high unemployment rate. This in turn has

given rise to an extensive informal sector. The different development

paradigms, which have been tested on the developing countries, include the

era of the Marxist ideology, the modernisation approach, dependency theory

and most recently the phenomenon of globalisation vis-a-vis market

liberalisation. All of these have had a direct impact on the livelihoods of the

urban population in varying degrees.

The modernisation approach, which focussed on industrialisation and

economic growth as the solution to underdevelopment, did not fulfil its aims,

as was evident in the widespread unemployment in the urban areas. Van der

Waal and Sharp (1988:137) have acknowledged this state of affairs by

remarking that after the Second World War industrialisation was slow to

spread, and even where it did, it failed to generate large-scale employment or

reduce income inequalities to any marked extent. This lack of development

was ascribed to the fact that a modern economy was simply superimposed

upon the traditional ones in underdeveloped countries (Van der Waal & Sharp,

1988:136). The traditional sector in the form of the informal sector was

regarded as an obstacle to modernisation, hence it was necessary to

transform it. The same emphasis is revealed in the study, whereby the local

authorities envision the progress of the informal sector as being brought about

by structural changes of the activities of street traders by formalising the trade.

The rationale for such an intervention is underlined in the principles of the

modernisation approach, in which progression and development are viewed

as a deliberate efforts at bringing about modernity. By relocating the street

traders into the markets, the idea is that this will enhance their livelihoods and

'catch-up' with the pace to development in the country.

The dependency theory, with its tenet of a core-periphery relationship, argued

that. the emulation of inappropriate foreign infrastructure frameworks in

underdeveloped countries gave rise to several problems. These foreign

21

models proved to be unsustainable and resulted in obsolescence. The end

result was structural unemployment caused by the withdrawal of transnational

companies and this meant that the people could not use the skills acquired, as

they were only pertinent to the technologies of the parent countries. This

deduction was supported by De Soto (1988:37) where he argued that the

dependency theory resulted in "distorted development" leading to high levels

of unemployment. Most of the unemployed ended up in the informal sector.

Another factor leading to urban unemployment was the systematic neglect of

rural development as a result of an urban bias. The result was a mass

exodus to urban areas, and this merely created further impoverishment and a

resorting to informal activities to sustain livelihoods.

The Marxist ideology, which prevailed till the end of the Cold War, propagated

the notion that the capitalist system was based on the suppression of the

masses and was bent on maximising wealth by exploiting the workers. It

argued that the poverty experienced by the proletariat was a consequence of

the contradictions that existed within the capitalist system and for this reason

the masses were supposed to fight against the system in order to be liberated.

The triumph of the masses was to be signified by their control over the means

of production. This goal was to be achieved through self-organisation as one

of the principal, viable political means by which reforms could be realised (de

Soto, 1988:40).

The triumph of capitalism at the end of the Cold War meant that most former

communist countries, including many developing countries, had to dismantle

their political systems, in order to usher in the new wave of market

liberalisation. Economic Structural Adjustment Programmes (ESAPs) became

the buzzword. These adjustments, which encouraged the lowering of

government budgets on social and military expenditure and emphasised

infrastructure adjustments, resulted in high levels of unemployment. The only

option was for the unemployed to venture into the informal sector. The

contemporary phenomenon of globalisation as discussed in Chapter One has

also had the same consequences.

22

The analysis so far has demonstrated the point that the informal sector has

been growing precisely because the envisioned developmental changes have

only left more people unemployed. It is this situation which is a cause for

concern for many governments, because of possible socio-political unrest

resulting from unemployment. To sustain their livelihoods, people engage in::?legal and illegal informal activities which prove very difficult to regulate. (The

difficulties in determining and controlling these activities are further discussed

in the section on the definitional problem: 2.4, below.) Before we come to this,

however, it is necessary to offer theoretical perspectives on the distinction

between the formal and informal sector.

2.3 Theoretical Perspectives on the Formal and .Informal Sectors

Van der Waal and Sharp (1988:136) note that the informal-formal dichotomy

became very popular because it was widely interpreted as a variant of older

dualistic arguments. These older arguments emanated from the fact that the

economies of the underdeveloped countries were divided in two: that is, they

had a formal sector which was superimposed on the informal sector. The

existence of these two sectors is interpreted as being a consequence of

opposite forces trying to increase their market share. According to the?

modernisation theory the informal sector is conventionally regarded as the J

troublesome element in this relationship as it is perceived to impede theJprogress of the formal sector. Its very nature in terms of its activities presents

a challenge to the formal sector.

This analysis yields the perception that there is a dualistic relationship

between the two sectors. The adversarial attitudes that exist currently - in

which the informal sector is viewed with suspicion and scorn by local

authorities - is testimony to this assertion. The panoply of laws which have

been enacted to regulate and restrict the activities of the informal traders

depicts this tenuous relationship. Formal-sector enterprises view the informal

sector as a cause of low levels of health, urban decay and other social ills like

crime. They also view the activities of the informal sector as encroaching on

(

23

their domain, thereby resulting in low profitability. Examples of this include the

ridiculously low prices, but also low quality of goods sold, trading conditions

and the low economies of scale caused by a drop in customer patronage due

to the existence of the informal sector.

Another school of thought asserts that there is a complementary relationship

between these two sectors. This perspective is expressed by the ILO

(1985:25) report on the informal sector in Africa. This view argues that the

importance of linkages arises from the fact that they act as mechanisms for

transmitting growth from the formal to the informal sector and vice versa.

These linkages can be conceptualised in three forms, that is:

• Forward linkages in which the informal sector acts as a supplier to the

formal sector. According to the ILO (1985:29) report, due to lack of inputs

over 70 per cent of informal-sector enterprises have no forward linkages

with the formal sector. This is ascribed to the level of development of the

informal sector in less developed countries.

• Backward linkages are much more common as most activities in the

informal sector source their products from the formal sector. In this linkage

the informal sector sells very little to the formal sector. The products

derived from the formal sector are consumed by most of the customers

who patronise the informal sector.

• Technological linkages - that is, transfer of technology and skills between

the two sectors - may take place independently of the movement of goods

as a result of the movement of skilled workers. This may happen in two

ways: a formal-sector employee may decide - after retrenchment perhaps

- to set up an informal-sector enterprise; and employees in the formal

sector may also pass their skills on to others in the informal sector. For

example, an employee at a shoe factory can teach a relative the trade and

the recipient can venture into shoe repairing in the informal sector.

24

This overview attempted to point out the major distinctions between the formal

and informal sectors. This background serves as a preamble to defining the

informal sector and understanding other perspectives related to it.

2.4 The Definitional Problem

The lack of a general consensus in defining the informal sector is reflected in

the numerous names given to it. Erasmus (1989:55-64) endorses this bY]

arguing that the definition of the informal sector is one of the most

controversial aspects. This is exemplified by the names used, some of whictr

are 'underground', 'black', 'subsistence', 'grey', 'subterranean', 'peripheral',

'hidden', 'irregular', 'shadow', 'parallel' and 'unrecorded economy'.

The different names given to this sector reflect a number of contradictions.

For instance, the term 'underground' could indicate subversive illeqal

operations such as prostitution, drug peddling and counterfeit trading. On the

other hand, the term 'parallel' could indicate that there is a dialectical

relationship between the formal and informal sector - that is, that they operate

in contrasting but adjacent ways. The term 'black market' has been criticised

because of its bias towards the Western economic system. In my opinion the

use of this term, especially in the context of the developing countries and in

particular Africa, has been one of associating it with the backwardness of the

African economies. The perception is that the activities germane to the

informal sector are illegal and destructive, and hence are perpetrated by those

(and the black population forms the majority of these people) who do not

embrace the Western notion of an organised formal enterprise.

The above summations clearly indicate the problem of finding a universally

acceptable definition. It must be stated at the outset that there is no well-

-c:defined 'theory~of the informal sector. Much confusion surrounds the subject

largely because there is little conceptual agreement about it. There n\

disagreement about whether it actually exists as a clearly defined sector and )

whether it should be defined in terms of people, economic activities or nature.__ .

25

of location (Moser, 1985:1041-64). This indicates that any definition to be

formulated should be contextualised by taking into consideration what that

situation seeks to achieve. An appropriate definition, therefore, is one which

can be used as an instrument to understand the activities of the Yeoville

traders in their total context.

2.5 Clarifying the Concept of the Informal Sector

Several attempts have been made to define the elusive informal sector, and in

the discussion that follows some of these perspectives are presented and a

critical analysis given as regards their suitability or irrelevance.

2.5.1 International labour Organisation (llO) 1972 ~

The term 'informal sector' rose to prominence in the 1970s. Van der Waal

and Sharp (1988:137) state that an ILO survey in Kenya in 1972 was the first

study.to point to the informal sector of the economy as the key to employment

and growth. This actually led to an interest by development agencies and

specialists in exploring how the informal sector could positively contribute to

the alleviation of gross inequalities and poverty.

According to the ILO (1972) report on Kenya, the informal sector was defined

as activities characterised by:

(a) ease of entry;

(b) reliance on indigenous resources;

(c) family ownership of enterprises;

(d) small scale of operation;

(e) labour-intensive and adapted technology;

(f) skills acquired outside the formal school system; and

(g) unregulated and competitive markets (ILO, 1972:6).

Problems often arise because, first of all, the activities that fall within or are

characterised by the above criteria are largely ignored, rarely supported, often

26

regulated and sometimes actively discouraged by governments. Also, these

characteristics which are bundled together may also occur separately due to

the different contexts in which the informal sector operates. Bromley

(1978:1031) points out the ambiguities by listing some of the particular

deficiencies: for example, the school of thought which emphasises the status

of the informal sector in relation to law and regulation argues that size is no

criterion. By their definition the activities in this sector may be quite large.

The inference is that the characteristics themselves cannot serve as a general

guideline to what the informal sector consists of. The characteristics given

also contradict the reality on the ground and are not applicable to all

situations. For example, the issue of ease of entry does not always apply as

regulation of informal-sector activities can make it difficult for new entrants into

the sector.

2.6 A Combination of Approaches to Defining the Informal Sector

After an analysis of various definitions, Mohlala (1995:17) concluded that the

definitions of the informal sector can be classified into two major approaches,

the complementary and continuous, as shown in Figure 2.1.

Figure 2.1: Consolidating the definitions of the informal sector

Definitions of Informal Sector

I

IComplementary Approaches I I Continuous Approaches I

I I IIDichotomous I Activity I Income Social Organisational

Opportunity Acceptability Structure

Source: Mohlala 1995.

27

2.6.1 Complementary Approaches

These approaches view the informal sector and the formal sector as working

together. These approaches are further divided into dichotomous definitions

(which are descriptive in nature) and those that classify the various elements

of the informal sector according to activity. The dichotomous approaches

emphasise that activities that are not recorded in any official returns are

informal. Classifications by activity define boundaries for different segments

ofthe informal sector (Broom & Joyce-Clarke, 1990:461-474).

Mohlala (1995:17) notes that the complementary approaches have been

criticised by Broom and Joyce-Clarke (1990:464) for being too simplistic and

ignoring the relationship between the formal and informal sectors. Broom and

Joyce-Clark point out in particular their failure to recognise the transitional

economic activities that take place between the informal and formal sectors.

2.6.2 Continuous Approaches

These approaches emphasise the intermingling and interaction that exists

between the informal and formal sectors in terms of income opportunity, social

acceptability, or organisational structure. Mohlala (1995:18) gives an in-depth

analysis of the different models used to explain the continuous approach.

(a) Models Based on Income Opportunity

These models identify three sources of income:

• legally earned income that is not disclosed for tax purposes (undeclared);

.• illegal income such as prostitution and drug dealing; and

• personal income or spending in kind (such as an expense account or using

the office telephone for private use).

28

(b) Models Based on Social Acceptability

The models based on social acceptability suggest that the level of social

acceptability of the informal sector activity influences the nature and attitudes

of people. Street trading, for example, is readily accepted (high social

acceptability) by most people while in its inception stage, but as it becomes

popular and the problems associated with it (such as littering or the unsightly

look of the place) increase, there is a change in attitude towards social

unacceptability (Broom & Joyce-Clarke, 1990). Activities that are seen as

unacceptable are those that are perceived as constituting a health threat - for

example, the selling of meat in open markets. Due tothe high levels of health

awareness customers now shun buying products which are detrimental to

their health.

(c) Models Based on Organisational Structure

The focal points of departure for these models are known activities which can

be identified as:

• large business (formal sector);

• small business (formal sector);

• medium-sized business (formal sector); and

• informal business sector operations.

These models serve to indicate that informal-sector activity should be seen as

an economic phenomenon involving all types of market activity - both legal

and illegal - that could be included in the national accounts but are

underestimated or not measured at all.

2.7 Choices and Decisions

Another important point, which the choices and decisions definitional

approach brings to light, is that the participants in the informal sector make

29

choices and decisions. These include choices in terms of freedom in

selecting locations where they want to trade, the type of products to sell and

the determination of prices. Informal sector participants also try to balance

the relationship between themselves and the formal participants. They have

to cope with competition from the formal sector due to restrictions imposed by

authorities which prohibit them from trading in certain goods and selecting a

location favourable to them. They therefore have to make decisions and

choose the right location for their activities in order to makea living.

2.8 Definition of the Informal Sector as a Safety Net

Most governments have now come to recognise the informal sector as a

safety net. During periods of cyclical or seasonal unemployment, many

people are left jobless and resort to informal strategies to make a living. TheJ'

failure of the formal sector to create job opportunities for the unemployed

means that the informal sector has to become the safety net and source for a

livelihood.

2.9 Income Opportunity and Activities Definition

This definitional approach looks at the informal sector as deriving income by

legitimate and illegitimate ways. In a survey based on informal income

opportunities in Nima, Ghana, Hart (1973:61-89) classified the income

opportunities under the following categories.

2.9.1 Informal Income Opportunities - Legitimate

(a) Primary and Secondary Activities

• Farming, market gardening, building contractors and associated

active, self-employed artisans, shoe makers, tailors, and

manufacturers of beer and spirits.

30

(b) Tertiary enterprises with relatively large capital inputs - housing,

transport utilities, commodity speculation, and rental activities.

(c) Small-scale distribution: market operatives, petty traders, street

hawkers, and caterers in food and drink, bar attendants, carriers (taxis,

rick-shaws) commission agents and dealers.

(d) Other Services - musicians, laundresses, shoe shiners, barbers, night

soil removers, photographers, vehicle repair and other maintenance

workers, brokerage and middlemanship, natural services, magic and

medicine.

(e) Private Transfer Payments - gifts and similar flows of money and

goods between persons, borrowing, begging.

2.9.2 Informal Income Opportunities - Illegitimate

(a) Services - hustlers and spivs in general, receivers of stolen goods,

usury and pawn-broking (at illegal interest rates), drug pushing,

prostitution, pouncing (pilot boy), smuggling and bribery, political

corruption Tammany Hall style, protection rackets. Some of these

activities are legal in certain countries, for example prostitution in the

Netherlands, and in some cases governments are silent on them due to

lack of capacity to control them.

(b) Transfers - petty theft (e.g. pickpockets), larceny (burglary and armed

robbery), speculation and embezzlement, confidence tricksters (money

doublers) and gambling.

An examination of current literature indicates that many of the activities

mentioned above are found throughout the informal sector in different

countries. Increasingly, research is concentrated on dominant activities within

the informal sector of a country.. For example, studies have focussed on

small-scale manufacturing: Kenya's informal machine makers (King, 1974),

31

tertiary services in Latin America (Peattie, 1975), street sweepers in Karachi,

Pakistan, a study of the informal industry in developing countries. the

provision of services, the garbage pickers of Cali (Birkbeck, 1982); informal

black business in Durban (Nattrass & Glass, 1986), and South Africa's

informal economy which is based on a wide variety of informal activities

(Preston-Whyte & Rogerson, 1991).

2.10 Defining the Infonnal Sector in Terms of Statistics ~/

I"":.'

According to the ILO (1996:4), defining the informal sector according to

statistics has been a problem. This is mainly because of the different contexts

in which the concept of the informal sector is discussed and also the different

survey methodologies used which do not give a standardised approach.

Furthermore, the heterogeneous sets of activities, which vary from place to

place, make it difficult for data users to make an analytical assessment.

In countries where the social system is advanced it is easier to determine the

nature and magnitude of the informal sector. An example is a country like the

United Kingdom in which the registration of the unemployed is efficient and

easy to monitor. In developing countries censuses and household surveys

have often drawn up inaccurate statistics and this creates problems for an

adequate understanding of the informal sector.

