COVID-19 is a pandemic, a socio-economic and health crisis whose impact is already unprecedented in my lifetime, writes Charleen Duncan, Director of UWC Centre for Entrepreneurship and Innovation Yet, as serious as this crisis is, it will pass. It will not have a severe, lasting effect on the entire socio-economic fabric in South Africa. But it certainly will impact unemployment at its current trajectory.
The lack of decent employment negatively impacts an individual, then the family of the individual, then the community and broader society. In South Africa, with official unemployment having risen to 27.6% and youth unemployment to 55.2% – according to Statistics South Africa – the government is looking to the informal economy, among other strategies, to reduce unemployment and stimulate economic growth.
The informal sector in South Africa comprises very small enterprises employing up to five people. Already in 2014 Statistics South Africa reported that 2,4-million people worked in this sector, representing 17% of the active workforce.
The National Development Plan (NDP) recognises the growth potential of the informal sector and projects that the sector, which includes domestic work, will create between 1,2-million to 2-million new jobs by 2030.
The optimistic projections, processes and plans captured in the NDP were a necessary narrative but, if the COVID-19 lockdown demonstrated anything, it’s that the informal sector needs more than encouraging words and affirming language if it is to survive, let alone deliver all those jobs.
The market of street traders disappeared overnight. The public transport and taxis vendors rely on to transport their goods stopped running. Even township spaza shops were initially expected to close as if residents on lockdown could access supermarkets near their neighbourhoods.
Despite the contribution the informal sector makes to the formal economy in terms of its enormous purchasing power, it does not share the same privileges that the formal economy has. So when the crisis is over, and the government starts to provide funds for business relief, expect all those unregistered little businesses to be left out in the cold – again.
How do we begin to frame our thinking around this complex, multi-layered problem? Unpacking the challenges exposes the profound inequalities within our society, just as COVID-19 has done in all societies. And just as people are already doing all over the world, we should also be asking: How do we restart the world post-COVID-19?
Allow the poor and vulnerable to be super-exploited?
After recognising them as a priority in the moment of crisis, do we continue to allow the poor and vulnerable to be super-exploited for the sake of profiting globalisation? Do we continue to treat the informal economy as if it must only exist outside the mainstream?
This is a sector almost unrecognised by banks and insurers, an economy governed by few policies but restricted by many municipal by-laws from accessing markets and operating freely. In practice right now, whatever the lofty goals of the NDP, this is a sector that is completely excluded from legal, social and financial benefits. And this needs to change.
It is untenable that the NDP plans for the informal economy to contribute hugely to job creation and economic inclusion, but we are not looking urgently at the support that the sector needs to enable it to play this role.
Not every problem is of Eskom proportions. Many strategies can be implemented with almost immediate results, using already available resources.
- Municipalities can prioritise reducing red tape and improve access to facilities that would reduce the cost of doing business in the informal sector;
- Government can underwrite risk so that banks can provide better access to loan finance for unregistered businesses;
- Some of the resources already in institutions such as TVET and private colleges, universities and SETAs can be directed towards providing entrepreneurship and business training, particularly to the youth;
- Government procurement can be amended to allow purchasing from unregistered businesses, or informal businesses can be drawn in through a novel registration system; and
- Changes can be made in the basic education curriculum to position and promote entrepreneurship better as a career option, and even offer it as a subject or a strong component of business-related subjects.
Growing the informal economy requires a progressive mindset and a creative approach to policy, training, government regulations, red tape reduction and ongoing support from the stakeholders in the ecosystem.
Moreover, we need to value everyone’s contribution. We need an inclusive narrative. We need a new language that breaks down the barriers and allows the vulnerable and the poor to be not just heard, but listened to.
It is the nature of the entrepreneur to come back from setbacks with resilience and optimism. I do not doubt that this sector will flourish after COVID-19 and hopefully, with more support and understanding than it enjoyed before the virus landed on our shores.