/ 6 June 2022

Cost of living: Informal sector pushed to ‘desperate situation’

The informal sector will be hard hit by the fuel price rise and inflation and the taxi industry (below) will probably increase its fares, hurting commuters. Photo: David Harrison & Paul Botes

Petrol price and interest rate hikes will have a ripple effect through the economy but will be “crippling” for the five million people who make up the country’s informal sector.

The R2.43 increase for a litre of petrol will push a chunk of those people, many of whom sell food staples from the roadside at small margins, below the breadline.

Mervyn Abrahams, of the Pietermaritzburg Economic Justice and Dignity Group, said: “Everyone is dependent on transport, so this will impact all consumers, but for the informal sector this takes them from a marginal situation to a desperate one. These are people with no buffer, no savings and no access to credit. Many of these businesses will just disappear.” 

Richard Dobson, cofounder of Asiye eTafuleni, a nonprofit organisation that advocates for street traders, said the informal sector was made up of poor, vulnerable people who are largely powerless to respond to opportunistic and exploitative price hikes.

“All the fuel hikes become an excuse to raise prices and these people often can’t push back. They are desperate. They live far away from work and already spend a chunk of their income on transport. For them this is not a case of readjusting their budget. There is no budget.”

Verushka Memdatt, general secretary of the Market Users Committee, a body that represents 3 600 informal traders in Durban, said the interest rate and petrol price increases came on the back of the Covid-19 pandemic and, in KwaZulu-Natal, an economy ravaged by last year’s July riots and floods in March this year.

‘Some won’t eat tomorrow’

Memdatt said: “Informal traders were crying before the petrol price increase. There is no opportunity, these are the poorest of the poor …some will not eat tomorrow.”

Brian Phalloh, general secretary of the South African Informal Traders Forum, said: “This is becoming crazy. People cannot survive. A plate of bananas used to cost R5 and now it is R10.”

He joined others in calling for more transparency regarding how the fuel price is determined.

Rosheda Muller, the president of the South African Informal Traders Alliance, said: “We need to know how the petrol price is made up and who gets what. The informal economy has about two million traders but it is as many as five million people if you count people like home carers, waste pickers and backyard mechanics. It is very diverse and these people are already suffering. Most things have to be transported and mostly via taxis where the fares are going to go up.”

Dobson called for civil society resistance to how the fuel price is structured. 

The price is, in part, made up of taxes for the Road Accident Fund, the Central Energy Fund and the Strategic Fuel Fund, which Dobson said were “flakey and dysfunctional”.

“We need to ask hard questions about how the pricing structure works.”

Dobson said informal traders were reeling from the “aggregated shock” of Covid-19, unrest, floods and petrol price increases. “Traders are just disappearing off the streets. Their capacity to absorb any more shock has reached zero.”

Informal traders were increasingly relying on social grants to survive or unscrupulous money lenders “who don’t take any prisoners”. 

“For these people, the safety net is threadbare or gone,” Dobson said.

Asiye eTafuleni estimates that nationally the retail and non-agriculture component of the informal economy is 5.1% of national GDP. 

The economic effect of the petrol price at scale can be difficult to comprehend, said Dobson. 

The almost R2.50 a litre fuel increase will affect everyone, but some more profoundly. 

“I was at the petrol station today and the garage attendant said it now costs about R3 000 to fill up a 4×4. For some people that is a month’s earnings. I took a picture of a trader’s table later in the day. A plate of potatoes is R5, so the increase is half a plate of potatoes. That is dinner for half a family somewhere.”

Muller said it cost R3 000 a month to feed an average family with staples.

“All the prices are going to go up and there will be less money because people are spending more to transport themselves to work or to buy stock. We’re in dire straits and we need a basic income grant to alleviate the stress.”

For informal economy expert GG Alcock, the author of Kasinomic Revolution; The Rise of African Informal Economies, the petrol price increase is a double-edged sword.

Snowball: Informal traders’ stalls along an abandoned railway station overpass near the Khayelitsha Mall.

“The fuel price increase will definitely have an effect everywhere. For many, especially in townships, it speeds up the trend for local shopping. The transport cost of a shopping trip is between R20 and R30 and that is money better spent on groceries.”

Alcock said taxi passengers often paid another fare to transport their shopping. Whereas a weekly shop used to involve the family dressing up and going to town, it was now usually one family member travelling to get essentials.

Commuter costs had spurred the growth of neighbourhood shopping.

“Mom [now] does the shop on her own and there is the growth in what I call spazarettes, which are a bit bigger than the hole-in-the-wall spaza shops that sell milk and bread. The footfall of these spazarettes has increased. These retailers will give you a guy to help you carry your groceries home. There is also a proliferation of mobile vendors who have trolleys or bicycle carts and travel around selling vegetables. They have always been there but now there are more now. Some have bicycle hooters and move around residential areas selling their goods,” said Alcock.

“Inner-city traders, like those around the Bree Street taxi rank in Joburg, for example, are struggling. These would be the vetkoek sellers and others who rely heavily on commuter traffic, which is down.”

But their loss is the gain of township traders.

“Overall, yes, definitely there is a big impact from fuel price hikes. I spoke to a guy the other day who sells fast-food chicken from the roadside in Soweto. He said Fridays were always regarded as takeaway night but now that has become a month-end treat. So nonessential purchases will be down,” Alcock said. 

“But you have to look at the different sectors to gauge the full impact. It would be dangerous to say everyone is losing out because of the fuel price increase. Taxis are definitely struggling. I spoke to a guy who plays the guitar at a taxi rank. He’s plying his trade playing for people while the taxi fills and it is taking much longer to fill a taxi now.” 

For Dobson and Memdatt, the far-reaching effects of the fuel price increase called for “conscience” about society’s approach to the informal economy.

Dobson said the attitude of the government to the informal sector added insult to injury.

“Look at how the metro police in Durban behave, for example. They know the informal traders are taking strain. They have lost through Covid, unrest and floods. They are trying to pay off debt and restock and the metro police come in with a busload of 26 cops and a compactor that confiscates and crushes their stock for so-called illegal trading. 

“We need huge reform in how we envisage spaces. We can’t just have a situation where an official designates a space with no thoughtful urban design and paints a square where someone can trade,” said Dobson. 

“These are all key entry points for corruption and that’s even before the police come down and destruct the space or are persuaded not to with some grease palming. Everyone wants good governance but, for heaven’s sake, don’t harass people trying to survive. 

“The petrol price is like a seismic shock across the economy hitting everyone’s pockets. It calls for communal conscience about the cost of living.”

Memdatt said traders were poised to protest historical and recent iniquities.

“Covid regulations on trade are still being enforced in some places. Traders rely on the income they make every day to fund the next day. 

“We will take to the streets to show our dissatisfaction. Some people will say, ‘look at those protests again’, but what option do people have? 

“Think of the smallest trader selling a box of bananas a day. There are about 120 bananas in a box. It costs about R200 from the market. If she sells a banana for R3 she makes R360, then less the wholesale cost, her travel expenses and her childcare expenses. And she is competing against a big retailer that buys at the lowest rate and has a slick, cold supply chain. Is she going to eat today? 

“The impact of all of this is scary. The question is, will we let them squeeze her out? No, we won’t take this lightly.”