2.11 Different Literature Definitions

Despite the difficulties involved in defining the nature of activities in the

informal sector within specified boundaries, some of the sector's main

characteristics emerge from the following descriptions (Naidoo, in Martins,

1995:4):

(j The informal sector is a process of income generation ~haracterised bY?

one central feature: it is unregulated by the institutions of society, in a legal

and social environment in which similar activities are regulated (Preston- 1

32

Whyte & Rogerson, 1991). This definition bases the informal sector':)

activities on the lack of regulation, but in reality most of the activities oft~

sector are either directly or indirectly regulated.

• The informal sector is that section of economic activities which is

unlicensed and therefore illegal (Du Plessis & Levin, 1988:10-35). This is

not really true as some of the activities are actually licensed and have to /, ,...------ __1

comply with a set of regulations.

• The informal sector is that part of the economic activities of the country

that is not recorded in its national accounts: in other words, the statistically

unrecorded part (National Manpower Commission, 1993).

~\ The ILO (1992) defines the informal sector as the aggregate of activities',,-J '

that result from the need for generating one's own employment to earn a

living because other sectors of the economy (agriculture, large modern

firms and the public service) are unable to provide a sufficient number of

adequate employment and income opportunities for a rapidly growing

labour force and there are no, or only rudimentary, social benefits from the

state to fall back on.

~) The informal sector is a self-help movement of individuals who have

refused to accept a state of unemployment and have gone out and created

their own form of earning a living through meeting community demands not

satisfied by the formal sector (Jacobs, 1982:20-35). This definition

addresses the basic reason for people ending up in the informal sector.

2.12 Synthesis of Definitions

A common thread which runs through these definitions is the notion that the;

informal sector is quite a broad field which can only be understood bU

analysing the various conditions in which it exists.

The definition by (Jacobs, 1982) which views the informal sector as

comprising of individuals engaged in self help forms a broad framework within

which this study will be focussed on. The vantage point of this definition is its

33

broad spectrum which includes everything from regulated economic activities

to unlicensed and illegal activities. It also takes account of statistically

unrecorded activities and self-employment magnitudes, which may also vary

from study to study.

2.13 Definition for this Study

As is clear from the discussion above, there is little agreement about the

informal sector. Moser (1985:1041-64) states that the main issue is whether

to define the sector in terms of people, economic activities or households.

However, there are general characteristics which emerge out of the different

definitions and literature, and these will form the broad framework for this

study. The different definitions discussed in the previous section will provide a

frame of reference for the specific approach to be used.

The broad conceptual framework which was devised by McGee (1976:3-38)

and which is generally accepted in case studies in developing countries will be

used in conjunction with the previously discussed definitions. It is also

important to mention that the generalisations from this framework cannot be

valid for all situations. Hence for the purposes of this study, only those

applicable to the South African environment will be used.

McGee's framework focuses on the informal sector's social, spatial, political

and economic aspects.

2.14 Social Characteristics

he overwhelming social characteristic of the informal sector is the extent of

overty of the participants in both spiritual and material terms. Not

surprisingly, the participants in the informal sector include a high percentage

women and old people, persons who because they have young families,

are too old or are disabled, are unable to obtain regular employment, recent

34

migrants to the cities, those who supplement meagre incomes earned in the

formal sector and ethnic groups with traditionally informal sector skills (ILO,

1992).

2.15 Spatial Characteristics

It is possible in many cities to identify a spatial dimension to informal sector

activities, both in terms of where these activities take place and in terms of

where the people involved live. Sethuruman (1977:343-351) says that many

of the people involved in the informal sector, because they are poor, tend to

live clustered together either in the poorest, oldest parts of the city or in

squatter settlements on the urban fringes. Biesheuvel (1979) also states that

a large number of informal sector activities in many developing countries are

performed within such communities - particularly in the squatter areas where

little is provided by the authorities in terms of services and amenities. But

there are also certain activities - particularly those of the street traders ­

which are carried out in the busiest areas of the city, for example, alongside

transport termini where people tend to congregate and opportunities for a

volume of business are consequently good (Biesheuvel, 1979).

2.16 Political Characteristics

According to McGee (1976), the impoverishment of the participants means

that there are generally three ways in which they participate politically:

• the frustration and despair that characterises this group could be the very

source to trigger an evolutionary process in society;

• an alternative view says that the poor in the sector are so busy looking for

ways to survive that they lack the time to devote to political action; and

• a third view states that the urban poor are more politically conscious and

for this reason respond urgently to the environment, thereby trying to

protect their interests.

35

2.17 Economic Characteristics

Most of the participants in the informal sector either get their products from the

formal sector or make products for this sector. An example of the latter is the

curio trade. The economic activities are mostly associated with the lower­

income groups who serve as customers. The products sold are meant to

satisfy the community needs and are mostly goods that the formal sector does

not adequately provide to the satisfaction of the customers.

2.18 Conclusion

This chapter's exploration of the informal sector offers a broader

understanding of the dynamics inherent in it. The boundaries of the informal

sector are often a point of controversy and a position is usually taken in this

regard that suits the purpose of a specific study or survey. For instance, a

particular study may define the boundaries of the informal sector according to

the specific activities to be investigated. These boundaries could for example

entail backyard mechanics or street hawkers, specific geographical areas,

specific population groups, or that part of the economy that is not recorded in

the official statistics (Ligthelm & Martins, 1995:3).

An open, dynamic conception of the informal sector and a more

complementary approach to the characteristics discussed in the different

definitions has been chosen as a point of departure for this study. For the

purposes of this study the informal sector is defined as a process which exists

side by side with the formal sector and any changes in one directly affect the

other. The continuous approaches as explained by Mohlala (1995:18)

actually support this complementarity, as does the framework provided by

McGee (1976). The profile and circumstances in the Yeoville market required

an analysis of the socio-economic and spatial characteristics in order to

understand the intervention by local government and the response of the

hawkers. The effectiveness of the decision-making institutions at the market

36

could only be evaluated by referring to the capacity and autonomy which the

hawkers had. In order to test this, the informal sector definition based on

choice and decision-making, proved to be invaluable to evaluate the hawkers'

participation in making decisions. In the next chapter the working definition

provided above will be used to describe the informal sector in South Africa.

37

CHAPTER THREE: GENERAL POLICY INTERVENTIONS

IN THE INFORMAL SECTOR

3.1 Introduction

According to Meagher, and Yunusa (1991), recognition of the role of the

informal sector in relation to development has led to two distinct policy

approaches. The first, represented by the ILO, recognises the poverty and

low productivity of the informal sector as an important drawback that the

informal sector cannot eradicate on its own. Rather, the development of the

informal sector requires supportive state intervention in the areas of credit,

technical support, infrastructure and entrepreneurial skills.

By contrast, the second policy approach, typified by the World Bank, has

assumed that the informal sector already possesses the prerequisite for

growth, since it has managed to survive in the absence of state protection,

and often under hostile legal restrictions. According to this viewpoint the main

obstacles to informal sector development were the market distortions created

by state intervention, as well as controls and restrictions which were put in

place to support small, inefficient formal-sector operations at the expense of

the masses. The solution, therefore, is to withdraw state support, and

increase deregulation: the liberation of economic activity to the free interplay

of market forces.

Within the South African context, the informal sector is referred to by.prest;]­

Whyte and Rogerson (1991:1) as one which has been both a potential source

of opportunity and upward mobility for some households and individuals, and

a sinkhole of exploitation for many others.

These conceptions and approaches have become a contentious issue. There

is a great deal of debate as to which paradigm or policy best helps to improve

and develop the informal sector. With these divergent conceptual frameworks

in mind, this chapter will seek to explore the different motivations and theories

38

regarding intervention in the informal sector. Other institutional organs

participating in the formal sector and the effects thereof will also be discussed.

The essence of a deeper analysis of these policy intervention paradigms is to

contextualise them in the South African informal environment. The current

policy instruments and the strategies adopted by the South African

government vis-a-vis the informal sector will be discussed in detail as a pre­

amble to the case study. This chapter will form the integral source of

reference in evaluating the viability and the problems emanating from an

external intervention into the informal sector.

3.2 Development Policy and the Informal Sector ./

The earlier theoretical discussicn on the policies affecting the informal sector

made it clear that any discussion of the relevance and effectiveness of

policies proposed have to take into account the dynamics found in the sector.

3.2.1 Role of Government

The attitude of most developing governments to the informal sector can b~,.....,

be described as ambivalent. Development plans in their formal

pronouncements place a strong emphasis on employment creation and the

satisfaction of basic needs, yet the day-to-day reality is one of harassment of

the informal sector. In most cases governments have been reluctant to]

implement laws to favour the informal sector or even put it on a par with the

formal sector (ILO, 1985:33). Anti-informal-sector policies manifest

themselves in fiscal, social and economic dimensions. Aspects of such

policies are discussed below.

In the South African context, Preston-Whyte and Rogerson (1991:144) statel ­

that the country's policy-makers and planners have a long record oU

suppressing informal economic activities, especially in urban areas. This was

entrenched during the previous apartheid dispensation, which formulated

39

negative policies. The post-apartheid period has seen a gradual shift towards-]

more tolerance and an attempt to formalise the sector. "-1

3.2.2 Regulations: A Major Constraint

The vast majority of informal activities have been found to be operating under

semi-legal or illegal conditions in the sense that they do not comply with one

or more existing regulations. Most street traders in South Africa operate on

sidewalks and at strategic points, which are mostly in violation of the

Municipal Act on hawking. The result has been an on-going cat and mouse

relationship between local authorities and street traders.

Regulations essentially define the framework within which business is

conducted. Regulations concerning land use - that is, zoning regulations,

land transactions, rental and tenure - affect the informal sector in a significant

way (Mhone, 1995). Similarly, labour-related regulations are known to affect

the informal sector in a number of ways. These may involve labour mobility.

Alternatively, they could mean compliance with a host of other regulations

dealing with working conditions and stipulations by trade unions, closure of

business and dismissal of workers, minimum wages and contributions to

social security.

According to a World Bank (1991) report there are also regulations which

essentially define the framework within which informal sector business is

conducted, and these are wide-ranging. They concern the details of the

establishment and operation of businesses: location, registration, licensing,

bookkeeping, hours of operation, holidays and tax obligation. In addition to

these there may be regulations that control the purchase of inputs, use of

power, transport and marketing of outputs.

Branch-specific regulations may exist too. In transport, for example, these

may include the operation of rickshaws and traffic regulations; in construction,

building codes; in trade and restaurants, health and environmental

regulations. According to a study conducted in India, informal-sector activities

40

even in small towns may be subject to control by up to 35 different

authorities/agencies from various parts of the government (World Bank,

1991).

The consequences of not complying with regulations may mean:

paying a penalty in the form of a lump-sum fee to the authorities

concerned resulting in a reduction in income for the traders;

closure of business or confiscation of business assets; and

forced evictions from pavements and in extreme cases incarceration.

The above mentioned actions are a reminider of the apartheid dispensation

draconian measures used to control the movement of the black people.

Human rights groups view the recently resurrected eviction strategies by the

local authorities in Gauteng as apartheid in reverse. An example of these

actions has been the forced evictions of street traders in the street of Yeoville,

Braamfontein and the inner Johannesburg area. The running battles which

took place during the period August to October 1999 between metropolitan

council security and the traders, exemplify the consequences of this

intervention.

3.3 Implications of Regulatory Applications

These regulations also apply to the formal sector. Contravention of any of the

laws by a formal-sector enterprise meets the same penalties as those of the

informal sector. The difference in the extent of the penalties is on the

economies of scale. Informal-sector products are limited, unlike those of the

formal sector. In terms of improving livelihoods, there is more damage ont~

levels of income to an informal participant than to the formal sector. For

instance, if the informal sector has to be regulated, it will have to comply with

all other stipulations like trading times, rate payments and abiding with health

requirements. The consequence of this may be low profitability, and this

could have a trickle-down effect on the other responsibilities of the informal

sector participant that is in terms of meeting th~_basic need~~d.,-Shelter\

41

a~ucation of d,ependants. In some cases these regulations are harsh to

the extent that they lead to abject poverty and socio-economic inequalities.

The regulations set for the informal sector should therefore strive to retain

those characteristics which make the sector viable. For instance, the

informality of the sector is a cornerstone for the viability of this sector and as

such should be left untouched or at least guided towards the maximisation of

benefits inherent in it. The location of the activities of the informal sector is

based on passing trade; therefore this logistical factor should be borne in mind

when interventions are made in the sector. Development of the informal

sector should be aimed at retaining the core essentials that contribute to

better standards of living.

Sethuruman (1997:18) concludes that, more often than not, the regulations

are not strictly enforced either because they are not clearly defined (and

hence subject to varying interpretations by enforcing officials) or due to

weaknesses in the institutional capacity to enforce them uniformly. Often they

are merely used as a threat.

The net result is to create uncertainty and discourage business investment.

Regulations affect profitability of different activities, disrupt the choice of

activity, determine resource allocation and dictate the incentive structure.

Some of these implications as related to the scope of this study, will be

discussed in the summaryand conclusions in Chapter Six.

Varied labour regulations also disrupt the kind of technology to be used. This

is so because some of the activities do not adhere to certain regulations so

they are deemed illegal. People using them are then disqualified from having

access to the various resources and markets that are under state/government

control. In some countries the formal-sector lobby has accused the informal

sector of unfair competition by selling at lower prices. The formal sector is

keen in such circumstances to see regulations extended to the informal

sector. A good example of this is the informal clothing sector which plies its

trade in counterfeit clothing with altered designs which more or less resemble

42

the original brand (especially designer brands in sport like Nike, fashion

brands like Levi, etc.). Hawkers in this trade face authority flnes and

confiscation of their goods. ---I

3.3.1 Reasons for Non-Compliance with Regulations

Hawkers or traders in the informal sector see non-compliance with regulations

as a means of reducing operational costs and creating an enabling

environment to reach new markets and increase sales.

De Oliveira and Roberts (1994:40) cite the following reasons for non­

compliance:

many traders/hawkers who have little or no schooling are mostly

of the regulatio s:

some are aware but cannot afford to comply unless they wish to close

their business; and

some enter the informal sector as a refuge to avoid compliance even

though they can afford to bear the cost burden; this move into the

informal sector is prompted by the lump-sum overhead expenditures

associated with investment in infrastructure, which is associated with

the formal sector.

These authors go on to describe the use of regulations as unnecessary, and

argue that they are often badly conceived and implemented. The regulations

in most developing countries are viewed as remnants of the colonial era and

fail to reflect on the current realities of the informal sector.

Studies which have been undertaken suggest that the costs and benefits of

these regulations point to the fact that the cost of compliance with them is high

and exorbitant. This has led to a review of regulations.

43

3.4 Supply and Demand Regulatory Factors

The above regulatory constraints have been referred to by the World Bank

(1991) report on Urban Policy and Economic Development as "supply side"

constraints. This is so because they limit in one or the other way the potential

of the informal enterprises to generate goods and services and hence fail to

generate incomes.

"Demand side" constraints on the informal sector, which are caused by the

regulatory framework, are deemed to limit the opportunities for production.

This is explained by the fact that most of the activities in this sector are

engaged in the production and distribution of consumer goods and services.

The World Bank (1991) reports that studies on the informal sector show that a

substantial proportion of the activities are faced with a declining demand for

their output. Many also reported facing "too much competition"; another way

of expressing the existence of limited opportunities.

These findings are indicators of overcrowding; by the same token they can be

interpreted as a failure of demand to grow, at least not as rapidly as supply.

Therefore development policies, if properly conceived and implemented, could

ensure greater demand for informal-sector output and eventually open up new

opportunities for participation.

rn conclusion, anti-informal-sector bias in government policies remains one of

~e obstacles stifling growth of the sector. The rigidities in the supply system

that is largely controlled by the government have acted as a deterrent, making

it almost impossible for the poor to help themselves through interaction with

markets directly. These rigidities which are embodied in the government

regulatory policies can also be traced to the in-built bias in the formal

institutions (for example banks which limit the access of traders to financial

credit or offer them nothing at all) against the informal sector or the poor. The

modalities of their functioning are often unsuited to the circumstances of the

44

informal sector and perhaps reveal that the profit incentive is the only thing

that dictates their policies.

3.5 Pro-Informal Sector Growth Intervention

There are always two sides to a coin, and this applies to forms of intervention.

Not all forms of intervention are against the informal sector. Those which are

for the informal sector will be discussed below.

3.5.1 Historical Background

UI Haq (1976) notes that governments of developing countries and the

international donor community have responded to the challenges of the

rapidly expanding informal sector by formulating pro-informal-sector policies.

