Inequality and Economic Inclusion

Friday, 18 December 2009

Clothing traders in Gauteng: Motivations, barriers and macroeconomic linkages

  • Year: 2009
  • Organisation: TIPS
  • Author(s): The Corporate Strategy and Industrial Development Research Programme (CSID); School of Economics and Business Sciences, University of Witwatersrand
  • Countries and Regions: South Africa

Street trading is the most common type of informal self-employment activity in South Africa. Traders sell a range of products such as fruits and vegetables, cooked food, new and used clothing, cosmetics, footwear, dvds, “public” telephone services and mobile phone accessories. Most traders operate from stalls or tables in market areas or on sidewalks. Some of these traders are licensed and rent their business space from the municipality.

The aim of this project is to understand whether the macroeconomic environment and other barriers to entry into the informal street trading sector offer insight into the relatively small size of the South African informal economy. The paper explores macroeconomic linkages and other barriers that traders encounter when entering street trading and while sustaining their businesses. The motivation for this research question is the paradox of South Africa's very high rate of open unemployment, estimated to be at least 40 percent using a broad measure (Cichello et al. 2006), but low level of participation in the informal economy. Because street trading is thought to be among the sectors in the informal economy with the lowest barriers to entry, identifying the barriers that traders do confront may offer some clues to the reasons so many of the unemployed do not enter trading.

The paper is divided into seven sections. The first provides an overview of the South African informal economy and unemployment. The second section contains an assessment of statistics on street trading in South Africa and the role of trading in the South African economy. Section three describes the fieldwork that was conducted to gather information about the barriers that traders confront. Section four explores linkages between the formal and informal economies and suggests that rather than operating as distinct “sectors,” there are concrete ways that they are tied together and mutually reliant. Section five offers a comprehensive analysis of trader-identified barriers to starting and maintaining their business. The sixth section connects macroeconomic policies to traders' experiences. The report concludes with a brief summary of the report and policy implications.