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Policy Brief 9 - Funding and Policy Framework for Supporting Urban Informal Employment

The South Africa urban labour market structure is undergoing a transformation of a different kind. One
which is uniquely characterised by the coinciding of high unemployment and low informal employment.
This is instead of the typical growth of formal employment which is associated with rapid urbanisation. Throngs of rural and peri-urban job seekers migrate to the cities, attracted by the prospects of employment and income. However, given the low formal sector labour absorption rate, many of these job seekers end up eking out a living through informal employment. This creates a policy dilemma over whether to support or discourage informality. Informality provides a cushion for over two million people, but at the same time is seen as a threat to productivity, competitiveness and fiscal receipts. As a result, the support given to the sector is often inadequate, or conceived as part of poverty reduction rather than enterprise development.
The Financial and Fiscal Commission sought to assess the role of cities and available intergovernmental transfers in harnessing informal employment. The results indicate that informal sector support and funding programmes are concentrated at national and provincial government level instead of at city level, where informal enterprise takes place. Existing interventions largely focus on the disbursement of grants and trading infrastructure, rather than addressing informal employment growth constraints holistically.

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