Informal sector can create significant employment
DURBAN - The informal sector has a significant contribution to create employment and significantly impact the local economy if it is given due respect.
Kasinomics and Kasinomic Revolution author GG Alcock says the most significant thing is that this informal sector boasted huge opportunities for entrepreneurs to grow out of it in the food, financial and a range of other sectors as a way to create jobs and opportunities.
Alcock says the problem is that businesses in this sector are not recognised as businesses as they are seen as little hawkers or spaza-shops.
“We do not recognise the huge scale as the kasi food sector is almost R90 billion, spaza sectors is almost R250bn and the muthi (traditional medicine) sectors is R3bn. When we look at those sectors we do not recognise these businesses. We do not recognise the huge opportunities within that environment as we see them as subsistence and survivalist businesses and we do not give them credit for how big that sector is and services they supply to the population,” says Alcock.
Alcock gave the main address in the third Entrepreneurship Development in Higher Education (EDHE) Lekgotla held at the Durban ICC this week. This programme brought together leaders in entrepreneurship at the country’s universities and TVET colleges. The EDHE Lekgotla 2019 was hosted by the Department of Higher Education and Training (DHET) and Universities South Africa (USAf) and co-hosted by the Durban University of Technology (DUT) within the unifying theme of entrepreneurship through the arts.
Alcock says to grow these businesses they should be granted credit by financial institutions as they also created jobs.
“People who work in them are not recognised as being in jobs as we talk about them as being informally employed. If we looked at real unemployment with informal jobs considered it would be closer to 15 percent unemployed and not close to 30 percent like the figures show. If we give credit to that sector as an employer and generator of incomes.”
Alcock says that the KwaZulu- Natal (KZN) informal sector was fairly huge.
“We import 300 million goats a year into South Africa. KZN is one of the breeders of goats and yet we have not grown that sector yet there is an opportunity to sell a million goats to Saudi Arabia. The muthi sector is one of the biggest sectors. While it is a rural space, the informal sector is more powerful in these sectors.”
The author says the scale of the sector is as big in KZN as it is in Gauteng and elsewhere. He says the challenges in KZN were the same for the sector as at national level.
“People do not recognise it, financial institutions do not recognise it and do not invest in it. Those businesses do not have security of tenure. A woman who has been selling at a school could be kicked off despite selling for over 20 years and bringing up her family. Security of tenure is really important to let people in this sector who have a shop or business of some sort to have financial institutions to invest in them to grow them.”
The dynamics of the sector are the same in Lagos, Nongoma or Tugela Ferry and that the more outlying areas like the rural KwaZulu do not believe these are opportunities and were looking to go to places like Gauteng yet the opportunities are there.
However, the informal sector uses technology .One only has to look at M-Pesa, a cellphone-based money transfer, financing and microfinancing servic in Kenya, a country far less developed than South Africa, which allows Kenya to have the most sophisticated financial model, he says.
Alcock maintains that the Fourth Industrial Revolution(4IR) is not going to change the dynamics of what makes a business, but it will bring technology into it.
“For stokvels, there are stokvel apps to allow them to do that. For a lady selling amagwinya she can have a device that will help her accept card payments. The 4IR will bring technology IT, artificial intelligence and the likes. But it will have to bring all of that down to the sector and it(sector) will adopt it,” says Alcock.
Alcock says he does not believe South Africa is going to create a million jobs in this country the way the government is talking about it until it looks at small and micro-businesses and the informal businesses.
“We have to grow those businesses that employ one or two people and we will suddenly employ a million people. We have to change the regulations of municipalities, the government and look at financial institutions and how they finance these small businesses. That is the only way we will transform out employment and economy.”