Learn from the riots: Link our formal and informal economies

The looting and destruction of public and private property were said by the president to be a deliberate, coordinated and well-planned attack on our democracy and economic sabotage. These events have badly affected our city economies and township businesses. Jobs have been lost and livelihoods threatened.

Looking at efforts to rebuild the country and bring the economy to its productive state, where should the focus be and what opportunities exist? Articles published by the South African Cities Network (SACN) are a good starting point and include a number of key messages. 

In the paper titled The Role of Informal Economies in Transforming the Space Economy the link between formal and informal economies is examined. Over the past few days, we have seen informal entrepreneurs operating alongside damaged malls and shopping centres. By laying bare the exclusive and unequal nature of our urban centres, the chaos has shown that South Africa is yet to realise hybrid and diverse economies in which micro-businesses can co-exist alongside large businesses and shopping malls in equal competitive terms. This is proof that the levers of integrated urban planning, transport and mobility, empowered communities and effective urban governance, as envisioned by the Integrated Urban Development Framework (IUDF), are not being rigorously employed.

In his address on the chaos that took place in mid-July, President Cyril Ramaphosa rightfully appreciated and encouraged the active efforts of citizens to take it upon themselves to bring the country back to normalcy. He further accepted that the government was ill-prepared for this kind of mass violence. By taking the initiative, active citizens are echoing a critical message that the state cannot continue to perceive itself as a provider of services as opposed to being an equal partner in service delivery. Citizens can no longer be considered passive recipients of urban services. The need for a shift in mindset in the government and all of society should be emphasised. This should be taken as a call for power to be shared and citizens’ expertise and willingness to deliver services should be leveraged.

Township economies are bearing the brunt of looting and damage to property. This is detrimental to people’s well-being because township economies ought to play an active and transformative role in the aftermath, especially in most affected areas of Kwa-Zulu Natal and Gauteng. The sustained shock is in addition to the institutional barriers to the growth and development of township economies that the SACN seeks to address through its township economies action research initiative. The lack of integration of the informal economy into the formal economic landscape is a result of a fragmented regulatory framework pertaining mostly to township economies.

Research has identified various myths about the informal economy. Among these is the view that the informal sector is unproductive to the extent that there is little need to measure its effect on the GDP. The fact that the informal sector tends to appear more within the punitive arm of the state than it does in its protective arm is evidence of the lack of understanding and appreciation of the sector. Work undertaken by the SACN and its partners attempt to rectify this. 

Incorporated into the urban economies paper series is the Mobile-ising for an Inclusive Economy paper, which identifies opportunities of the fourth industrial revolution and the realities of township economies. Through digital marketing and digital business practices as well as generating digital products and services, the digital economy has the potential to increase the competitiveness and resilience of township economies. But there is an obvious need to assist township entrepreneurs to understand the digital economy and related business models and how they can enhance their businesses.

There is also a need to create enabling platforms, a starting point of which can be to build digital cultures, including start-up cultures in townships, schools and business competitions. How technologies become instruments for reducing marginalisation and poverty depends on how well or poorly a country is prepared and equipped to reap the benefits of digitisation. We rarely interact meaningfully with township entrepreneurs and do a thorough needs analysis as to what business models they use and what technologies they employ. No one should be left behind in this era. 

The challenge of achieving inclusivity remains the digital divide, exacerbated by profit-centred service providers who comfortably charge beyond globally competitive prices. South African data costs remain some of the highest in the world and this continues with no robust government intervention.

If we are to see any meaningful change once the clean-up has happened, and shops and malls reopen, we need to see the link between informal and formal trade strengthened. In this regard, cities will have to be pivotal and innovative in providing various critical infrastructure and facilitate resilient economic networks. Those who live on the periphery of formalised commercial activity will continue to be kept from having any chance to build strong, more resilient businesses. If the past few weeks have taught us anything it is that there is a large community of township entrepreneurs who need a hand-up, not a hand-out.

The urban economies papers are on the SACN website.

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Kopano Ntsoane
Kopano Ntsoane is junior researcher at The South African Cities Network (SACN)

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