Informal employment in South Africa

Abstract

Employment policy in South Africa has paid only limited attention to issues of the informal economy. For a number of reasons, any feasible and reliable scenarios of employment in South Africa needs to pay due attention to the informal economy. The informal economy has since the early 1990s grown considerably. Notwithstanding this growth, unlike most other developing countries, the informal economy in South Africa continues to be small. The debates about why South Africa continues to have a small informal economy with high levels of unemployment is an important consideration for employment policy. The formal and informal economy are often seen as two distinct and unconnected components of the economy. The informal economy is deemed to be made up of very small economic units which operate outside the purview of regulations and statistics, and their output is therefore unrecorded. Also, these economic units are deemed to operate independently of formal sector economic units, that is, the formal and informal economies are not connected in any substantial fashion. In fact, the formal and informal economies are integrally connected so that developments and cyclical factors in the formal economy are likely to have a significant impact on the informal economy and vice versa (albeit less strongly). More important, structural changes in the economy over time are also likely to have significant impacts on the informal economy.