UI Haq states that national authorities in many countries were initially reluctant

even to recognise, let alone support, this sector; it was believed that with

modernisation and economic growth the sector would disappear. But over the

years they have come to realise that this sector is unlikely to disappear in the

foreseeable future. Since this sector has acted as a safety net and ensured

political and social stability, and since it is contributing to reduction of

unemployment and poverty, most governments have become more tolerant,

and some are even supportive of it.

3.5.2 Target Group Oriented Development Approach

The World Bank identified the informal sector as a target group after a critical

appraisal of development performance in the 1970s led to the broader

conclusion that the benefits of development had failed to trickle down to the

poorest and vulnerable groups in society. This in turn led to the formulation of

what was called a target group oriented development approach (World Bank,

1993).

45

The raison d'etre of this approach was a conscious attempt specifically to

target the informal sector by allocating resources, encouraging participation

and making developmentequitable. This intervention was intended to:

provide missing inputs and services;

direct allocation via newly established or strengthened institutional

capacity; and

encourage project-based activity.

The above approach has become the intervention tool adopted by many

developing countries in order to promote and formalise the informal sector.

Initiatives of these projects in different countries have mainly been based on

micro-enterprise development while others have sought to ease one or more

specific constraints at the enterprise level.

3.5.3 Current Policy Interventions

In support of these new interventions, other studies have also brought forward

a variety of policy interventions formulated to expand the growth capabilities,

income and employment potential of the informal sector. These policy

interventions entail:

i. the provision of location incentives to encourage a correct balance

between rural and urban informal economic activity (Sethuruman,

1997);

ii. the creation of institutions to provide capital for small-scale business

(Buthelezi Commission, 1982);

iii. the reform of laws governing standards and licensing with a view to

reducing the impact that they have on the informal operator (Tokman,

1992:1067-76);

iv. policies to encourage the informal sector to enlarge its share of the

domestic market (Tabaitabai, 1993).

v. incentives to encourage the creation of co-operatives designed to

facilitate both access to capital and access to markets (Taimni,

1981:505-517); and

46

vi. the removal of all preferential treatment of the formal sector, for

example specific subsidies or specialised facilities.

3.6 Modalities of Intervention

Government and donor interventions in the informal sector have used different

modes for the development of this sector. Micro-enterprise development

programmes to assist street vendors and other small entrepreneurs have

been implemented through the following modes:

3.6.1 Easing Access to Credit

Both government and non-government organisations have sought to ease

credit constraints for the urban poor. Sethuruman (1997) states that, since

credit is not accessible from formal sources, the focus has been the provision

of alternative sources and developing alternative delivery mechanisms. Most

of these interventions have focussed on alleviating credit constraints for the

rural and urban poor.

The best-known sources of credit have been: the Grameen Bank in

Bangladesh; Bank Rakyat Indonesia; and Prodem (the Fundacion para la

Promocian y Desarrollo de la Microempresa) in Bolivia (World Bank, 1996).

The specific problem with private interventions is the collateral requirement,

which makes it difficult for the informal sector participants to access funds.

The other exacerbating factors are the interest rates on loans, which are

exorbitant and do not cover the high overhead costs. In South Africa Ntsika

and Khula are black empowerment groups that are servicing the small, micro

and medium enterprises (SMMEs).

3.6.2 Easing Access to Training and Technology

Efforts to alleviate other constraints such as lack of access to training through

formal institutions have been through ad hoc projects. Project-based training

in the informal sector, especially in Africa, has been done through the informal

47

apprenticeship system (King, 1977). In some cities in India quasi­

governmental organisations have attempted to provide skills to youth in slums

so that they can move into better jobs (Sethuruman, 1997). In Kumasi,

Ghana, the University of Science and Technology has been assisting specific

manufacturing and repair activities in the informal sector to develop prototype

products to improve quality. The other channel of upgrading technology has

been through sub-contracting arrangements with formal-sector firms

(Oyeyinka, 1993). The South African context presents a totally different

scenario, whereby sub contracting is done in the way of construction of the

trading market and the consequent management of it by the contracted

company. The implications of such privatisation ventures are discussed later

in the Chapter.

3.6.3 Easing Access to Land and Infrastructure

As regards infrastructure, attempts have been made by some local

governments to create market places by allocating land and by constructing

low-cost structures where traders might locate themselves. In some cities

they have provided kiosks to informal trading and servicing units. In

exceptional cases like Jakarta in Indonesia, multi-storey buildings have been

constructed to relocate street traders and thus provide them with legal

protection and support and perhaps greater visibility. Oyeyinka (1993) states

that for informal manufacturing units industrial sheds have been constructed

and made available on a rental basis in some countries. Only in a few cases

such as Kumasi town in Ghana did the city plan provide land for selected

informal-sector activities and thus attempt to integrate the informal sector with

the mainstream urban economy.

In South Africa, the concept of trading markets is gathering momentum as a

solution to street trading and the eradication of the perceived hazards it brings

along. Markets are being constructed in Gauteng province by the

Metropolitan Trading Company, which has won the tender from the

Metropolitan Council. In other areas shopping malls are also being targeted

for market infrastructure development. The Rosebank market, Bruma Lake in

48

Gauteng, the Victoria street market in Durban are a few of these endeavours.

These markets have also brought about new problems with them, especially

in terms of structural design, their management and support from the

hawkers.

3.7 Intervention by NGOs

As a way of improving the conditions and incomes of the informal sector,

NGOs have intervened. This has been done in order to strengthen the

capacity of grassroots organisations to defend their interests. In most cases

NGOs have successfully provoked policy changes by mobilising the informal

participants into unions, thereby setting up institutional bodies. NGO

interventions can be categorised into two broad groups. The first is support

for informal sector operators to address their specific problems and help

transform their operations. The second is intervention, especially policy

advocacy, in relation to the broad economic developmental strategies which

underlie the transformation of both informal sector activity and the broad

economy so that the informal sector can be part of the integrated development

of the national economy as a whole (Nuakoh, 1996:1-17). Areas of

intervention by NGOs have been analysed by Nuakoh (1996:1-17) under the

following four categories:

(a) the developmental policy level;

(b) the organisational level;

(c) the level of the mobilisation of human, material and institutional

resources to address the particular problems of the informal sector; and

(d) the educational level.

3.7.1 Policy Level Interventions

NGO intervention here should aim at influencing national governments to

transform their national economies into dynamic, naturally integrated, self­

sustaining and development-oriented economies. The development of the

informal sector should form part of the integrated transformation of national

49

economies. A vital complement of this national process is action at the

continental and regional levels to promote the cross-national integration of the

productive and trade structures of the developing countries. Africa's

economies in particular stand to benefit from this kind of broadening of scale

and complementarity (Nuakoh, 1996:11-17).

3.7.2 Organisational Level Intervention

At this level, NGOs should strive to develop and promote the organisation of

the informal sector, in accordance with the needs of this sector. This requires

in the first instance the development of an organisational policy based on an

assessment of the needs of the informal sector, to develop the appropriate

mechanisms through which NGOs can organise the sector. In addition, NGOs

should support the formation of trade associations in the informal sector to

meet the trade needs of the different sections of the sector (Nuakoh, 1996:1­

17).

3.7.3 Resource Mobilisation

Action in this area concerns how NGOs can help solve the particular problems

- like demand, finance and input - confronted by the informal sector. In the

main, NGOs should mobilise resources - material, technical, and human - to

meet these needs and find ways of contributing to employment and income

opportunities. They can contribute to domestic provision and supply of goods

and services, provision of training and contribution to the acquisition of skills,

development of indigenous entrepreneurship, and the use and processing of

local input. They could for instance help informal-sector operators expand

their markets by helping them locate extra markets, both foreign and national,

for their goods. They could also help them develop sub-contracting

relationships with formal-sector firms (Nuakoh, 1996:1-17). Mcintosh, in

Rogerson and Preston-Whyte (1991:279) states that church and mission

bodies in Transkei give assistance to self-initiated ventures. These ventures

stretch from handicrafts, candle making and chicken rearing.

50

3.7.4 Education

Action at the educational level includes support by NGOs for informal-sector

operators to improve relevant skills. NGOs could mobilise vocational and

technical training for informal-sector operators in areas such as business

management, marketing and technical requirements, as well as personal

management. One important component in this area is the introduction of

international labour standards to guide labour relations in this sector (Nuakoh,

1996).

3.8 Regulatory and Policy Intervention Frameworks: A Critique

3.8.1 Regulatory Framework

According to the World Bank (1991) report, very few attempts have been

made to modify regulations and simplify their application to the informal

sector. The report gives the following examples:

In Mexico legislation known as the "Special Statute for the promotion of

Micro-enterprises" was passed in 1988. Similarly Brazil adopted a

Micro-enterprise Statute in 1985. Both of these have been judged to

be effective even though the system of registration still remains

cumbersome because of the bureaucratic requirements. In most

African countries certain regulations have failed to receive political

support from the constituencies - that is, the informal-sector

participants.

3.8.2 Policy Framework

Few interventions if any have focussed on policy changesthat would enhance

the opportunities for participation by the micro-producers or traders in the

informal sector (World Bank, 1991). According to the World Bank, certain

51

countries explicitly stated their support for the informal sector in official

documents such as national development plans. In a few cases, however, the

governments have created special units or agencies to oversee policy

implementation (for example, following the publication of the Sessional Paper

No. 1 in 1986 the government of Kenya established a special unit within the

government). Though the question of enhancing the demand for informal­

sector goods and services was addressed in some countries by changing the

prevailing procurement practices of the government, the emphasis has largely

been on easing the supply constraints. In most cases the changes were

aimed at assuring the informal-sector operators that they would be able to

continue their activities without being harassed by police and local authorities.

This no doubt reduced the legal risk and uncertainty for many but contributed

little to improving their incomes (Sethuruman, 1997:1).

3.9 Critique of Modalities of Interventions,

Although interventions in favour of the urban informal sector have been taking

place, it is only during the last three decades or so that there has been

considerable literature assessing the effectiveness ofthese interventions (ILO,

1992). This shows concern on the part of multi-lateral agencies and

governments about the problem of urban poverty in developing countries and

the effectiveness of solutions proposed thus far.

3.9.1 Credit

Credit as one of the most widespread forms of intervention has been largely

successful, particularly that instituted by Grameen Bank and other banks.

Jackelen and Rhyne (1991:40-46) caution that credit and savings will only

assist clients if this allows them access to a greater range of choices to

survive in the informal sector based on their abilities and hard work. For this

reason, this type of intervention should not be construed as a panacea for the

poor. The weakness of these credit interventions has been their failure to

recognise the macro-economic environment and the failure to distinguish

52

between activities (or individuals) since the capacity to absorb credit and the

rate of profitability vary. Another factor worth noting is that there are a limited

number of potential beneficiaries due to locational and institutional constraints.

The establishment of small, micro and medium enterprise financial bodies in

South Africa has been an attempt to provide monetary support for the

development of the informal sector. Financial institutions like Ntsika, Khula

and the People's Bank attempt to assist the low-income earners to have

access to finance provision. These institutions' success rate has been low

mainly due to a lack of proper co-ordinated criteria of lending funds and also

due to unprofitability of enterprises, in which the informal sector participants

engage in.

3.9.2 Training and Other Forms of Assistance

Dessing (1990) argues that there has been very little critical evaluation of the

interventions designed to ease access to other resources or markets. The

author further points out that there are no quantitative assessments of projects

designed to improve skills and technology in the informal sector. The lack of

evaluations is ascribed to the fact that the projects devised had multiple

interventions through provision of credit, as well as upgrading of skills and

technology and hence it is difficult to assess their singular effectiveness. A

survey of the literature suggests that projects adopting a minimalist approach

- that is, those aimed at alleviating one or two specific constraints based on a

limited coverage - have been generally successful (Dessing, 1990).

The current Skills Development Act in South Africa could serve as a safety net

for the people who will end up in the informal sector. Training of these

workers will at least equip them with skills in the informal sector in the event of

the privatisation of some functions of government and private sector

downsizing and retrenchments. The Social Plan, which will be discussed

Chapter Four, could also be a point of equipping participants in the informal

sector with skills.

53

3.9.3 Land and Infrastructure

According to the literature study on the provision of infrastructure the main

problems have been:

excess demand that the facilities created were not able to satisfy; local

demand consequently had to be rationed on the basis of certain

criteria;

rental charged for the facilities was used as a screening device and

was generally exorbitant, hence limiting profitability;

inappropriate locations, usually away from central markets;

where mini-industrial sheds were attempted, they seemed to have had

a low rate of success either because they were too costly to rent or

because the shelving space was too limited; and

there have been instances where the traders or micro-producers

deliberately avoided occupying the facilities because this would imply

immediate conversion into the formal sector, -drawing the attention of

various regulatory authorities and hence the threat of an additional cost

burden (Sethuruman, 1997:28).

3.10 Conclusion

The heterogeneous variables and nature of the informal sector in terms of

differentiation in location, conditions and products sold largely determine the

nature of intervention to be used. It is absurd to assume that the pro- and

anti-informal-sector interventions discussed in this chapter would necessarily

be appropriate to the South African informal sector. (Replicability is also a

problem associated with this generalisation notion.) The initial endowmentof

micro-producers or informal participants varies, and the regulatory and policy

constraints also vary between activities. An appropriate intervention is

therefore one which contextualises the conditions and needs of that

community. As South Africa is going through the waves of changes, the

54

informal sector also needs to be addressed in the context of these changes

and any intervention guided by an appropriate intervention strategy.

There is also evidence from the literature study that the problems facing the

urban informal sector occur not only at the national level but also at the local

government level. Generally speaking, the various national governments~_._-_..~~--'"-- - .

have emphasised employment creation l:m~_p()y~rtyalleviation in their policy

documentation, wliile-tne--Iocal -governments-'iat--tocal'-roUhcil' levels) have"-,_._ ..--~----...-.,_........,~.~,, .._.-.

stressed the need for urban physical expansion by creating a larger tax rates-,'- .~-~--_••__._---~--•.•. " ..•~ , ..•._,,--->.-.., '.-.~.-•.•~•. ~",_. _ •••...•.. _ •. ,.-._•.-_•.__ ._.-_. -----,-_._ -.-_.•----'~-. ,,, .- ••._-~_.

base, and informal-sector operators are targeted as contributors to this. The

consequence i;u;ar1>olicies'are-Uleri--dev'iSed~t-loc;I-le~~I"t~--~~gulate the

activities of hawkers in order to harness their earnings. This is evidenced in

the South African context whereby the informal sector's activities are

managed by an outsourced private company acting on behalf of the local

authorities.

The local government plays an important role in enforcing various regulations

in the informal sector. Often there are overlapping responsibilities between

national and local government. Though the local governments have to deal

with the sector on a day-to-day basis, they rarely command the resources

they need, partly, because they lack the political authority. These issues,

mostly pertaining to the question of urban governance, suggest that there are

indeed formidable obstacles to informal-sector development in developing

countries including South Africa.

55

CHAPTER FOUR: POVERTY, INEQUALITY AND POLICY

DIMENSIONS IN THE INFORMAL SECTOR IN

SOUTH AFRICA

4.1 Introduction

The informal sector has been the subject of a great deal of debate in SouthJAfrica since the mid-1970s. Naidoo (in Martins 1995) argues that, due to its

vocational specifics, the informal sector in South Africa is extremely difficult to

measure. These vocational specifics refer to the different types of informal

activities prevalent in South Africa. In this chapter the historical background of

the informal sector in South Africa is explored in the context of apartheid

policies. Furthermore, aspects of spatiality, size and the demographic profile

of the informal sector are investigated from a macro perspective. In order to

narrow down the scope of analysis a micro perspective discussion of the .

Johannesburg informal sector is provided. This will also give an idea of how

widespread the informal sector in Gauteng is.

The implications of policy dimensions on the informal sector are also

analysed. Macro-economic strategies like the Reconstruction and

Development Programme (RDP), Growth Employment and Redistribution

Strategy (GEAR) and other specific legislation which directly affects the

informal sector (for example, the Business Act No. 71 of 1991; the Municipal

Notice No. 96 of 1995 and strategies like the iGoJi 2002 revival plan) are also

addressed. Attention was given to how they relate to the informal sector,

especially in the case of the activities of street traders and hawkers.

4.2 Historical Background: the Apartheid System V ....

The current high levels of unemployment in South Africa have been attributed

to a great extent to the apartheid system. The grand design in Verwoerd's

56

terms was "to reverse and ultimately halt the flow of black labour to white

areas" (Wilson & Ramphele, 1989). The apartheid system and its associated

legislation prevented blacks from owning and operating their own businesses

within white areas. The~ack~_~~r~ t~~~excluded fromp~_~i~~~~ing i~.:.the )

white-controlled economic system (Biesheuvel, 1979:14). The consequence

of the above was a deliberate policy of locating certain industries in black

homelands. However, the South African government's decentralisation policy

was geared at supplying the needs of the white industrialists rather than

attending to the provision of jobs for the unemployed black population. Th.~

apartheid system therefore reinforced and aggravated the pres~-'.ltJ

unemployment situation in South Africa.

