Creating our own African dream will take effort from all sectors

Published Dec 13, 2006

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Johannesburg - They are just two of the nearly 2.5 million people trying to climb the ladder that will take them out of what President Thabo Mbeki has dubbed the second economy and into the formal sector.

Business Report interviewed Kosia Moloi and Samuel Mangani, who are at the bottom tier of the growing economy.

Moloi is a casual construction worker, Mangani a security guard.

They each earn less than R2 000 a month, which does not go a long way towards paying for basic necessities.

But they haven't given up hope of moving into the mainstream economy. They are happy that they have a job and are not among the 38 percent classified as either unemployed or too discouraged to look for work.

Data show that nearly a third of South Africa's workers are employed in the informal economy.

These include domestic workers, informal traders such as street vendors, waste pickers, transport workers and those making goods and providing services from home.

Of those working informally, about half are in trade, while others are in services, construction, manufacturing, transport and finance.

Although individual incomes are often low, it is estimated that the informal economy - one element of the second economy - contributes between 8 percent and 12 percent of gross domestic product.

Gavin Lewis, an independent developmental consultant, says the private sector needs to help small businesses by outsourcing to them.

"The private sector needs to support the non-governmental organisations that support small business people through mentoring programmes and skills development," he says.

"This also goes back to us radically improving our school education system with tertiary institutions teaching applied skills."

Economists argue that there is a close correlation between being poor and working in the informal economy.

Neva Makgetla, the former Cosatu economist who now works for the presidency, says most informal enterprises involve hawkers and subsistence farmers.

"Three-quarters earn under R1 000 a month," Makgetla says. "Nine out of 10 informal workers are African, compared with six out of 10 in the formal sector.

"Moreover, 44 percent of informal workers and self-employed are women, compared with 37 percent in the formal sector."

The informal economy is disproportionately dominated by the retail and wholesale trade.

The International Conference for Labour Statistics defines an informal business as one that is small in terms of the number of employees and is not registered in terms of taxation, other commercial legislation or labour legislation.

In a bid to integrate the second economy into the mainstream and accelerate job creation, the government plans to create 100 000 small and medium-sized enterprises a year through a programme focusing on the informal economy.

Speaking at a national conference in April, former agriculture and land affairs minister Thoko Didiza emphasised the need for the government and other stakeholders to support enterprise development, with a particular focus on women and the youth.

According to Nonhlanhla Mjoli-Mncube, the economic adviser to the deputy president, the programme favours the creation of jobs and small enterprises that promote self-reliance at household and community level, while contributing to growth at local and national levels.

Dawie Roodt, the chief economist at Efficient Group, argues: "In my view, the government should do nothing to create jobs, but rather create an environment that enables the private sector to grow and create jobs.

"The government should focus on economic growth and everything else will follow."

The problem with this argument is that South Africa's growth has not necessarily led to job creation.

Roodt says that while it is difficult for people in the informal sector to graduate into the formal sector, there is a need for the government to cut red tape and encourage people to start their own businesses.

"We should create our own South African dream," he says. "By this I mean people should be encouraged to be self-employed, and in the process employ others.

"The minister of finance, Trevor Manuel, is aware of the problem that is why in his budget speech he cut taxes for small and medium enterprises."

Carleene Dei, the local mission director of the US Agency for International Development (USAID), said in March that South Africa needed to move more people out of the informal economy and into the formal sector if it was to avoid enormous problems caused by great economic and social inequities tracing back to apartheid,

Speaking at the Alliances for Economic Growth and Job Creation forum organised by USAID, Dei said the challenges of job creation and skills shortages would not be easily met.

"It would require all of us - the public sector, the private sector and donors - to work more closely than ever. It will require new resources, new approaches and a great deal of innovation," Dei said.

Speaking earlier this year about the accelerated and shared growth initiative for SA, deputy president Phumzile Mlambo-Ngcuka said that "the goal of addressing and ultimately eliminating the second economy cuts through all our strategies".

The challenge for South Africa is to make sure that those stuck in the informal sector will eventually graduate into the formal sector of the economy. However, this will take time because of lack of skills.

The answer lies in education, especially in the knowledge economy, where South Africa now operates.

- This five-part series will conclude tomorrow

Security guard wishes government would step in to increase wages

Samuel Mangani (29) works seven days a week as a security guard in Johannesburg's Newtown.

While his job provides benefits such as a provident fund, the R1 582 he earns each month does not allow him to own property or buy a car.

He is yearning to learn skills that would allow him to get a better job.

He also wants a house of his own, after years of renting a back-room shack for R250 a month in Soweto.

Mangani also wants his five-year-old son to go to creche like other kids his age, rather than stay at home with his unemployed wife.

"Government needs to nationalise the security industry because of exploitation in this industry," he says.

"I think wages would improve drastically if we were employed by the government."

Mangani says he cannot pay his many accounts because his money only provides for food and transport. As a result, he has been blacklisted.

"For instance, if I need to put burglar bars in my shack, I have to save money for at least four to six months," he says.

Casual construction work too |chancy for thrifty family man

Kosia Moloi (32) earns R1 800 a month as a construction worker.

He pays R300 a month for a rented back room in Diepsloot, outside Randburg, and spends R18 a day on transport to work.

He is married and has a 15-month-old daughter. His wife is unemployed.

Moloi says most of his income goes to meeting his family's needs. To buy clothes, he starts saving as little as R50 a month from January.

Moloi says he cannot spend a cent on himself - but life in the squatter camp is not expensive. There is no electricity, so the family uses paraffin and candles.

Moloi and his wife can only afford to eat meat on Sundays because money is short.

His main gripe is that his job is casual, so he can lose it at the drop of a hat. He would like to see more permanent jobs created, especially in construction.

"The problem is that construction work is not constant," he says. "We get to work for several months and then work stops and I have to stay without a job for three months."

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