1.  INTRODUCTION

The informal economy makes an important contribution to the economic and social life of Durban.  In the past, there were strict rules controlling street trading and the establishment of built markets. Home based work was largely not in the domain of local government. The rapid deregulation at the beginning of the 1990s, as well as the transition in local government, led to a changed policy environment. Durban has committed itself to promoting economic development, but has had no comprehensive, written policy to guide the management and support of workers in the informal economy.

 A policy has the following purposes:

 1.1              It makes local government’s approach and principles clear.

 1.2              It forms the basis for appropriate and workable legislation.

 1.3              It provides the basis for common action by different government departments.

 1.4              It provides the basis for making decisions about allocating resources for management and      support.

 1.5              It provides the basis for making agreements with other stakeholders about what the roles of local government and other groups should be.

 1.6       It provides the basis for monitoring and evaluating what has been achieved.

 2       THE POLICY PROCESS 

2.1         The policy process was undertaken for the North and South Central Local Councils (N&SCLCs), two of Durban’s six local councils.  It has however kept in mind that by the end of 2000, all local councils and Durban Metro will be merged into one unicity. 

2.2         The policy process was consultative. Interviews and workshops were held with a variety of stakeholders, including informal and formal business organisations, councillors, officials, civic organisations and development forums, as well as members of the public. (See Annexure 1: The Consultation Process, for details.) 

2.3         Section 3 of this report gives the broad vision or approach adopted by the Technical Task Team. Section 4 gives a brief outline of the informal economy in Durban.

 Sections 5 through 13 then outline the major components of the policy. In each section, the policy position is put forward, and levers for change are identified. The Current Situation briefly summarises where we are now, and levers for change are identified. Ways forward itemises new operational frameworks. In most cases these are summarised, and supplemented in more detail in the Annexures.

 Sections 14 and 15 respectively deal with Pilot projects, and Transitional Arrangements, and the Conclusion is given in Section 17.

 3       THE APPROACH TO THE INFORMAL ECONOMY 

The South African Constitution mandates local governments to promote economic development. This N&SCLC policy for the informal economy is grounded in the overall strategic policy set by Durban’s local government for economic development. Among related initiatives are the Central Business District (CBD) Revitalisation Strategy, the Best Practice City Commission, the Safer Cities Project, the Long Term Development Framework, as well as strategic work on inter alia Small, Medium and Micro Enterprises (SMMEs),  area-based management, and transport planning. 

This policy shares the vision of those initiatives, of a Durban which is safe and secure for its citizens; where people live in a healthy environment; where the urban environment is well-managed. Durban’s future economic and social health depend on its being investor friendly, with incentives for new and existing business to put down roots and grow. Good planning and management must include long term thinking about spatial development and transport planning. 

The health of the entire economy is important. The economy does not divide neatly into ‘formal sector’ and ‘informal sector’. Rather, the different sectors, such as manufacturing, tourism, services, and construction, are on a continuum which has a more formal end and a more informal end. The great challenge to local government, in its support for economic development, is to enable the creation of as many opportunities for work as possible, at different points long the continuum, while ensuring health and safety, orderly planning and management.

All work, whether in the more formal or more informal ends of the continuum, is to be valued, and especially when unemployment is so high,^[1] and when there is a high link between unemployment and crime. The HIV/ AIDS epidemic is likely to increase the numbers of people relying on the informal economy for work.

This policy takes as its point of departure that local government has a difficult role in supporting economic development, while at the same time pursuing pro-poor policies. The policy must be based on the following realities.

3.1              A long term policy goal for some is to support the move of informal economy workers into the formal economy. However, it appears that the formal economy is informalising rapidly; the informal economy offers diverse opportunities for absorbing those who have lost their jobs, and for new entrants into the economy. The informal economy is here to stay, not only in Durban, but internationally.

3.2              The formal and informal parts of the economy are mutually interdependent. The good health of one depends on the good health of the other. It is difficult to promote growth of smaller enterprises, if the overall rate of economic growth is slow.

3.3              Management of the informal economy in the past has concentrated on people trading in public places, such as street vendors, and in municipal markets. With the growing importance of home based and outdoors informal work, and changes (again internationally) in the uses of public and private space, local government has to revise its role and responsibilities.