Another consequence of this system was the socio-economic inequalities

which resulted from unequal access to resources. A panoply of laws limiting

job opportunities through the Job Reservations Act led to a skewed profile

which saw the blacks on the fringes of abject poverty and the predominantly

white .Afrikaans and English-speaking people living in relative affluence.

These inequalities led to social deprivation in terms of access to housing,

education, health facilities and social welfare. The fact that black people wel

not accommodated in the mainstream formal economy meant that they were

absorbed into the informal sector.

According to Van der Waal and Sharp (1988:140), these restrictions through

racial and economic practices were in accordance with the policy of separate

development. The Group Areas Act and influx control in particular resulted in

the poverty-stricken informal sector participants resorting to underground

activities to avoid the authorities.

4.3 Street Trading

Street trading is no new phenomenon to urban South Africa. Street

tradinglhawking has been a major occupation for blacks, coloureds and

Indians for decades (SACOB, 1993:2). The introduction of racial segregation

57

policies in 1923 (Native Urban Areas Act), which culminated in the Group

Areas Act of 1952 were designed to ensure that the cities and towns remained

white (SACOB, 1993:2). In pursuit of that policy the combined efforts of state

and municipal officials saw the repression and virtual elimination of street

trading other than on an illegal basis. The SACOS (1993) report also states

that street trading by whites (Cheapjacks) was repressed in the 1930s. The

CheapJacks were a group of whites who were uneducated and could not be

absorbed into the mainstreameconomy.

To a large extent the negative attitude of urban planners towards street

trading stemmed from an ideological orientation that perceived street trading

to be foreign to the First World and to have no place in the modern city.

The demise of apartheid, which resulted in the abolition of the Group Areas

Act, and subsequent ridding of the influx control measures led to the massive

migration of people from the countryside to the urban areas. The

abandonment of this system created problems for the integration of white and .

black business and the creation of employment opportunities for rural

migrants to the urban areas (Business Bulletin, 25 August 1999).

Furthermore, the growth of the informal sector accelerated dramatically after

1994, in particular due to the influx of legal and illegal immigrants to South

Africa after the democratisation of the country. The perception existed that

there was an abundance of employment opportunities. This proved to be an

illusion and led to the informal sector being overstretched.

4.4 Profile of the Informal Sector /

. The informal sector in South Africa is particularly important and has sh0WTl,J

phenomenal growth i~J recent years. Most employment surveys do not take--· ..... _.m"_•• ·,.,'-~~ .• ~","-

account of the informal sector, with the result that total employment (in the

sense of economically active people) in South Africa is underestimated

58

(Barker, 1999:94). Any discussion on employment in South Africa should

therefore pay attention to the contribution of the informal sector.

4.4.1 Size

According to Barker (1999:96), it is almost impossible to determine the size of

the informal sector in South Africa mainly because it cannot be clearly

defined. Naidoo (1993) also supports this opinion by noting that, by its nature,

the informal sector is extremely difficult to measure or estimate with any

degree of precision. The different approaches and methodswhich have been

used to measure this sector vary from: measurement of income and

expenditure discrepancies, tax audits, traces in the monetary sector, labour

market analysis and aggregating the results of area and other micro studies.

These measures yield estimates of the informal sector that range from 8% to

40% of all economic activity in South Africa.

The problem of determining the size emanates from the fact that some people

in the informal sector have full-time formal jobs and may undertake their

informal activities only on a part-time basis to supplement income. Informal­

sector activity might also be undertaken on a temporary basis to bridge a

period of unemployment. Many children are also involved in the informal

sector and some criminal activities might or might not be seen as informal

sector activities.

The size of the informal sector in South Africa has grown due to its income-~generating spin-offs, In some circles this is ascribed to the fact that South

Africa does not have a well-developed system of social security and for this

reason the poor and the unemployed are forced to resort to survivalist...--_.-..

strategies to make a liVing..--------------.__....•......... - .•

59

4.4.2 The October Household Survey of Statistics South Africa (OHS)

Statistics South Africa conducts an annual survey to provide certain insights

into and perspectives on the most important elements of unemployment

(Website:http://www.statssa.gov.zaldemograp/demogrol.htm).This is known

as the October Household Survey (OHS) and gives the most accurate picture

of unemployment, although even this data set is subject to criticism (Barker,

1999:171).

According to a report prepared for the office of the Executive Deputy

President and the Inter-Ministerial Committee for Poverty and Inequality (13

May 1998), those in the informal sector tend to remain in poverty while still

being in informal employment, since the informal sector consists

predominantly of workers involved in survivalist activities. Of the 1,2 million

people in the informal sector, 86% are Africans and 7,6% coloureds. In this

study the term 'black' refers to the race grouping of coloureds, Indians and

Africans as defined in the South African constitution. Informal-sector activities

commonly carried out are retail- and service-oriented and a relatively small

proportion of the self-employed are in manufacturing. Those in manufacturing

include backyard panel beaters, mechanics, dressmakers and curio-makers.

According to the initial survey (1993), a total of 4 million persons were

involved in the informal sector either fulltime or part-time. The 1997 survey,

however, shows only about 1,8 million people in the informal sector; this group

forms 15% of the economically active population. Taking into account the

results of earlier surveys and of other studies, the figure of 1,8 million is

probably a gross underestimate of the size of the informal sector.

This gross underestimate could be a consequence of the previously

mentioned statistical definitional problem of the informal sector discussed in

Chapter Two. The underestimation could also be due to the fact that many

informal sector activities take place in households and are not easy to record

and account for.

60

TABLE 4.1. PERSONS INVOLVED IN THE INFORMAL

SECTOR, OCTOBER 1997 (Thousands)

TOTAL ASIANS AFRICANS COLOUREDS WHITES

Agriculture 182 - 150 29 3

Manufacturing 80 2 58 13 7

Construction 102 1 76 2 4

Trade and

Accommodation 168 6 131 22 9

Transport 56 2 47 4 3

Services e.g.

Domestic 830 4 683 122 21

Other 422 14 336 24 46

TOTAL 1840 29 1481 235 93

Source: Statistics South Africa, October Household Survey, Statistical

Release, 317.

A significant number of informal sector workers are in the domestic services..

A significant number are also involved in agriculture and in trade and

accommodation services.

\

61

According to a Financial Mail report [24 August 2000] a research on South Africa's

Informal Sector revealed the availability of jobs by specific categories according to

the following information . See Figure 4.1 .

Figure 4.1 South Africa's Informal Sector: Where the jobs are

Source: Financial Mail (24/08/2000) Unemployment and the Informal Sector

62

On the basis of their own surveys, Schlemmer and Levitz (1998:4) estimated

the size of the informal sector to be 22% of the economically active population

in 1996 (about 2,6 million persons). According to these experts the weakness

of the existing informal sector lies in its concentration on retailing and personal

services, its lack of craft skills and its consequent weakness in value-added

production.

In terms of value added, the informal sector's contribution to the gross

domestic product (GOP) in 1995 was estimated at R2,7 billion per month,

which amounts to 6,7% of the estimated official GOP for 1995 (Barker,

1999:97).

Barker also points out that the average income level of a worker in the

informal sector is calculated as R1551 per month. Because the number of

people in the informal sector is underestimated, their income level is probably

deflated and this could be much higher especially considering the fact that

37% of total population are classified as household. The average informal­

sector income level is below the average wage level in the formal sector and

close to the monthly subsistence level.

These contradictory estimates aside, the reality is that the informal sector

remains the component in which most people in South Africa are engaged.

For instance, the 1989 survey by Statistics South Africa noted that Africans'

per capita income is 50% higher because of informal-sector activities (Barker,

1999:95).

4.5 The Informal Sector: Poverty and Inequality

The Inter-ministerial report on Poverty and Inequality that was discussed in

3.3.1 states that, according to the SALORU (1997) survey, the average

monthly net return to the self-employed was R826, while the medium monthly

\

63

income was much lower at R200. By contrast, the mean monthly wage

across all sectors is R1900, which is the main reason the informal sector has

been identified as the second-best option next to formal employment. A

minimum of 45% of the self-employed are earning an income lower than the

Supplemental Living Level (SLL) poverty line, set at R220-10 per month. The

report also states that there are four characteristics of poverty among the

participants in the informal sector in South Africa. These relate to race,

gender, age and location:

Africans constitute 76% of the self-employed earning less than the SLL,Iwhile 60% of all those earning less than the SLL are women; ""'\

similarly, 67% of the informal sector participants earning less than the\

SLL are aged 15-24; and \)

the most disadvantaged are the women, especially those in rural areas. _//

There is also a strong correlation between the type of activity the self­

employed are engaged in and the extent of poverty. Among shopkeepers the

majority have incomes above the poverty line, while occupations with the .

highest incidence of incomes below the poverty line are street traders and

hawkers. There are pockets of better-remunerated individuals in the informal

sector, but it is clear that the sector contains a high proportion of the working

poor that would readily take up employment in the formal sector.

4.6 The Informal Sector in Gauteng

The informal sector trade in Gauteng is referred to by Mohlala (1995:24) a~

mostly located at points that have a maximum interface with pedestrian~

These locations comprise pavements, traffic-light intersections and taxi rank~

The highest concentration is in the CBO of Johannesburg followed ~

Hillbrow, Yeoville and Fordsburg.

The sight of hawkers selling anything from meticulously arranged tomatoes

and oranges to imitation designer clothing and bags has become a scenic part

64

of the cityscape - but is one that the Johannesburg Metropolitan council is

determined to change (Sunday Independent, 30 October 1999).

The socia-biographical and demographic profiles of the informal sector in

Gauteng are important in order to understand the characteristics of this sector

and specifically as they relate to the study. The information gathered was

mostly sources from the Gauteng Hawker Association and the Johannesburg

Metropolitan Council.

Informal traders in the Johannesburg central business district (CBD) vary

according to the time of the day, day of the week and time of the year.

Although it is not easy to state the exact number of traders, it is estimated that

there were roughly 15 000 registered informal traders on the pavements of

central Johannesburg in the year 2000 (Gauteng Hawkers Association: 2000).

4.6.1 Locational Characteristics

According to the Gauteng Hawkers Association report (2000), all evidence

gathered on the choice of location points categorically to the importance of .

pedestrian flows (62%) as the determinant of location: The secret of success-l

for the informal trader is to choose a location where the greatest number o~

potential consumers can locate her or his goods. The numbers of the informal

traders are greatest near transportation nodes, near entrances to

supermarkets like Shoprite-Checkers, OK, and other highly frequented food

and grocery stores. The distribution of the activities is mainly on the

pavements around street blocks.

Apart from pavement/sidewalk trading, another locational feature of hawkers

in Gauteng relates to those who trade in Metropolitan Council-designated

areas, namely market places. Examples include the Oriental Plaza in

Fordsburg, Bruma Lake in Eastgate, the Market Theatre ad-hoc market and

others in the high-density suburbs of Katlehong and Vosloorus situated in the

65

East Rand. A recently opened market is the Yeoville market (which is the

main focus of this study).

4.6.2 Types of Goods Sold ./'

Fieldwork findings reveal that a high concentration of fruit and vegetables is

mainly to be found on busy streets characterised by public transport and

pedestrian flow. Besides fruit and vegetables, there is an interspersing of

other goods like shoes, clothes, food, traditional medicine, flowers, music and

mixed goods. Services offered include hairdressing, shoe repairing,

photography, car touting and washing.

4.6.3 Demographic Profile I

A number of studies of the informal sector done in other parts of the world

suggest that people entering this sector of the economy have a particular

demographic profile. Drawing on a number of these studies in a recent report

of the ILO, Naidoo (in Martins 1995) concludes that:

.men comprised the majority of the workforce;

women dominated particular activities such as tailoring, food

processing, trade and domestic service;

informal business owners are usually in the 30-40 year age group

whilst their employees are younger; and

most of the people in the sector have less than 6 years of formal

education.

Studies of the informal sector done in South Africa show similar profiles in

many respects. A study of hawking activities in the Eastern Cape urban areas

showed a dominance by women, particularly in food and clothing (Nattrass &

Nicoli, 1984). A socio-economic survey of Katlehong on the East Rand

showed that men dominated the small business sector (including informal

small business) and that the average (median) level of education was 7 years

of formal schooling (Nattrass, Glass & JiIIi, 1984).

66

Most South African studies on the informal sector show that the largest age­

group of participants is the 30-40 year one. The participants in the informal

business sector in Gauteng, however, tend to differ in the sense that the

largest age-group is between 20-29 years. Amongst the participants, women

constitute the largest part, making up 61% of the total (Barker, 1999).

The African Chamber of Hawkers and Independent Businessmen (ACHIB)

believes that 40 percent of all the hawkers are foreigners from neighbouring

countries like Zimbabwe, Senegal, Uganda, Angola, Mozambique, Zambia,

Ghana, Cameroon, Congo and Nigeria. The other hawkers are locals from

Soweto and other provinces of South Africa (South African Institute of Race

Relations 22 March 1997).

The above account offers some general characteristics of the informal sector

in Gauteng. What stands out from this discussion is that informal trading is far

from being homogeneous because it incorporates many activities performed

under different conditions. It is also a rapidly expanding economic activity

which is providing goods and services to thousands of people in the cities.

Despite such positive values, there are also negative conditions under which it

operates and these are a source of conflict with fhe formal sector and local

government.

4.7 Policy Dimensions

4.7.1 Background

The majority of people in the informal sector of South Africa have been

oppressed by a panoply of laws and regulations imposed during the apartheid

years of separate development. These measures were meant to impede the

development of small businesses, hence obstructing informal-sector economic

advancement. Discriminatory legislation under apartheid did not provide for

67,

informal-sector activities in the CBD. In addition, for many years city by-laws

prohibited trading in a street or public place within a 'Prohibited Area' which

included the core and peripheral CBO areas. Until recently the only way that

informal traders could access the lucrative CBD consumer market was by

illegally occupying public spaces to trade or by applying to the Johannesburg

City Council and paying a fee of five to ten Rand.

Spiro (1987) discusses the laborious process of obtaining a licence. The

application was scrutinised by the municipal health, traffic and planning

departments and in many cases the licensing board would require that the

applicant advertise in at least two newspapers, one in each of the two official

languages (English and Afrikaans), to allow for objections to the application.

Even were the individual to pass these hurdles (at a total cost of some 100 to

130 Rand), he/she would remain considerably hampered by time and place

restrictions. For instance, all street selling in much of the city centre was

prohibited between 7 a.m. and 6 p.m. Hawkers in other areas were required

to change sites every 25 minutes.

Where restrictions were ignored, the traders exposed themselves to arrests,

fines and confiscation of goods. Therefore all the enterprises which were'

carried out in Johannesburg CBD, were illegal and did not enjoy the legal

security which is basic to formal business establishments. Also because it

has been blacks who have been relegated to a sub-standard existence, their

enterprises were further constricted by the presence of arbitrary standards

and entry regulations.

4.8 Intervention through Legislation

There are currently two pieces of legislation governing street trading. Thesel

are the Business Act 71 of 1991, and the Municipal Notice 96 of 1995. TheJ

Business Act delegates authority to the provincial administrator (the highest

official before 1994) to make certain regulations regarding street traders.

68

4.8.1 Business Act No 71 of 1991

As a way of removing the oppressive restrictions placed on the informal

sector, and specifically street trading and hawking, the Business Act 71 of

1991 was passed. Its main intention was to repeal and amend certain laws

regarding the licensing and carrying on of businesses, and shop hours. It

provided for the following:

to make certain new provisions regarding licensing and carrying on of

businesses; and

provide matters connected therewith (Statutes 'of the Republic of South

Africa - Trade and Industry, 24 May 1991).

4.8.2 Implementation of the Act

According to the City Manager of Johannesburg, Ketso Gordhan (24 August'

2000), the by-laws translate the Business Act (1991) into what local

government can and cannot do. Council no longer has the right to give

licenses for street trading. Council may, however, declare certain areas

prohibited, restricted or designated for informal trading.

4.8.3 Powers of Local Authorities

The Business Act No. 71 of 1991 states that a local authority may, with the

approval of the administrator, make by-laws regarding:

the supervision and control of the carrying on of the business of street

vendor, peddler or hawker; and

the restriction of the carrying on of such business -

(a) in a garden park to which the public has a right of access

(b) on a verge as defined in Section 1 of the Road Traffic Act of

1989 (Act No 29 of 1989) contiguous to -

(i) a building belonging to, or occupied solely by, State or the Local

Authority concerned;

69

(ii) a church or other place of worship; and

(c) a building declared to be a national monument under the

National Monuments Act.

