Reform property laws and bureaucratic system so that South Africa’s informal sector can thrive – The Mail & Guardian

Trading informally is not a choice but a necessity in a country where the unemployment rate is at an alarming level. (Photo by: Roger de la Harpe/Education Images/Universal Images Group via Getty Images)

South Africa’s informal sector, often overlooked and undervalued, provides livelihoods to millions and contributes significantly to the GDP. It accounted for 6% of GDP in 2017, while 18.3% of employed people were in the informal sector during the third quarter of 2019, according to Statistics South Africa. These businesses are the backbone of South Africa’s poorest communities, offering a means of survival in an economy that has failed them. 

Yet, instead of receiving the support and recognition they deserve, informal business operators are met with hostility, harassment and exploitation at the hands of law enforcement and a rigid bureaucratic system.

Rather than fostering an environment where informal businesses can thrive, the government has turned its back on its most vulnerable people. Police officers routinely intimidate street vendors, demanding bribes under the guise of a “cold drink”. Arbitrary confiscations of goods are commonplace, stripping families of their primary means of income. These actions not only deepen poverty but also perpetuate a cycle of distrust between citizens and the state. 

Attempting to escape this hostility, some traders seek to formalise their businesses. But the legal requirements for registration are exclusionary. Registration demands proof of ownership or a lease agreement for the land on which the business operates, a condition that most informal vendors cannot meet. Many trade on public land or reside in informal settlements, where property rights remain elusive because of systemic failures in land reform and rampant corruption. Despite decades of occupation, residents are often unable to obtain title deeds, leaving them in perpetual limbo.

South Africa’s property laws disproportionately disadvantage the poor, reflecting a painful irony in a nation that prides itself on freedom and equality. The failure to provide title deeds and secure land rights to informal settlement residents underscores the government’s inability to address historical inequalities. This failure is compounded by the state’s heavy-handed approach to regulating informal trade, effectively criminalising poverty.

The latest campaign to register spaza shops, prompted by a food poisoning tragedy, further illustrates the disconnect between policy and reality. While the initiative is well-intentioned, it overlooks the systemic barriers that prevent informal vendors from registering their businesses. Without addressing the underlying issues of land tenure and police corruption, such efforts will remain superficial.

Harassing the informal sector is not only morally reprehensible but economically shortsighted. The informal sector serves as a buffer for those excluded from formal employment, providing jobs and generating income for millions of households. By undermining these businesses, the government is, in effect, undermining its own economic resilience. Beyond its economic contribution, the informal sector plays a vital social role, enabling families to afford essentials such as food, education and healthcare.

Furthermore, the state’s reliance on the informal sector to cover gaps in formal employment highlights its own inadequacies. Instead of penalising informal traders, the government should recognise their resilience and provide them with the support needed to operate safely and effectively. Civil society and private-sector initiatives could play a crucial role in this effort by creating platforms that amplify the voices of informal traders and offer them resources for growth.

To genuinely address the plight of informal vendors, the government must adopt a two-pronged approach: legislative reform and accountability. First, the government must design laws that allow informal vendors to register their businesses regardless of land ownership status. This could include the creation of licences specific to public land use or temporary trading permits that acknowledge the realities of informal trade. Second, police corruption must be tackled head-on. Establishing an independent anti-corruption body or a transparent complaint mechanism could make it easier for vendors to report misconduct without fear of reprisal.

Additionally, the government must expedite land reform initiatives, ensuring that residents of informal settlements can obtain title deeds. Securing property rights would not only empower people but also pave the way for more inclusive economic participation. To further support the informal sector, public-private partnerships could fund training programmes, offer microloans and establish safe trading zones in urban areas.

South Africa cannot claim to be a free and democratic society while systematically oppressing those who contribute to its economic and social fabric. Informal traders, who embody the entrepreneurial spirit of the nation, deserve protection and respect. The government has a moral and economic obligation to ensure that these businesses can thrive without fear of harassment or exploitation. By reforming exclusionary laws and addressing systemic corruption, South Africa can unlock the full potential of its informal sector — a step that would benefit not only the traders themselves but the nation as a whole.

Lindani Zungu is the founder and editor-in-chief of Voices of Mzansi.

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