the state of the informal economy in gauteng by thulani guliwe presentation to salga informal sector...
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The state of the informal economy in Gauteng
By
Thulani Guliwe
Presentation to SALGA Informal sector Summit, 20 September 2012
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Background• The informal economy has been in a state of decline since the 80’s;
• The informal economy has been an alternative to the shortage of permanent jobs in South Africa;
• In other African countries such as Ghana, Tanzania and Zimbabwe informal economy is the biggest employer (employs over 70%) of the workforce;
• Self employment represents 70% of informal employment in Sub-Saharan Africa;
• For women in Sub-Saharan Africa, informal economy represents 92% of the total job opportunities outside of agriculture;
• Street vending predominates in much of the informal economy;• In South Africa, informal economy contributes very little to the GDP and
there is lesser attention on it despite the economy being highly informalized.
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Background
o The decline of the informal economy has been linked to the growth or decrease of the formal economy;
o A critical number of the labour absorbing sectors are experiencing decent work deficit in South Africa
o Labour absorbing sectors of the economy such as clothing and textiles, hospitality, farm sector are becoming highly informalized;
o Both formal and informal sectors continue to shed jobs as a result of the global economic crisis and other factors.
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ESTIMATED RESULTS: SIZE OF THE SA INFORMAL ECONOMY
The formal and second economy in South Africa (% trends)
• the size second economy averages 8.2% of GDP (2nd GDP/FGDP) over the whole period,
• there is a clear decline in the size of the second economy relative to formal GDP for the 1980 to 2011,
• The share of second economy declining sharply from a relatively high value of 21.6% in 1981 to the trough value of 3.1% both in 2008 and 2009 before relatively rising to 3.5% by end of 2011.
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ESTIMATED RESULTS: SIZE OF THE GAUTENG INFORMAL ECONOMY
The formal and second economy in Gauteng Province (R millions)
• the size informal activities have been hovering between R29 billion and R20 billion during the period reported, though the second economy has been on a declining trend.
• the percentage share of informal activities versus formal GDP has been averaging around 5.6% per annum, with the highest share of 8.6% recorded in 1995 and the minimum percentage share of
3.5% recorded in both 2008 and 2009.
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ESTIMATED RESULTS: SIZE OF THE GAUTENG INFORMAL ECONOMY
Trends in informal activities in Gauteng Province (Rm) Millions)
• the size of informal activities have been hovering between R29 billion and R20 billion during the period reported, though the second economy has been on a declining trend.
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Growth trends in informal activities in Gauteng Province (%)
• the growth trends has been oscillating around zero, that is, they have been growing positively in some years and then negative in some years.
• There is no clear pattern as far as growth trajectory of Gauteng province’s informal activities is concerned.
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Interventions on the informal economy
• Through the Gauteng Employment Growth and Development Strategy (GEGDS) and Gauteng Industrial Policy Framework (GIPF), the focus is on SMME’s and Cooperatives;
• This intervention is aligned with the following initiatives:o Investment in skills for the economy;o Transformation of the economy (labour absorbing sectors) o such as Clothing and Textiles, Green Economy, Agro-o processing etco Re-industrialization (includes the resuscitation of the o Townships economies e.g. Skills transfer to backyard o mechanics linked with the auto sector, manufacturingo of school uniforms, shoes etc
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Key challenges
• Deconstruction of the formal economy through outsourcing, subcontracting and casualization and labour brokering;
• The deconstruction of the formal economy is now prevalent in the labour absorbing sectors such as hospitality sector, security guards, clothing and textiles, farm worker sector etc;
• Government legislations such as bye-laws prevent informal businesses from growing;
• Lack of credible data on the informal economy;
• Competition between the locals and foreign nationals;
• Inability to move from being suppliers of goods to manufacturing (producers);
• Move from survivalist to sustainable businesses;
• Capacity to manage business and the skills required to take the business further;
• Lack of financial management skills etc;
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Years of operation for SMME’s and Cooperatives
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Key findings of the study on state of the informal economy in Gauteng
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Purpose and objectives of the study
• To develop a profile of cooperatives and a comprehensive understanding of the informal economy;
• Identify key challenges facing cooperatives in the province;
• Develop a holistic approach to assist cooperatives in becoming the engines of growth in Gauteng
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Methodology
• Focus on the 5 regions in Gauteng;• Targeted 1000 respondents but managed to
obtain 760 sampling units;• Of these 300 were supposed to be cooperatives;• We managed to get 170 cooperatives (very
difficult to get hold of cooperatives)• Initially all the 5 regions in GP were visited for
SMME’s and Cooperatives and informal sector;• Tshwane was emphasized because they were
more organized.
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Age
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Approximate net profit of the Informal economy
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Registered Companies (n=246)
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How many businesses do you own?
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What business are you in?
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Where does the business operate from?
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Which of the following do you use in your business?
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What made you start your business?
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Who are your clients?
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How did you start your business?
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How would you best describe performance of your business.....
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How would you describe the success of your business?
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Has your company submitted a Government tender in the last 12 months?
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Were the submissions successful?
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Do you save or invest any money you make as profit?
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Recommendations• Need to develop a uniform approach in regulating the
informal economy and relaxation of bye-laws to ensure that hawkers and street vendors benefit;
• Need for government and business to provide support to ensure that cooperatives and SMME’s create jobs and become sustainable;
• Link cooperatives and SMME’s with big industries to ensure that they are well capacitated, competent and linked to both the local and global markets;
• Ensure that cooperatives and SMME’s move from being survivalist to become sustainable businesses that manufactures (produce).