The Act also covers places where hawking can:

cause an obstruction in front of a fire hydrant or an entrance to or exit

from a building;

cause an obstruction to vehicle traffic; or

substantially obstruct pedestrians in their use of a sidewalk as defined

in the Road Traffic Act, 1989.

4.8.4 Compliance

The contravention of these laws or non-compliance therewith may result in:

a penalty of a fine or imprisonment for a period not exceeding three

months; and

the forceful removal and impoundment by an officer of any goods,

receptacle, vehicle or movable structure (which the officer reasonably

suspects is being used in the carrying of the business by the street

vendor, hawker or peddler).

4.8.5 Trading Site

Another important aspect of this legislation is that:

a local authority may by resolution declare any place in its area of

jurisdiction to be an area in which the carrying on of the business of

street vendors, peddler or hawker may be restricted or prohibited; and

before such a motion is adopted, the local authority shall have regard

to the effect of the presence of a large number of street vendors,

peddlers or hawkers in that area and shall consider whether-

(i) more effective supervision or control in that area, including

negotiations with any person carrying on in that area the

70

business of street vendor, peddler or hawker or their

representatives will make such declaration unnecessary; and

(ii) the intended restriction or prohibition will drive out of business a

substantial number of street vendors, peddlers or hawkers.

(Statutes of the Republic of South Africa - Trade and Industry,

24 May 1991).

4.8.6 Enforcement

Recent attempts to legislate street trading in Johannesburg started with

numerous discussions between provincial and local government and the

street traders and this led to a full set of street-trading laws being gazetted in

July 1998 (Metropolitan Wide Projects, 8 August 2000).

Within the Johannesburg CBO the process towards the enactment of these

laws was preceded by the Council's economic development unit discussing·

the laws with the traders in a year-long process from 1997 to 1998.

According to Ketso Gordhan, the City Manager of Johannesburg, the year­

long education process included the distribution of the booklet, Streetwise, to

all traders. In 1998 the laws were promulgated. Council created and trained

a 25 person-strong law-enforcement unit, comprising Council security and the

Central Johannesburg Partnership. This unit started on a second six-week

education exercise, which again, involved lengthy discussions with hawkers.

The unit then went back to all traders and gave warnings, in late 1998,

outlining the laws and explaining the future of informal trading.

The first traders affected by this process were those in Braamfontein and in

Yeoville. (The media was filled with images and descriptions of the forceful

removal of the Braamfontein traders from the pavements and streets.) The

options given by the Council was that either the hawkers desist from trading or

they relocate to the designated hawking area - that is, the Yeoville market

place.

71

The City Manager Ketso Gordhan justified this move by arguing that the idea

was not just to get hawkers off the street, but also to develop the informal

trade sector. In the market the traders would be given greater protection and

would be offered training in the management of small commercial units,

thereby improving their business and attracting more customers.

4.9 Reconstruction and Development Programme (RDP) -/

Numerous official documents addressing the problem of unemployment in

South Africa have been drafted. Recently, the African National Congress

(ANC) produced the RDP (African National Congress 1994), and the

Government of National Unity published an RDP White Paper (1994), both of

which directly relate to employment creation (Barker, 1999:181).

The RDP was formulated based on six basic principles of which only the one

relevant to this study will be discussed. The specific principle for this context

relates to the RDP as based on integrating growth and development through._---- ."--"._._..__._-~._-.- ..--._..-'~-----._.-'."._.-.. '"," ... -"'~"~--.~..~~...•.__..,

programmes that will meet both basic needs and open up previously-------~._----_.- ...-

suppressed economic and human potential in urban and rural areas (RDP /

White Paper, 1994:7). The reference to 'suppressed economies and human

potential'irelates to the informal sector and.specifically women. In order for'_.,...-_' -.. --, . -,-

these objectives to be realised the RDP states that, the role of provincial

governments is to link with the local communities and thus spearhead these

programmes. The involvement of the communities are seen as the 'unlocking

the political and creative energies of the communities in order to ensure a truly

people-driven process (RDP White Paper, 1994:21).

As a way of developing the informal sector the RDP has targeted small and

medium sized enterprises as a platform for employment creation. The action

plan for this sector has been the formulation of appropriate support policy vis­

a-vis amendments to legislative and regulatory conditions. The Business Act

72

No 71 of 1991 is such a policy instrument aimed at facilitating the socio­

economic development of the informal sector. Other support mechanisms

entail the formation of informal co-operatives, creation of financial support

through credit provision and human resource development through training.

The infrastructural programmes in terms of trading markets, which are

planned for the different inner city areas are a deliberate effort aimed at

fulfilling some of these objectives.

4.10 GEAR Policy

In 1996 the ANC-Ied government released its Growth, Employment and

Redistribution (GEAR) Policy, which has job .creation as one ofits most~---". -.- ..,... .. ---._--

important objectives (RSA, 1996).

GEAR as a macro-economic policy emphasises the growth of the economy

through privatisation, with a subsequent creation of employment opportunities

in order to attempt to eradicate poverty and alleviate inequality. The failure of

(GEAR to employ people in the formal sector and the Iiberalisation of the

o economy has resulted in jobless growth and the informal sector has become0~;//.. thc:_~bs~rption base for people who have beenretrenched, downsized and

"- right-sized due to organisational restructuring.

The most comprehensive document published on this issue by government to

date is the 1998 Presidential Job Summit (RSA 1998b;

Website:http://www.polity.org.za/govdocslmisc/jobsframework. himl).

4.11 1998 Job Summit (Presidential Jobs Summit)

The national government, in conjunction with Business South Africa (BSA)

and the Congress of South African Trade Unions (COSATU), committed itself

73

to creating the conditions needed to establish the credibility of the GEAR

programme.

As regards the informal sector, this Presidential Summit envisaged the

following:

small business promotion by establishing a national mentorship

scheme, launching new financing schemes and providing support

services; and

the pledging of resources by business and labour toward the financing

of job-creating activities (Barker, 1999:190).

The common thread that runs through the three policy documents by

government - that is, the RDP, GEAR and the 1998 presidential Jobs Summit

- is an emphasis on economic growth, special job-creation programmes by

the government and employment-enhancing policy shifts (Barker, 1999:186).

An emphasis on human resource development (human capital) through

training and hence the creation of an entrepreneurial environment is very clear

in this initiative. It is also clear that the informal sector should be a major.

beneficiary of this initiative. The establishment of small, micro and medium

enterprises is at the base of the initiative and this serves as a way of

improving the informal sector.

4.12 Small, Micro and Medium Enterprises (SMMEs) Policies

The informal sector with its abundance of small businesses is potentially thil

largest creator of new jobs in any country (Free Market Foundation, 2eJ

September 2000).

The RDP White Paper refers to small and medium enterprises enhancing

employment growth (Government of National Unity, 1994:33). The growth

and development of the small, medium and micro enterprise sector is

acknowledged by most interest groups and policy-makers as being of critical

74

importance to South Africa's ability to address the serious problems of

unemployment, income inequality and poverty.

In the White Paper on the National Strategy for the Development and

Promotion of Small Business, it was acknowledged that inappropriate

legislative and regulatory conditions were acting as a constraint on the growth

and development of small business (SACOB, February 1999).

As a way of trying to address the informal-sector challenges, institutions to

drive the sector have been set up. These include the Centre for Small

Business Promotion, Khula Enterprise Finance for the financing of small

enterprise, Ntsika Enterprise Promotion Agency to provide non-financial

assistance, and the National Small Business Council (Ntsika Enterprise

Promotion Agency, 1997). It should be pointed out that informal-sector

activities can also be classified as small, micro, medium enterprises. An

activity like panel beating could becomea small enterprise even though it falls

within the informal sector. SMMEs are sometimes just like any other activities

in the informal sector.

The RDP White Paper refers to various other programmes to support and

encourage small and medium-sized enterprises (Government of National

Unity, 1994:33-34). The self-help community-driven project is an important

cornerstone of the RDP for employment creation. This policy encourages the

growth of the informal sector. According to GEAR the small, micro and

medium enterprise sector is severely underdeveloped and should be

accelerated to create more employment(RSA, 1996:13).

4.13 Social Plan Policy

A "Social Plan" refers to policies designed to deal with the negative social

implications caused by economic restructuring and, more specifically, large­

scale job losses (Barker & Holtzhauzen, in Barker, 1999:137).

75

The Labour Market Commission (1996:99) supports the introduction of such

policies. Interventions in this regard are aimed at alleviating large-scale

redundancies, which lead to people joining the informal sector without the

skills to start up informal businesses. The Social Plan Policy assists in

retraining, small-enterprise promotion and the design of appropriate social

security nets (Douwes-Dekker, 1996:52). The design of safety nets is an

important developmental aspect that enhances the livelihoods of people

during times of need and has been top on the agenda of the Congress of

South Africa Trade Union (COSATU).

4.14 iGOLl2002 Plan

The enforcement of the laws is part of what has been termed by the

Johannesburg Metropolitan Council the 'iGoli 2002' vision for the city.

This strategy has two phases. The first phase of iGoli 2002 is a three-year .

plan aimed at getting the basics right. It involves the:

privatisation of non-core municipal functions;

the corporatisation of some council functions; and

the restructuring of the city administration.

The overarching goals of iGoli 2002 are to create an efficient city and ensure

effective delivery of services, growing investments and a safe environment for

visitors, businesspeople and residents (Centre for Policy Studies, 1999).

The regularisation of the informal sector and specifically the activities of street

traders into a corporate entity clearly fit in with the strategy of the iGoli 2002

plan. The designated market areas have been ceded to corporate companies

who are intended to actually manage the street traders. Agents like the

Metropolitan Trading Private Company have been appointed to manage these

projects within the Johannesburg Metropolitan area.

76

The second phase of the iGoli 2002 plan is to elevate greater Johannesburg

to the level of a world-class, globally competitive city by the year 2010 (Kihato

Studies, 1999). Council motivated the need for this as being the decay, grime

and crime caused by street traders, hence leading to the flight of business

from the CSO (SACOS, 1993).

4.15 Conclusion

This chapter presented an overview of the extent and nature of the informal

sector in South Africa. The emphasis on the historical development of this

sector was significant in order to demonstrate how this sector has been

growing. The magnitude of the sector, as expressed in terms of its benefits,

presents a challenge to the law-makers as to how to make it more organised

and viable without losing its essence as an oasis upon which the unemployed

are dependent. The importance of this sector to govemment was also

discussed in view of the policies and strategies that have been formulated to

regulate it. It is this intervention by external parties that the study is based

upon, and from which the conflictual relationship between the traders and .

authorities starts. The ultimate viability of the sector is dependent upon this

relationship. The different definitional approaches provided in Chapter Two

served as a guide for explaining the nature of the relationship between the

informal sector and local authorities. In the next chapter, the different forms of

policies and interventions applied in the relationship between the two parties

will be explained. The effects, which are usually associated with such an

engagement, will be explored in order to give meaning to the relationship.

77

CHAPTER FIVE: A CASE STUDY OF THE YEOVILLE MARKET

5.1 Introduction

This chapter forms the principal focus of the study. Firstly a historical

background to Yeoville will be presented. The background information to this

metropolis provides reasons for Yeoville becoming a pull factor for the

informal sector. This historical information will also provide explanations

concerning the cosmopolitan nature of the demographic setting.

The background to the intervention by local government in the activities of the

street traders is addressed at length. This discussion also centres on the role

of the different stakeholders involved in this project and how they formed part

of the overall design. The bulk of this chapter is an analysis of the data

collected and an attempt to give meaning to it in the context of the objectives

of this study. The different socio-economic backgrounds of the hawkers are

also addressed, as they contribute to an understanding of their behaviours

and livelihoods. The crux of the study was to ascertain the effects of the

intervention on the livelihoods of the traders. This was only possible by

addressing and analysing all the relationships that are conducted in the

Yeoville informal sector. These relationships are also linked to issues of

development: empowerment, capacity building and participation.

5.2 The History of Yeoville

The history of Yeoville is described in various sources. Those contained in

the archive collection of the Yeoville Community Development Forum (YCDF)

provided quite a range of information.

According to the Yeoville Community Development Forum, Yeoville has a long

and rich history going back to the 19th century when it was one of the first

suburbs of Johannesburg. Yeoville was founded by Thomas Yeo Sherwel! in

78

18.86. Yeoville was named after Sherwell and the present water tower serves

to memorialise his early enterprise of supplying water to pioneer residences.

Yeoville was targeted for accommodating elites.

On 27 January 1890 the Digger's News carried an advertisement hailing the

new township as the Sanatorium of Johannesburg where the elite would be

bound to purchase sites. Thomas Yeo Sherwell himself set the example and

in 1894 built himself a house at 27 Hendon Street. The township was laid out

around Yeoville Square, where the Recreation Centre, clinic, swimming pool,

tennis courts, public park and police station are today. The street names were

those of Sherwell's sons, friends and business associates. The east-west

streets were continuations of those of the marginally older township of

Bellevue as they are still today. Yeoville Square was the hub of community

life and Raleigh and Kenmere Streets were soon lined with shops, which

gradually spread eastward into Bellevue. By 1910 electric tramlines had been

laid. However, as Johannesburg grew, Yeoville's prominence declined.

An early Bellevue resident recalls that, round 1905, Mahatma Gandhi lived in

one of the semis opposite a white neighbour. He used the tram but had to sit

at the back with the Zulu servants. Yeoville was one of the first integrated

areas in the country, well before the emergence of 'grey areas' in the late

1980s. As one of the oldest Johannesburg suburbs and long-time home to

Orthodox and Hasidic Jews, Yeoville has evolved over the latter part of the

1900s into South Africa's pre-eminent bohemian (socially unconventional)

enclave (YCDF 12 August 1999).

The eclectic mix of 'races', backgrounds, and lifestyles that characterised

Yeoville was in stark contrast to the social agenda of the country's apartheid

legislation. As might be expected, in the late 1980s Yeoville became a

bastion of defiance against apartheid. It had been classified as a 'grey area'

meaning that people of colour and whites could stay together. This became

the meeting place for liberal whites and Pan-African groups thereby creating a

bond of defiance to the apartheid government. It also became a haven for

people running away from political prosecution. With the demise of apartheid

79

in the early 1990s, followed by the elections in 1994, Yeoville began to

change once again. On the level of local infrastructure provision, there was a

creation of various community forums that were intended to be the engines of

social and economic change in the post-apartheid era.

The demographic profile of the Yeoville community changed rapidly. With its

preponderance of low-rent housing and the community's long tradition of

openness to all 'race' groups, the area inevitably became a magnet for

migrants from other parts of South Africa as well as immigrants from other

neighbouring African nations and Europe.

According to Richard Levin, a Yeoville resident and sociologist, Yeoville

afforded an urban toe-hold and at least the prospect of opportunity at a time

when times were difficult. Itwas the fusion of the old bohemian Yeoville with

the pan-African Yeoville that appeared to pose the greatest challenge to

Yeoville's future. This multicultural and multiracial composition is widespread

in this suburb.

The above historical account describes the foundations on which present-day

Yeoville was built. The high social interaction by elites at Time Square, the

preponderance of a large variety of local and foreign goods being traded and

the multiplicity of varied ethnic groups is a sequel to the beginnings of Yeoville

and the current state of this suburb.

The cosmopolitan nature and high-density population which is characteristic of

Yeoville has attracted the informal sector in the form of street traders to this

place. This is due to the heterogeneous needs of the residents who require

the wide range of products that the informal sector makes available. The

sprouting of this sector did not please the local authorities, however. By way

of the Business Act No. 71 of 1991, various by-laws and the iGoli 2002 vision,

the prohibition of street trading has been effected, resulting in the relocation of

many traders from all their strategic sites to the newly constructed Rockey

Street Hawkers Market.

80

5.3 Intervention by the Local Metropolitan Council

The relaxation and ultimate abandonment of the influx control system led to a

proliferation of makeshift trading stalls on the city's pavements (Matlou,

2000:1). The implementation of the Business Act No. 71 of 1991 and the iGoli

2002 plan in 1999 affected the hawkers in Yeoville through removing them

from the streets and relocating them to the newly built market which is

managed by the Metropolitan Trading Company (MTC). The other traders to

join the Yeoville hawkers were from the inner city, mainly Braamfontein, where

similar evictions had been effected earlier on. Running battles between the

municipal police and hawkers marred the evictions in Braamfontein. During

October and November 1999 scenes of property destruction, confiscations

and violence were presented in the media and this became a national issue

and concern for Human Rights Groups and Civic Organisations. It was

described as reminiscent of the apartheid-era policies of forced removals. All

efforts of defiance were in vain and finally the traders gave in and were

packed into the crowded Yeoville market.

