The headline for this story was going to read: Desperate but (please) not damned.
This began as a woeful story about South Africa’s unemployment crisis and how to fix it. Instead, it offers another view of joblessness.
Most people with a conscience wonder how we can help the growing number of unemployed. In downtown Durban, one road back from the beachfront on sunny afternoons, you’ll find poor, scruffy youngsters lining the pavements, shooting up heroin in plain view of the public.
One user said life as an addict numbed the crushing hopelessness of having no job, no house and very limited prospects. He got up every morning in Inanda to do nothing. Eventually, embarrassed by his situation, he left home for the city centre and got caught up in drugs that blotted out his reality.
His story is abject, especially against the grim backdrop of Statistics South Africa (Stats SA) data, which said earlier this year that the unemployment rate rose to 33.5% in the first quarter of 2024, while the economy shrank by 0.1%. The record high for unemployment in South Africa is 35.3% (fourth quarter of 2021).
It’s trite and true: there’s no silver bullet for unemployment. Creating a more enabling environment for entrepreneurs must be part of the answer.
But is our economy truly this dire? And are the Stats SA numbers the full picture?
Absolutely not, says author and informal sector specialist GG Alcock.
GG doesn’t buy the statistics. He says the state’s data collection is poor, relying heavily on phone interviews and computer-generated research. In a word, he calls it “crap”.
This is not to say there aren’t disillusioned work seekers. But the real story, he argues, is less about narrow definitions of unemployment and more about the bustling informal sector — and how to grow it.
There are different views on this. Academic Siyabonga Hadebe, for example, offers a contrasting perspective in an article for News24. But back to GG.
He points to Stats SA’s Annual Household Survey, which reflects that in 2022, only 23% of social grant recipients said their grant was their primary source of income. That means 77% reported having other income streams.
“So we look at the statistics as though the world is ending and everyone is playing the violin weeping, instead of looking at how people are hustling — and how admirable that is,” he says.
GG cites numerous studies showing how dynamic the informal economy is. He admits that 99% of people think his numbers are exaggerated, but he backs up the following estimates of annual informal sector turnover:
-
Spaza shops: R178 billion
-
Fast food outlets: R90 billion
-
Township hair salons: R10 billion
-
Backroom rentals: R20 billion
-
Rentals to immigrants running spaza shops: R25 billion
-
Licensed liquor taverns: R110 billion
-
Traditional medicines: R18 billion
-
The taxi industry: at least R50 billion
-
Stokvel savings: R44 billion
“The informal sector easily turns over upwards of R750 billion a year. Imagine if they could get better loans — if this sector grew by just 5%.”
GG notes that Capitec Bank has 22 million accounts, and more than a million account holders use their personal bank accounts to run businesses, depositing more than R15,000 a month from trading activity.
He also cites inner-city trader advocate Richard Dobson, who tracked a group of mealie sellers in Durban’s CBD. About 140 boiled-mealie sellers were moving 26 to 28 tons of mealies a day — generating more than R1 million a week in turnover, according to Dobson’s organisation, Asiye eTafuleni.
Johannesburg’s fresh produce market does about R9 billion a year in turnover, with an estimated 40% to 60% of that going to hawkers and informal traders.
GG also points to listed property funds reporting that their trading densities (turnover per square metre) are highest in townships. Retail-focused Vukile Property Fund, for example, reported a significant uptick in trading densities at its local malls, with township shopping centres leading the way.
“One hungry person is one too many,” GG says, “but broadly speaking, the wrong language is being used in our country about unemployment and the informal sector. It is demeaning and doesn’t acknowledge the country’s strong entrepreneurial culture.”
He argues that too many people confuse entrepreneurship with start-ups. South Africa is awash with entrepreneurship incubators, many run by academics and experts with little real-world business experience. Many are endorsed by a government that, he says, doesn’t understand the informal economy and tends to shy away from it.
“They teach people about cash flow and stocktaking — all a bit condescending to a gogo who has been selling vetkoek on the side of the road for decades. She has supported and educated children and grandchildren from that income. She understands cash flow and stocktaking. She’s financially astute. Her business is not hand-to-mouth.
“Maybe 10% of informal traders are survivalists. The rest are making good money — some are making a lot. We should be asking how we can help those people scale up.”
That means a multi-sectoral approach. Informal businesses need security of tenure — a reliable place to work. It might be a container, but they must be able to operate consistently without the constant threat of being moved on.
Hot dog sellers in New York are a beloved feature of the city and often run successful multi-generational businesses. Why aren’t vetkoek sellers in South Africa afforded the same recognition?
“We need to change municipal bylaws so informal businesses can operate legally. It doesn’t have to be onerous and exhausting. Bureaucracy should assist and enable businesses, fast-tracking regulation to help a sandwich seller instead of arresting them, as happened in one instance in Rosebank.”
Entrepreneurship could be bolstered, GG says, if government made it easier to register and run a business. Registering a company in Rwanda takes four days; in South Africa it can take 40.
“We also need to simplify our tax structure so micro-businesses are supported rather than penalised.”
Informal traders also need access to finance — small, short-term loans to improve working capital and keep stock, instead of borrowing from stokvels or family. Mobile payment companies like iKhokha are already advancing loans to customers based on their turnover data.
“We won’t change the unemployment statistics through the formal economy,” GG says. “We have presidential summits and all sorts of incentives for companies to offer internships. But that’s based on the expectation that you will get a job in the formal sector, whereas the chances are far higher that you will earn a living in the informal sector.
“We are creating the expectation that everyone will get a formal job, and their souls end up being crushed. We live in a new gig economy, with digital nomads and informal trade flourishing. We must eliminate this patronising approach that expects everybody to fit into an eight-to-five job instead of letting the informal business sector fuel the economy.”
