Formalising the informal sector : a case study on the City of Johannesburg

Abstract

Informal trading is a phenomenon prevalent throughout the world, but nowhere more visible and contributively to local economies than in the developing world. South Africa faces similar challenges as any other emerging economy, which demonstrates a duality insofar as its formal and informal arrangements are concerned. In addition, poverty and unemployment, HIV/AIDS and concomitant social problems all form part of the Country’s current socio-economic landscape. The Constitution of the Republic of South Africa, 1996 provides local government with a mandate to govern, provide service and to promote development within their areas of jurisdiction. The Constitution of the Republic of South Africa, 1996 stipulates in Section 153 that local government must structure and manage its administration, budgeting and planning processes to give priority to the needs of the community and promote the social and economic development of the community. The concept of developmental local government is extensively elaborated upon in policy documents and legislation, which impress the obligation of local government to apply technologies to further its developmental objectives. The Metropolitan Trading Company (MTC) in the City of Johannesburg is mandated to manage trading within the area of its jurisdiction by acting as a conduit and facilitator to economic activities associated with bottom end trading. This function poses significant challenges, especially if taken into account the extent of poverty and different forms of disenfranchisement, which traders currently experience. Location in terms of finding appropriate trading venues, abiding with the regulatory framework imposed by the authorities (especially the municipal authorities) and access to support mechanisms to enhance their prospects of success (including finance, skills development and product/market options etc.) are all contributive factors to limiting the success and growth that is needed by such traders. On the one hand, a proper system within which orderly trading is assured (such as a regulatory framework that limits trading in particular areas and registration) is necessary and highly desirable. Yet, on the other hand it should be noted that the trading community would remain and possibly even grow. It should be noted furthermore that the trading community would continue to expand even if general local economic growth is significantly improved. Global trends in countries, which demonstrate similar socio-economic characteristics as South Africa, testify to this. Urgent support mechanisms are needed to improve this state of affairs. The fundamental role of these mechanisms is to transform the informal sector and trade into a contributing channel of entrepreneurial performance and job creation. This article endeavours to assess the issues faced by local government in this process and offer some solutions within the frame of a case study.