According to a council official interviewed during one of the field visits, "since

the enactment of the by-laws there is now more walking space and a high

level of cleanliness in the streets." But the question to be asked is, qui bono

(who benefits)? The feedback from the traders points to the fact that the

beneficiary of this intervention is the MTC. These complaints will be

discussed later in this chapter.

5.3.1 Profile of Yeoville Traders"....-0/

The Yeoville traders are indigenous SouthAfricans and foreigners mainly from

Africa. The South African traders mainly come from the high-density

townships of Soweto and Alexandra (which is the nearest black township).

Others live in Yeoville. From the interviews conducted, different reasons were

given as to why they ended up in the informal sector. These included the

scarcity of employment opportunities in the country and lack of education

81

resulting in a lack of skills for certain jobs in the formal sector. Some indicated

that they ended up as street traders by choice. Reasons given included

having the freedom to work for oneself, and this was perceived as yielding a

better income and working conditions. The activities of the South African

traders mainly consist of the selling of books, cigarettes, fruit and vegetables,

running food outlets and telephone services.

The second group of traders comprises the foreign traders. These are either

legal or illegal immigrants. It was very difficult to ask the respondents about

their legality status. Indirect questions directed at finding out about their

countries of origin, however, yielded clear indications as to who was legal and

who illegal. Those coming from countries experiencing civil war - for

example, Democratic Republic of Congo, Burundi, An'gola, Liberia - had been

granted asylum and therefore had refugee status.

The other groups from Zimbabwe, Malawi, Mozambique, Ghana and Senegal,

which are politically stable countries, were in South Africa mainly due to

economic' hardships and for this reason were mainly here as illegal migrants.

Most, of the latter indicated that they came after the 1994 democratic

elections. This influx had arisen mainly as a result of the perception that there

were job prospects.

The traders from Mozambique, Zimbabwe and Malawi expressed the feeling

that working in South Africa is a historically old pattern and not just a post­

apartheid trend. This group exhibited widely diversified trading activities.

These included fruit and vegetable selling, shoe repairs, hair cutting, hair

plaiting, clothing, tailoring, selling of traditional African dishes, used toys and

electronic gadgets, imported body creams and cosmetics and music

cassettes. The wide array of these products has also required an increase in

shelf space. The implications of these differences in the range of products

offered by the South African and the foreign traders respectively will be

analysed later.

82

There is generally a cordial co-existence between the local hawkers and the

foreigners. The only point of disagreement is the fact that the foreigners feel

disempowered because they cannot influence any policy or changes with

regard to the running of the market because they are mostly illegal foreigners.

Home Affairs immigration officers also expose them to periodic raids.

Most of the foreign hawkers occupy the front high-rental stalls, while the local

hawkers occupy the inner sections, which are mostly fruit and vegetable stalls.

Foreign hawkers dominate services like haircutting and shoe repairs. The

deduction from feedback with regard to this locational factor is that the foreign

hawkers are prepared to pay the higher rentals because they clearly feel that

business is more lucrative at the front stalls.

5.3.2 Hawkers' Involvement in Relocation

An important aspect of the intervention in the Yeoville informal sector was the

logistics implemented in seeking the traders' opinion about the relocations.

According to an interview with a current Yeoville hawkers' committee member,

the consultations with the Metropolitan Trading company (MTC) were rushed,

because the company had to meet a deadline for the completion of the

construction and the official opening. A hastily set-up forum of the street

traders initiated by local government engaged with the MTC, and in the

negotiations acceded to most of the issues brought forward by the company.

These issues pertained to rates, rent and other logistical arrangements. The

speed at which the street traders were to be relocated to the market and the

threat of confistications, which ultimately took place, surprised most of the

hawkers.

It was only later that traders discovered that some of the members who had

formed part of the traders' committee had never been street traders, but were

on the payroll of the MTC to push the agenda of relocation, as mandated by

the Greater Johannesburg Metropolitan Council (GJMC). After this

realisation, there was resistance from the hawkers to go into the market.

They stayed on the streets, but after several raids and confiscations by

83

metropolitan police they succumbed and relocated to the new market. The

circumstances under which relocation to the market was effected can

therefore be described as coercive.

5.4 Yeoville Market: Location

Yeoville market place is situated along Rockey Street, which is the busiest

area with most of the service centres. The market is of a square design

bordered by Raleigh, Cavendish, Hunter and Rockey Streets respectively (see

Figure 5.1).

According to Graeme Reid, the inner city manager, the Yeoville Street Market

is a pilot project that seeks to rejuvenate Johannesburg, attract investment

and return the streets to the ratepayers and pedestrians. In return, hawkers

are provided a sheltered site, with proper facilities, to sell their wares in an

appropriate and conducive environment (Matlou, 2000:1).

/

5.4.1 Structural layout of the Market' J

The market has been constructed in the shape of a hall square and is

surrounded on each side by normal service roads, as shown in figure 5.1. All

the trading is done on the floor level - that is, from the road-facing sides up to

the interior. Access to the internally located hawkers is by passages as

indicated by arrows on the diagram. The market was constructed to cater for

360 street traders, each occupying varying space allocations. A 1 x 1,5 metre

pavement-facing stall currently fetches a monthly rental of R350. The closer

to the interior of the market, the lower the rental - around R150 per month.

The rental for the enclosed shops is up to about R900 per month. These

figures are current ones.

The previous rates at the inception of the market were as high as R700 for the

front stalls and R350-440 for the interior ones. The unaffordability of the stalls

has led to the rentals being constantly reduced, after intense negotiations

84

between the MTC and the Yeoville market committee. Other hawkers like

hairdressers and shoe repairers occupy stalls with a monthly rental of R185.

To avoid these high costs, most traders share stalls and this limits the scale of

their operations, resulting in a reduced income.

S .v/"erviees

The market offers services such as posted security, which patrol the place, to

deter would-be criminals. Rockey Street is renowned as a haven for

criminals. At the time of field visits the Standard Bank opposite the market

had already relocated after having been robbed four times. The trading hours

at the market extend to 20hOO, but few traders utilise this benefit due to the

previously mentioned problem of crime.

The ablution facilities are available at a cost of 20 cents for using toilet

facilities and 5 cents for a shower. These are aimed- at maintaining a healthy

environment, especially considering that many activities involve the trading of

foodstuffs. These is provision of electricity for activities which use power - for

example salons, telephone services, music sellers, the caretaker who cleans

the market after closure and storerooms for safe keeping of goods. Inside the

market there is also a courtyard which can be used for any entertainment

function. Another category of traders, who only ply their trade 3 times a week,

that is, Friday to Sunday and operate 12 days a month, pay a rental of R75

per month and occupy the inner-most shelves.

Whilst all the above indicates a very conducive formal set-up, the irony is that

the people who are meant to be served by the market are gradually sliding

into poverty. Criticisms of the market related to factors like the structure of the

market and rent. These will be addressed later in this chapter. An important

factor about the structure of the market is explained by referring to figure 5.1.

The Rockey Street side (side A) has the highest frequency of passers-by,

followed by sides B, C and D in that order. The rate of sales corresponds to

the frequency of passers-by, so the Rockey Street stalls are the choice ones.

85

The irony to this is that it is also this side that suffers the highest incidence of

crime.

The new Yeoville market was officially opened on Friday 10 December 1999

by- Gauteng's Premier Mbhazima Shilowa. However, the opening. was

characterised by a very low attendance, and this was a form of expressing the

dissatisfaction of the street traders. The market is one of more than six that

the council plans to construct in the inner city. The market is directly

managed and under the responsibility of the Metro Trading Company (MTG)

which is a private company formed to exploit the services outsourced by the

council. .The Gauteng province funded the construction of the market to the

tune of R5,2 million, and has an equity share of 15% in the project. The rest

of the shares are owned by the MTG.

5.5 The Yeoville Market Demographic Profile

5.5.1 Men-Women Ratio

This study found that the ratio of men to women was directly related to

the trading activities being carried out. Women at the Yeoville market

specialise in dressmaking, hairdressing, selling fruit, vegetables and

food, while others are engaged in selling second-hand clothing and

exotic cosmetics (especially the foreign women).

On the other hand, men specialised in selling goods such as shoes,

bags, books, music tapes and GDs, confectionery goods (that is,

sweets, chips and cigarettes), used toys, fruit and vegetables,

cosmetics and foreign delicacies. Services offered include car touting

and washing, haircutting, shoe repairs and dressmaking.

The point is that there was no clear indication of domination by either sex in

the market, especially with regard to trading activities. An under­

representation of women on the committee was glaring. The committee is

male dominated, and this shows the neglect of women's input into the issues

pertaining to the market. The committee is supposed to be the forum for

86

discussing issues with the MTC management in terms of problems affecting

all the hawkers, that is foreign, local and women hawkers included. The

committee can best be described as paternalistic.

5.~.2 Age Structure

The median age category for the sample as a whole of the traders interviewed

was 20-40 years. The age group of 20-25 comprised some of the workforce

hired to man the stalls, or provide services like hair cutting by the owners of

the hair-clippers or stall owner. The 25-40 age group comprised the

proprietors of the stalls. Only about 2-3 hawkers were above 50 years of age

and were women in the food, vegetable and fruit trading.

5.5.3 The Educational Profile

The educational profile of the interviewed hawkers indicated that the South

African traders had lower levels of education than the foreign hawkers. The

average educational level of the South Africans was less than Grade 7-8.

Three hawkers had a tertiary-level qualification, but many had no formal

education at all.

On the other hand the foreign hawkers exhibited high levels of post-school

skills and educational attainments. The foreigners, mostly from

commonwealth states, showed attainment levels of Grade 12 ('0' level) to first

year at tertiary level (A level). The others with these educational levels also

revealed a post-school skills development in terms of tradesmanship. The

sample interviewed included textile machinists, clearing and forwarding

agents and former teachers. Other foreign hawkers from the Francophone

countries had only a school-leaving educational level. (It is also important to

point out that the foreign traders had language barriers in communicating in

English, and this presented difficulties in soliciting information).

87

Bar--J 1 1 LCAVENDISH STREET C

.....fI)

oo,

....wwc:::....CJ)

>­w~ooc:::

· .· .

· .· ..

· .· .· .· .· .· .· .

· .· .

· .· .

· .· .· .· .· .

D H

.... Sww

fI) c:::0- ....0 CJ)L: CJ)fI) c:::0 wz ....

z::>:I:

IIRALEIGH STREET B

No shops II IfCJ) CJ)

KEY RENT

• SHOPS - R900

- PASSAGEWAYS

D INTERIOR STALLS: FRUIT AND VEGETABLES - R150 per month

~ 12 DAY PER MONTH STALL - R75 per month

G HAIR CUITER - R180 per month

o SHOE REPAIRS - R185 per month

~ PAVEMENT FACING STALLS - R300 per month

mSTORE ROOMS AND TOILET FACILITIES

Figure 5.1 Morphology of the Yeoville Market

88

5.6 Management of the Market

The privatisation philosophy of the Johannesburg Metropolitan Council means

that the Metropolitan Trading Company (pty) Ltd (MTC) was established and

outsourced to own and manage a series of markets still to be built in the inner

city and greater Johannesburg area. The Yeoville market forms part of the

Council's strategy to end all street trading in Yeoville and the inner city of

Braamfontein and the CBD by relocating them to this new facility.

A resident operational team manages the security issues, rent collection and

cleanliness of the market and forms a link between the Yeoville Hawkers

Market Committee and the MTC offices in Braarnfontein. Failure to pay the

monthly rent results in the closure of a stall. The management of MTC also

presides over disputes between the traders.

5.6.1 Yeoville Hawkers Market Committee (YHMC)

As previously mentioned in this chapter, the initial YHMC was a hand-picked

committee hastily assembled to persuade the street traders in Yeoville to buy

into the idea of relocating to the market. The failure of this committee was

precipitated by the discovery that two of its members were actually appointees

of the MTC and were merely under the guise of being street traders. This

created a mistrust of the intentions by the MTC. The current committee

comprises of fUlly-fledged hawkers in the market who are familiar to the rest of

the small trader's community.

Following the dissolution of the earlier committee, the new committee has the

following main tasks:

to act as liaison between the MTC and the hawkers;

to negotiate for conditions of trading on behalf of the hawkers;

to intervene and act as mediator in conflict resolution between MTC

and hawker;

89

to arrange marketing strategies to popularise the market in consultation

with MTC; and

to suggest changes to MTC in order to improve living standards of the

traders.

Most of these tasks are of a mere consultative nature in the sense that each

individual hawker has to sign a contract before being accepted into the market

and this document actually lists the dos and don'ts. Therefore the

effectiveness of the YHMC still needs to be evaluated. None the less, credit

should be given to it for the intense rent-reduction negotiations which ended in

favour of the hawkers.

5.7 The Hawkers' Views of the Market

The intervention by Local Council and the subsequent implementation of the

iGoli 2002 plan has left a bitter taste in the mouths of the hawkers at the

Yeoville market. Their complaints included the following:

"We are going back to where we used to trade. And this time we are

going to fight, because this market was built to enrich MTC"

(Metropolitan Trading Company).

Mr X, a confectionery hawker said, "It is ridiculous that we are

centralised in this small area and our businesses no longer make

income as they used to make when we were scattered all over Yeoville.

Now people have to move all the way down passing big supermarkets

to come to us which has reduced customers."

Another hawker, Mrs M from KwaZulu-Natal, who sells fruit and

vegetables said, "Look at this place, it is disorganised, food in the first

table, shoes in the next, bags in that, what is that? Where in the world

have you ever seen such a thing? Who will buy this food covered by

shoes, bags and clothes? The council is making fun of us becausewe

are poorl In this place we pay high rent but the profit is less than

before when we were on the streets."

90

Clothing seller and Botswana-born Mark Hitten (who did not mind his

name being published) is one of the few white people trading at the

market. "It has destroyed the livelihood of hundreds of people. It is a

white elephant. Maybe a miracle will happen, but I do not see this

happening in the near future," he said. Mark also noted that he made

some money only during the festive season, but thereafter he has been

making only about R200 per day and he feels it is unreasonable for the

MTC to expect him to pay R450 rental per month. He suggests that

efforts should be made to promote the market so that more people will

buy goods. He also advises that the council should study how other

markets such as the Bruma Lake Flea Market operate.

The dressmakers, shoe shops, and salons within the market

complained that their shops are enclosed and as a result customers

don't even know that they exist. They now depend on the good will of

established customers who they have to constantly remind to come

and buy or lower their prices to maintain the customers' loyalty.

Freedom Ndlovu, a hairdresser, said, "Competition has now become

too stiff because the number of customers has gone down." This was

. evident in the way the competing barbers solicit passers-by to come

and have a haircut.

However, the foreign hawkers have a different perspective as is evidenced by

the following:

Yusuf (not his real name), who is a foreign hawker, said, "It is not like

before where we were manipulated by people for no reason other than

that we are foreigners. Here there are security personnel. No one can

simply take our stuff. It is also good to be in this market because here

there is competition in prices and that is good for customers. The only

ill feeling I have is that we have to pay rent which is difficult to afford."

Akino, a Ghanaian fruit and vegetable trader, also finds rental charges

for trading sites unaffordable. Not many traders are making good

business.

A Ugandan woman hawker stated: "We now trade like brothers and

sisters with our South African colleagues and the Yeoville Hawkers

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Market Committee have done well in this. Even if the rent is high we

enjoy the atmosphere here. No more harassment and theft of our

goods by street kids and council police."

The views expressed by foreigners primarily point to the fact that they

prioritise their safety and the issue of income is secondary. The emphasis on

human security is an important aspect of development and this shows that

development cannot only be viewed from an economic growth perspective.

The human, personal dimension also needs to be taken into account.

5.8 Summary of Findings from Hawkers

Most of the interviewees bemoaned the huge loss in income levels since

relocating to the market and this has made it difficult for them to pay for rental

at their lodgings, pay school fees for their children, clothe themselves and

even provide a decent meal for their families.

The location of the market was also a constant point of criticism across all the

traders' interviews. Its proximity to the crime-ridden extension of Rockey

Street acts as a push factor for the customers. The distance also in relation to

the chain stores was seen as a handicap.

The following table shows the average reduction in terms of income levels,

since the relocation to the Yeoville market.

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INCOME LEVELS DIFFERENTIATION 1998 and 2000

Table 5.1

OCCUPATION PREVIOUS WEEKEND PRESENT WEEKEND

INCOME MONTH END INCOME MONTH END

1998 WEEKDAY

WEEKDAY

PER DAY PER DAY PER DAY PER DAY

Fruit and R300 - R500 R700 - R1000 R50 -R100 R300 - R400

Vegetables

Hair cutters R 40 - R 60 R 80 - R 150 R O-R 20 R 40-R 60

Clothing R100 - R200 R700-R1000 R 0-R100 R100- R300

Food R400 - R600 R500-R1000 R50-R200 R300-R600

Books R100 - R200 R400-R 600 R50-R 90 R100- R300

Music R 60 - R100 R600-R 900 R O-R 50 R200- R400

Other R 50 - R100 R200-R 400 R30 -R 50 R100- R200

Accessories

5.9 Reasons for Low Levels of Income

An analysis of the above statistics reflects a sudden shift in terms of income

differentiation. The following were some of the commonly cited reasons:

(i) Accessibility of the market by customers. The market is located far

away from the hive of activity - that is, the local supermarkets. Given that the

.majority of the customers are pedestrians, mobility from one point to another

is a problem. When customers finish buying groceries from these chain

stores, their goods and luggage already burden them; walking to the market

would entail more inconvenience and expenditure of time.. Therefore they

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would rather buy fruit and vegetables from the chain stores than suffer the

inconvenience of going to the market for a few commodities.

(ii) The hawkers cite the unavailability of parking space for customers with

cars, whether they are coming from the inner city or from Yeoville. The fact

that there is a decrease of the mobile customer frequenting the market means

that sales are also affected.

(iii) The structural design of the market was viewed as negating the

economic principles underpinning informal trade. Most of the products being

traded are goods, which are passers-by-oriented. The design of the market

makes it impossible for all the goods to have enough exposure to the market,I

hence the fruit and vegetables will suffer due to their perishability compared to

goods which are not perishable, for example shoes and bags. Therefore, the

positioning of the stalls benefits some and on the other hand severely

disadvantages others. On the issue of exposure to customers the areas

marked C and 0 on Figure 5.1 have the lowest intensity of pedestrian

frequency compared to A and B. The result of this is that they have a low

capita per day income or no business at all.

Activities like hairdressing and shoe repairs normally receive more customers

if they are situated on pedestrian strategic points. The removal of this

characteristic makes the activity more dormant and less attractive-hence the

hairdressers have resorted to the solicitation of passer-by in order to make an

income.

.5.10 Views of the Foreign Hawkers

In general the foreign hawkers present a different perspective on the market.

They claim that since their removal from the streets to the market they have

had an improvement in personal security and protection of their goods. There

was also a wide-spread indication of the fact that business is much better than

it was on the streets, because they can now order more stock and sell a

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variety of goods, which they could not do in the streets. They allege that the

problem with local traders is their lack of entrepreneurial skill, which leads to

low incomes. From this they allege that petty jealousy and suspicion against

them has developed. For example, the local hawkers say that they have their

low income because foreigners use 'muti' (charm) to attract customers. The

foreign hawkers claim that the local traders tend to close early and over

weekends indulge in social entertainment and drinking and therefore neglect

their stalls. This lack of work ethic by local hawkers could be a reason for the

resentment against the foreign hawkers. Foreign hawkers claim that they

established a client base during the street trading times and that their clientele

has followed them and has also brought new customers in the process. They

also complained about the rent and the poor location of the market as sources

of dissatisfaction to all traders. The foreign hawkers expressed their feeling

that the local traders are to blame for their own problems: they formed the

majority of the committee which consented to the local government demands

for relocation.

Due to lack of political participation and bargaining power the foreign hawkers

perceive that the running of the market is best left in the hands of the local

hawkers. Two reasons could be given to this, that is, either the foreign

hawkers do not want to antagonise the relationship with the locals for fear of

reprisals or the income levels and standard of living in South Africa are much

better than in their parent countries. The latter could be true if one considers

the fact that the goods they sell are from their home countries and they get

them cheap and maximise their profits by charging exorbitant prices, which

makes them to have higher income levels. The relative peace and security

which exists in South Africa, especially for foreign hawkers from countries in

political turmoil could be a reason for these hawkers to perceive better

standards of living. The self-imposed exclusion by foreign hawkers from

participation could in the long run disempower them in terms of contributing

towards decisions, which affect them. The experience of market trading,

which the foreign hawkers bring with from the established markets in their

parent countries, could be important towards making the Yeoville market

viable.

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5.11 Yeoville Hawkers Market Committee Perspective

The Yeoville Hawkers Market Committee is affiliated to the Gauteng Hawkers

Association (GHA) which is the umbrella body of all hawkers in the province.

The Yeoville Hawkers Market Committee represents the hawkers within the

market and serves as the forum for engagement with other stakeholders like

the MTC, GJMC, GHA, the South African Police Services in Yeoville and the

Yeoville Development Committee forum which embraces all stakeholders

operating for the cause of the upliftment of Yeoville.

According to Mr X, chair of the Yeoville Hawkers Committee, membership is

open to all hawkers from Yeoville and this is reflected in the representation of

non-South Africans on the committee. The Yeoville Hawkers Committee

contends that the long-term objective is to run the market along business

principles in which hawkers acquire equity shares. They also aim to develop

and impart business development skills to the hawkers. The Yeoville

Standard Bank branch has offered to open accounts for hawkers and to serve

as a reference for those who wish to expand their entrepreneurial ventures.

5.12 Gauteng Hawkers Association (GHA)

In an interview, GHA liaison officer Edmund Elias blames the problems of the

Yeoville market on the council's failure to consult with established hawker

leadership. Edmund reiterates that "the council tried to implement a policy of

forced removals, thinking that would make the market viable. The policy has

backfired on them badly."

GHA vowed that the association would only co-operate to make the market

viable if four criteria are met. These were that:

Council should accept that there should be a mix of markets and

properly regulated street trading. The position in this case is that the

council is trying to divide the formal sector from the informal sector and

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the GHA is adamant that this will never work and street trading is here

to stay.

Anchor tenants, for example, a chain store from the formal sector

should be incorporated into the markets. GHA believes that the council

officials do not have an ounce of business acumen hence the

misinformed decisions. The street traders are the true entrepreneurs

and they know which locations are best for business. The Yeoville

market should therefore have been built away from what is perceived

as Yeoville's high crime area.

Hawkers should be allowed some input into the location of the markets.

Hawkers should be given equity ownership in the markets, rather than

remaining perpetual rent-payers. This is viewed as giving meaning to

economic empowerment.

The informal sector must be incorporated into the mainstream. GHA

acknowledged also that it is aware of the needs of the city and is aware

of the importance of keeping streets tidy.

The liaison officer of GHA accuses the council of deliberately allowing

street trading to get out of control in Yeoville so it could force the

markets on to traders. He also states that there are plenty of hidden

agendas around street trading, with a lot of people trying to make

money out of it. GHA vehemently states that it rejects these agendas.

The problems continually being experienced by the Yeoville market

traders are viewed as a deliberate attempt to exploit the meagre

earnings of the hawkers through this privatisation venture.

Due to these problems experienced by the hawkers, the Yeoville Hawkers

Committee and GHA state that since the relocation and inception of the

market, there has been an abandonment of the market by the bulk of the

traders. The initial number of hawkers accommodated was 360. It was so

crowded that it was virtually impossible for customers to enter or navigate its

narrow passageways. Many traders drifted away to other areas, leaving only

about 150 today.

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In an interview with Business Day (10 March 2000) Yusaf Ahmed, who left

after trying for three months to make a living at the market, trading in spices,

remarked that, "I was dying a slow death. I could not even pay my home rent.

Now I am a happy man. I can pay my rent and I can buy my daily bread and

milk." Ahmed blames the traders' troubles on the loss of passing trade crucial

to any retail enterprise.

5.13 MTC and Local Council Perspective

In between the Hawkers and the Local Council stands the Metropolitan

Trading Company. This latter organ justified the intervention by stating that:

The challenge facing the company is to cover overheads. Operational

costs of running the market stand at R108 000 a month. This includes

security, cleaning, refuse removal, rates, services and promotions. To

offset this deficit MTC passes on the costs to the traders in the form of

rent collection. The company has also terminated existing contracts for

security and cleaning services that were costing R30 000 a month

These responsibilities would be taken over by the hawkers, allowing

rentals to be reduced by R50 per month for stakeholders along the

market's Rockey Street frontage and by R25 per month inside.

This was the fourth rent reduction to be announced since the opening of the

market in December 1999. However, to date the affordability of the rent by

the traders still remains a problem. The viability of the market is also in doubt,

as is indicated by the exodus of big business from Yeoville. At the time of

writing, Nedbank and Standard Bank had already closed their doors and

relocated. The entrepreneurial development skills envisaged to be beneficial

to the traders in the earlier intervention by MTC are now problematic, as

Standard Bank, which had committed to assist, has pulled out of the area

citing crime and grime.

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The Metropolitan Trading Company's acting CEO, Rory Robertshaw, admitted

that many problems had been experienced in Yeoville, but said new initiatives

should help to turn things around.

According to Graeme Reid, the inner city manager, the Yeoville street market

seeks to rejuvenate Johannesburg, attract investment and return the streets to

the ratepayers and pedestrians. The manager of the market supports the

Local Council position by stating that the market concept at Yeoville is

informed by other social concerns such as city rejuvenation, alleviating crime

levels, property values of the shops around the market and unemployment.

It is clear that the market is being used as a method of arresting the social

misdemeanours within Yeoville at the expense of the hawkers. The objectives

of the intervention seem to ignore the promotion of the livelihoods of the

affected hawkers and emphasise instead the privatisation of the sector to

generate funds from the already poor hawkers. Formalising the activities of

these traders will further enhance the market as an income-generating source.

for the MTC.

5.14 Free Market Foundation (FMF)

The Free Market Foundation is a non-governmental organisation based inl

Sandton, Johannesburg. Its main mission is to promote economic freedom,

civil liberties and to assist in constitutional issues for the historically deprived

people by legal representation.

Due to the controversies which afflict the Yeoville market, and the subsequent

decline in the hawkers' income levels, GHA has brought along the FMF to

garner support for the hawkers. Leon Louw has come in on behalf of the

traders. An interview with him revealed the following:

"The council's actions in terms of having had to forcefully remove the street

traders was unconstitutional," he said. The FMF believes that the Constitution

of South Africa guarantees everyone the right to practice their profession and

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if their profession is street trading, they must be allowed to practice it. Leon

stressed that "street trading is a fact of life in South Africa, and council can

only regulate it, not ban it outright." As a result Leon Louw is currently raising

money for a court interdict and Constitutional Court review of the legality of

the Council's ban on street trading and relocations to designated markets.

Leon Louw regards the council's intervention as a fundamental mistake,

because it is working in an apartheid paradigm. He blames this mistake on

white apartheid bureaucrats who are still in power and hence practice

apartheid principles in terms of segregation and the Group Areas Act

philosophy of placing black people in designated areas and hence thwarting

their business development.

The attitude of the council is regarded as being anti-informal sector and there

is a perception that the council officials are on the side of the formal sector,

which experiences inevitable competition from the traders. This same

adversarial relationship exists between the GHA and the Yeoville Hawkers

Market Committee. The latter is seen as acting in the interests of white

corporatists, by agreeing to anything, which is indirectly resulting in lowering

the livelihoods of the traders.

The issue of lack of business acumen by council officials is constantly brought

to the fore. Council is viewed as lacking basic economics and development

knowledge, hence the ill-informed decisions and inappropriate intervention

methods in terms of addressing the street traders' problems. A basic example

is given in the understanding of the difference between a street trader and a

hawker. Louw explains that a street trader operates on the intersections or

nodes of roads, selling different products and services. A hawker operates on

the sidewalks or pavements and is dependent upon passing trade. What

council does not understand in its bias in favour of the formal sector, is that

even the ATM machines, Telkom public telephone booths, Coca-Cola vending

machines, cigarette machines and other forms of vending machines on the

sidewalks are a form of hawking and cause the same traffic problems and

sanitation issues as the informal sector. Not much is done to control this, but

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for the hawkers, plying their trade is a serious offence. It is these basic

dynamics that the council does not understand, and this causes them to

formulate poorly designed projects.

The City Council views the establishment of markets as alternatives to street

trading/hawking. This is the wrong approach: markets should be viewed as

an addition, depending on the type of goods being sold. The selling of

vegetables and shoes requires different economic considerations. It is more

profitable to sell vegetables at strategic pavement stalls and have clothes sold

in a flea market set-up. The economic principle of selling perishables like

vegetables and fruits is that it is dependent on passer-by trade. Clothing, on

the other hand, is a form of 'destination shopping'.

Louw also explains that the opposition by council to street trading and the

establishment of the Yeoville market is a characteristic of the desire of a First

World level of standards that is foreign to the Third World. This is being

reflected in the restructuring and privatisation aspects of the iGoli 2002 plan.

Lack of consultation with experts in the informal sector has led council to

misread the Yeoville market dynamics. Louw states that the GJMC is

confused in the way it is making decisions and implementing them. The

council targets black people but ignores white people also plying their trade.

Their emphasis is to look at mistakes and not come up with proper

sustainable solutions. The council assumes a "FIX IT" attitude and "robs

Peter to pay Paul" (that is, it taxes the informal sector's meagre earnings to

subsidise and protect the formal sector).

5.15 Views of Customers

A wide spectrum of opinion was given on the new Yeoville market, but the

general trend of responses indicated the following:

The narrow passages within the market are a nuisance to navigate. The

multiplicity of products being sold confuses the customer in making a buying

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decision. The market looks extremely busy and overcrowded and it is

therefore not attractive to spend time in it.

Other divergent views from a smaller number of customers supported the

market in the sense that there is a wider variety of goods and services; and it

is convenient for the households in close proximity to the market.

5.16 Views of Security Personnel

The Rockey Street area is a high-crime area; therefore there is more

vulnerability to criminals during shopping. On one of the fieldwork visits, a

foreign hawker informed me that she had been a victim of theft. She

complained that the other hawkers were present and could not do anything

about it. Later on when I interviewed one of the market policemen on duty

about the incident, he defended himself by stating that the MTC does not

provide him with a firearm or even a two-way radio and it is therefore difficult

for him to apprehend armed criminals, lest he becomes a victim himself. The

hawkers themselves should actually apprehend the criminal, he argued, and

co-operate with each other, because he cannot patrol many places at the

same time.

What this indicates is that even though there is reasonable security, the

spillover of crime from the other parts of Rockey Street is inevitable.

5.17 Conclusion

From the above discussions and viewpoints expressed, the main issue which

is revealed is the weak bond between local governments and its electorate.

The removal of traders from the Yeoville streets to the market has raised

many questions about the challenges facing the informal sector and local

government. As mentioned earlier (in Chapter Two) there are many

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difficulties associated with defining the informal sector; the same difficulty is

shown here in how to best develop it.

An in-depth analysis of the different stakeholders' viewpoints in the case study

points to the fact that:

1. The hawkers' livelihoods have eroded considerably since their

relocation to the new market. The original occupancy of the market,

which was at 360, has now gone down to 150, owing to a high level of

dissatisfaction. The 150 remaining hawkers are more vulnerable, as

they find themselves in a predicament of either going back to the street

or risking arrest or staying within the market and suffering low income

and high rental levels. The highest drop-outs have been local hawkers,

thereby presenting a situation whereby the foreign hawkers seem to be

content. This could be due to the relative security and the ability for

them to contend with the situation, as they have no alternative but just

to persevere. Most foreign hawkers are used to the open market

system in their original countries, which could be a plus factor for their

. continued stay at the market.

2. The option created by Council is not a feasible one, taking into

consideration the type of trade it is planned for. The hawkers were

much better off in those 'bad conditions' as perceived by council. The

new designated area is flawed in several ways. The very nature of

street trading is based on the principle of high frequency of passers-by

and very close interaction with the market (customers). The location

specificity should be a strategic one which maximises the catchment of

people. In the case of the Yeoville market, these principles have been

negated, and the result has been extremely low revenue especially for

local hawkers situated away from the front stalls which are more

expensive but profitable.

3. As a compensatory strategy, the hawkers are forced to engage in

illegal pirating of their produce. What this means from a observation at

the market is that, as soon as the Metropolitan police finish their duties

at 16:30, the hawkers use the remaining evening time to sneak back to

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their original strategic points to sell their goods. This practice becomes

a trade-off between risking perishability of their fruits and vegetables or

risking possible confiscation and arrest. During weekends when the

police are off duty the practice is widespread. This trend could result in

a movement towards pavement trading again. According to the

hawkers, this trend is at least boosting the income levels and

supplementing the dreaded monthly rental and drop in customer

frequency, which is a nightmare for most of them.

4. The architectural design and morphology of the market has drawn

criticism. The frontage areas are at high passer-by points thereby

generating better sales than the stalls located within the market which

depend on a flow of customers entering through the narrow passages

leading from the outside stalls. The most affected are the hairdressers,

shoe repairs and other shops situated away from the hive of activity.

As a way of making the market concept viable the Yeoville Park area

has been suggested by GHA as an alternative. This location would

allow for a parallel structure, thereby enhancing fair corroetitlon.,

proximity to most formal shops which have high clientele which will lead

. to high patronage at the market for everyone. Currently the foreign

hawkers occupy the front stalls because of the affordability to pay rent

and proximity to the passing pedestrians. The unorderliness of goods

sold creates confusion for the customers. A solution will be to have the

African style structure where the goods are differentiated in terms of

levels or floors in order to make it convenient for customers.

5. The location of the market is another point of contention. It has been

located away from formal business, which serves as a pull factor to

attract more people. Its new location is next to the notorious hang-out

of drug pushers and other criminals - that is, Rockey Street. These

factors have become a push factor for many consumers, thereby

lowering the patronage of the market. A suggestion from GHA has

been to market the venture by bringing in anchor tenants like a chain

store to open inside the market, so as to act as a centrifugal force for

customers. These will then result in a high frequency of passers-by.

The closure of formal financial institutions, namely Nedbank and

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Standard Bank, poses a threat to the anchor system and the attempt to

attract formal stores to Yeoville.

6. The general satisfaction expressed by foreign hawkers is not related to

income levels but is based on the enhancement of their personal and

property security. The market has provided them with an ideal refuge

from the criminality and xenophobia that they would face in the street.

But in terms of income levels, there has not been an improvement, as

the situation of the market does not provide for a dynamic business

environment.

i.], A glaring education gap exists between the local and foreign hawkers.

Apartheid, which meant inferior education and, which could not provide

them 'tflh the skills needed to face their present reality disadvantaged

the local hawkers. Providing some Adult Basic Education related to

their business environment should alleviate the low levels of skills they

possess.

8. There is an adversarial and conflictual relationship between local

governmentand its constituencies. The relationship is characterised.by

mutual suspicion and disrespect, in which local government is not

taken seriously because of its inability to address and communicate

. with its electorate. The call by FMF and GHA, especially the liaison

officer of GHA, Edmund Elias, "to make representations to Thabo

Mbeki to mediate in the Yeoville market and also to call for a

Constitutional Court verdict on the street traders", is critical of the status

and decision-making powers of local government and reveals the lack

of communication between all stakeholders. Due to lobbying by the

Yeoville market committee the rentals have been reduced four times

already. This also shows the lack of planning, business acumen and

direction of the MTC and the council officials. It also raises the

question as to whether this form of intervention was necessary in the

first place.

9. The answer to this question lies in the iGoli 2002 plan on privatisation

and corporatisation of some functions of the council. The issue of how

to formalise the informal sector has been a thorny one. In the case

study the intervention reflects a failure of the market. This may be an

105

indication of the need to redesign and rethink the priorities of the iGoli

2002 vision by putting people first, and not to emphasise operating

costs and profits which the MTC is bent on accruing from the poor

hawkers. At least an effort should be made to make the council more

willing to live with the street hawkers than with the consequences of

destroying their chances to earn a living which can result in social ills

like crime and unemployment. This could also alleviate the bad

attitudes towards the council on the part of concerned stakeholdersand

civic movements.

10. An overall evaluation and analysis of the data collected points to the

fact that the hawkers' livelihoods have been decimated since

relocation, and the future viability and sustainability of the Yeoville

market is in the balance.

11. The Yeoville market as a pilot case for other envisaged projects by

GJMC serves as a litmus test for possible costs and benefits in the

future. The success of such projects does not lie in the profitability

margins but in consultation with the people in devising an intervention.

They should be put first and be the beneficiaries of any intervention.·

The outsourcing of some local council functions like the economic,

development and welfare of people to private companies and to the

corporate world should be discouraged as this exposes people to

exploitation or leads them into complex economic systems which they

do not understand, hence sinking them deeper into poverty.

Tough measures do not necessarily result in compliance. The case study

reveals that the 'carrot and stick' method of forcing people to develop in a

direction not determined in consultation with them will not work. The Yeoville

market's conception and implementation is severely flawed and its viability is

doubtful before it even celebrates its first birthday in December 2000. The

conceptualisation of this venture flouted the basic principle of planning with

and for the people. The lack of consultation and empathy for the informal

sector and a bias towards the corporateworld has placed severe strain on the

whole venture. Only time will tell whether the market will succeed, but the

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criticisms of the hawkers suggest that the market could be one big white

elephant.

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CHAPTER SIX: SUMMARY AND CONCLUSIONS

6.1 Introduction

In this last chapter of the study it is important that possible alternatives to

intervention in the informal sector are provided. These could be strategies

and guidelines to be implemented in order to effectively assist the informal

sector to enter the mainstream economy of the country and improve the

livelihoods of the hawkers. Before this is done it is also important to refer

back to the objectives of the study, as these will guide the direction of

conclusions.

The aims of the study were to:

1. Assess the form of intervention the local council has used as a way of

regularising the informal sector.

2. Evaluate whether this intervention has led to an improvement in the

livelihoods of the hawkers.

3. Forecastthe viability and sustainability of the market.

4. Explain the adversarial, tenuous and conflictual relationships, which

exist between the local authorities and their constituencies.

Given the above, it is possible to provide conclusions based on the findings

which have been set out in Chapter 5.

6.2 Summary of Results

6.2.1 Form of Intervention

The process of deregulation is a complexone and can only be successful if it

is introduced or implemented gradually so that informal traders can adjust to

the new circumstances (Rogerson, 1989). The form of intervention used by

GJMC was a forceful one and this did not provide the hawkers with the

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opportunity to air their views and assess their options. This intervention was

characterised by forced evictions, confiscation of goods and threats of

imprisonment, which only exacerbated the already conflictual relationship

between the local authorities and their electorate.

For any intervention to be successful, the type of activities, which are being

undertaken by the hawkers, should be taken into cognisance. Different

categories of products will require certain economic principles for profitability

and growth. In the case of the Yeoville market, the different activities were all

lumped together as one and no consideration was given to their unique

trading requirements. The result was that, instead of the intervention assisting

the fruit and vegetable hawkers, it actually made them to resort to illegal

activities to supplement their income. An intervention should aim at promoting

growth and not fuelling social ills, like unemployment and crime. Naturally,

people will resist or shun any form of victimisation or exploitation whether

directly or indirectly. In the case of the Yeoville market, half of the original

hawkers who occupied the stalls have left, and this reflects a resistance to the

intervention.

Any form of intervention in the informal sector should be conceptualised as a

source of employment and be characterised by a promise of sustainability.

The intervention should in its framework entail social safety nets to protect the

recipients from possible collateral damage caused by its implementation. By

this I refer to issues of skills development, the ability to manage risks and

empowerment through creating the capacity for entrepreneurship. The

intervention in the form of the Yeoville market seems to lack this important

aspect. The project is close to a year old, but there are no signs of this kind of

assistance. The traumatic situation which the remaining hawkers are

experiencing, in terms of sudden loss of income and their inability to meet

some of their basic needs, requires an urgent remedy.

Since the informal sector consists of both dead-end survival activities and

small-scale activities with the potential for growth and technical upgrading, the

main aim of policies of intervention should be to increase the modernising

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elements of the sector. This requires better supply conditions in terms of

capital, technology, skills and infrastructure and improved demand conditions

by building up linkages between local authority and industry associations and

NGOs.

Interventions should be coupled to partnerships and alliances with other

I stakeholders as they all form part of the supply chain. Bringing in non­

governmental organisations and other social and business bodies creates the

possibility of wider consultation and different perspectives on solving

problems. A one-band attitude often results in shortsightedness and

proneness to bad decisions, which affects people, negatively and causes

material loss.

The intervention by local council in the Yeoville situation was one based on a

corporatist, privatisation paradigm. As a result, its underlying objective was

based on profitability at the expense of the hawkers. Any intervention aimed.

at improving the livelihoods of people should be preceded by a social impact

assessment to evaluate the possible costs and benefits to the people, before

implementation takes place.

6.2.2 Livelihoods of Hawkers

The livelihoods of people entails a wide spectrum of issues: personal security,

self-esteem, access to material goods, spiritual satisfaction and meeting basic

needs in terms of a decent meal for the family, affordable shelter and a clean

environment. As mentioned earlier, unduly restrictive regulations encourage

the development of social ills that can damage the living conditions of the

people and in this particular case the informal sector. The findings of this

study indicate the serious concerns on the part of hawkers regarding a drop in

their living standards as a result of lowered levels of income. It is true to say

that the council has helped to improve the working conditions of the hawkers

by providing healthy conditions and a clean environment, which is also

relatively secure. This alone does not ensure human development, however.

The hawkers as individuals benefit from the clean surroundings but their

I1

110

immediate families suffer due to the fact that they can no longer afford to fulfil

other needs like education, a decent meal and affordable shelter.

Policy-makers should therefore identify and remove those unnecessary

obstacles to enterprise formation and growth. Hawkers at the market have

cited obstacles of low contact with passers-by and high rentals as

impediments to better livelihoods. Local council could assist by giving title

rights to the stalls with a minimum title-deed payment. This would create

ownership and thereby create innovativeness to increase profit margins. The

current state at the Yeoville market is one of desperation and anger and

should be urgently addressed to avoid further departure of the already

impoverished hawkers. Other barriers, which prevent access to financial,

educational and productive resources, undermine the improvement of

livelihoods in this sector and should be removed.

6.2.3 Viability of the Market

The Yeoville market's survival is already questionable. The reasons are its

location (which does not enhance the accessibility principle); architectural

design (which leads to unfair advantages depending on where the hawker's

stall is situated); the overhead operational costs paid by the hawkers (the high

rentals do not equate the levels of income, thereby resulting in losses in

trade).

The rationale behind trading markets is also questionable. The relocation of

the flourishing street traders to designated, demarcated areas destroys the

one advantage that the traders have in the streets - that is, easy access to

passers-by. By nature the activities of the informal sector are informal and it

is this informality characteristic or principle that underlies the generation of

income. Removing this element means removing the benefits that are

typically provided in an informal context.

The markets are founded on the principle of destination shopping, just like

shopping malls. They serve a rational consumer with some level of

111

sophistication. Substituting irrational consumers (that is consumers who buy

impulsively or on an ad-hoc basis) with replacing them with rational customers

will result in low patronage of the market. As regards the Yeoville market, all

the former irrational customers of the hawkers do not frequent the market due

to this basic marketing concept. They would rather risk buying goods from

another outlet than suffer the inconvenience of travelling further away to get

these goods. This exposes street traders to competition from established

shop owners that they may not be able to withstand. According to the Kihato

(1999) the council has estimated that 40 per cent of street traders at the

Yeoville marketwill not survive in the next three years.

In the same publication of the Centre for Policy Studies there is discussion of

the fear that the Council's stance on street trading by relocating hawkers to

markets will worsen crime and other social ills. Unless the council provides a

viable alternative for traders, many of whom are simply desperate citizens

struggling to provide for their children, they may do something a lot worse

than create unsightly pavements.

6.2.4 Relationships between Local Council and its Constituency

As discussed in Chapter 5, statements from different stakeholders clearly

point to a particular type of relationship between local government and its

electorate. This is characterised by an adversarial and conflictual relationship

with a lot of mistrust, suspicion and disrespect for the government. These

misunderstandings are attributed to a lack of communication between the elite

bureaucrats and their communities. The forums, which represent the

communities, are seen as easy to manipulate by the government officials in

order to push for their own agenda. The Yeoville Market Committee is viewed

by GHA as acting in the "interests of the privatisation schemes of the GJMC

and are the cause for the misery and poverty which is now afflicting the

hawkers". GHA accuses the Yeoville Market Committee of having swallowed

a "sugar coated poisoned pill" by acceding to the council's drive to relocate

hawkers to the Yeoville market. GHA also alleges that this committee is

112

working in cahoots with the white MTC corporatists who are bent on exploiting

the meagre earnings ofthe hawkers.

The lack of knowledge of entrepreneurial and socio-economic development

concepts by government officials is seen as a cause of conflict. Policies are

drawn up and implemented without prior public debate or consultation with

experts in the field. As a result, there is defiance by the constituencies they

are meant to serve, as is exemplified by cases of Human Rights infringements

being taken to the Constitutional Courts in order to reverse some of the

contentious regulations passed by the Council.

In order to establish a firm bond and relationship of mutual consent between

local government and its electorate, there should be a reinforcement, of the

fundamental principles of good governance based on integrity, comr;nunity

participation and human development. The Centre for Policy Studies

emphasises this relationship by pointing out that the biggest challenge fa,cing .

South African municipalities, in the words of the White paper on Local

Government (1998), is lithe need to rebuild relations between municipalities

and the local communities they serve". South Africa has emerged from a

system of local governance in which the majority of the population had

tenuous and adversarial relationships with their local governments. This,

then, should be the focus of government structures to create a strong

interface between the communities and themselves. The other planned

activities should therefore be reprioritised in view of somefindings in this case

study.

6.3 Conclusion

Finally, there are a number of pitfalls associated with local government

intervention in the informal sector. The major pitfall stemsfrom the inability of

policy-makers to understand the dynamics of this sector. The intricacies of

this sector have made it difficult for many governments worldwide to formulate

an appropriate policy. The good part of this is that it shows an emerging

113

recognition of this sector as an important part of the mainstream economy and

as a base for employment opportunities. The problems raised in the case

study also serve to illustrate the complexity of formulating an appropriate

definition of the informal sector. What should be understood is that the very

nature of 'informality' is the underlying principle of the sector's growth and

should be preserved and explored in order to maximise the benefits of it.

Recommendations

As the hawkers markets start sprouting in the CBD it is important that lessons

from the Yeoville Hawkers Market serve as a mirror. For the success of these

markets the most important aspect is to establish the catchment area from

where most of the clients come. A customer catchment research should be

conducted before any construction can take place in order to determine future

patronage trends. Failure to explore this will result in the markets being white

elephants as is exemplified by the gradual deterioration and apathy by

hawkers at the Yeoville market. Due to low income levels generated at

markets, the hawkers resort to illegal ways, like going back to the streets to

supplement the daily income. This fuels new trends of criminality as a way to

avoid compliance, quicker ways of making a living could emerge and these

are mostly illegal activities. Centralisation of markets in terms of proximityand

accessibility should be the criteria for location and not the current position of

locating them away from formal activities, as they are viewed as a menace for

urban development. There should be a mutual co-existence between the

formal and informal sector as they all share the same clientele.

The structural design of markets should at least have two floors in order to

exhibit the goods in a.way that will enhance customer freedom of choice. The

hall structure leads to interpersonal conflict by hawkers due to a scramble for

vantage-points. The distortion in rental emanates from this weakness. Due

the fact that most of the hawkers depend on hand to mouth survival, it is of

importance that overhead costs are offset, otherwise this is the main cause

leading to low income and subsequent low livelihoods. Models from other

areas especially West and East African countries where the market trading

114

system has been established for a long period should serve as points of

reference in order to improve the local markets' viability.

In the instance of the Yeoville market, promises were made to the hawkers

that they would receive training in small business development and that links

would be made with the local bank to facilitate opening of accounts and

possible credit facilities. This never materialised and the result is downright

I mistrust between the hawkers and the responsible authorities. It is a plausible

development initiative to enskill people, but expectations should not be

created as the non-fulfilment leads to discord.

Privatisation as one of the tenets of globalisation has been blamed for the

distortion of people's livelihoods. Therefore there is a need for government

intervention in order to fulfil its mandate as a social safety net provider.

Leaving its constituency to the mercy of private enterprises only leads to

further exploitation and improverishment of the people, as the private

companies are focussed on profitability.

The democratisation of opinions, should be the basis for any intervention,

which affects the people. Institutions comprising representatives of the people

to facilitate development should not be created on a unilateral basis, but

should be a constant process of consultation. It is through an on-going

consultation that the participation and empowerment of both people will be

achieved. A viable, people-oriented policy formulation only emanates from

such an engagement.

Credit provision has now become one of the most important aspects of.

developing the informal sector. It should not be used as a carrot, but should

be viewed from the premise that the informal sector is also bankable.

Therefore the terms of transactions and other facets which go with credit

provision should be made flexible in order to maximise the benefits for the

informal sector.

115

Lastly, there should be an integrated approach to the development of the

informal sector by linking micro aspects to the macro environment. This could

be through improved policy and a supportive regulatory environment, which

places the needs of the participants in the informal sector as the central focus.

Current policies have an undertone of viewing the informal sector as a hazard

and as such the policies are directed at placing the sector on the margins of

the formal sector in order to protect the latter.

, ,

116

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