3.4              To date, much of the support for the informal economy in South Africa, through national SMME policy, has been focused on medium size enterprises and has not been very successful. Not enough support has been given to the poorer segment - the very small operators in the SMME sector, sometimes called survivalists. At national level, the Department of Trade and Industry (DTI) acknowledges its lack of success overall in supporting SMMEs, and especially poorer ones. Private training and support providers in the city and region are nearly uniformly missing the poorer operators and survivalists.

3.5              There will always be a tension, for local government, in reconciling its own formality, and rule-bound procedures, with the fluidity and change of the informal economy.

3.6              Local government has to balance the need for job creation, in both formal and informal parts of the economy, with the need for orderly management of the city and of residential areas.

4        THE STATUS QUO – THE INFORMAL ECONOMY IN DURBAN

 4.1         Economic contribution

The important economic contribution made by informal workers to the economy of Durban and of the region has not been well understood. Local government in Durban, at Metro and N&SCLC levels, has taken the need for research seriously, and a clearer picture is emerging.          

 4.1.1         The informal economy makes an important contribution to job creation. In 1996, there were about 20000 street traders in the DMA area. About 60% of these were women. Thousands more people work from their houses. Common activities are child minding, cooking, manufacturing, and repair work. The majority are likely to be women.

An unknown number of people are mobile outside workers, such as garbage pickers, and cardboard recyclers. Many informal workers are casual labourers, such as those waiting at curbsides to get daily employment in the construction industry.

Many of the workers, such as street traders, themselves generate work along a chain of supply and distribution - the muthi trade has been estimated to generate about 14000 jobs in Durban.

 4.1.2        A great deal of money flows through the informal economy, and between the formal and informal ends of the economy. In 1998, black householders in the DMA spent more than R500 million in informal sector outlets (street vendors, shebeens, spazas, tuckshops, private persons).  Of this about R340 million was spent on food. 

In 1998 more than R170 million was spent on raw and prescribed products in the Russell Street muthi market.

In peak season, some 28 tonnes of cooked mielies are sold every working day, to      commuters arriving in the central city. This amounts to a daily turnover of around R200 000, and in a five day week, a turnover of around R1 million. (It also, of course, means a substantial amount of mielie leaves and cobs to dispose of.)

The money generated by activities defined as illegal[2] is likely to be very high - and difficult to estimate. Durban is the economic hub of South Africa’s dagga distribution, with well known internal and export distribution networks. There are increasing numbers of commercial sex workers, rich and poor.

4.1.3        The informal economy contains great diversity (see Fact Sheet 1: Diversity in the Informal Economy). The most visible workers in the central city – the street traders – are far outnumbered by the many home based and outside workers.

4.1.4        Shopping in informal outlets is extremely convenient for thousands of  commuters and residents. Whether buying mielies and fruit in town, or buying paraffin and candles from spaza shops in residential areas, the informal operators offer a pro-poor, convenient service to many of citizens.

Home based work is convenient for many women and men, and has increased rapidly in recent years. While most of this work remains invisible, and often generates small incomes, many women find it convenient to be able to combine work and child-caring, and caring for the home.

4.1.5        Informal outlets trade in many goods which are important in the cultural and religious life of citizens of, and visitors to, Durban.  About 80% of the African population uses traditional medicine, the basis of the muthi trade; sea water is an important ingredient for various cultural and religious practices, including weddings; apparel and decorations for temples and mosques are sold in informal and formal outlets.

The provision of cultural artifacts is important for local people, as well for the tourist market. 

4.2         Durban’s commitment to the informal economy: institutional and management status

 4.2.1        Research shows that Durban is ahead of other large South African cities in terms of integrating informal economy concerns into appropriate institutions of local government. At Metro level, the informal economy is in the Economic Development Department, for the purposes of policy development and strategic planning. At N&SCLC level, street trading is in the Development Facilitation Department, and Informal Trade and Small Business Opportunities (ITSBO) has a planning and policy division.

4.2.2        Durban created the DITSBO (now ITSBO) in 1991 to support the development of small enterprises. The Informal Trade division manages built markets, has established numbers of satellite markets, has area managers and site supervisors who do area-based work, and provides training and support to small business operators; the Small Business Opportunities division does policy and strategic development.

4.2.3        City Health has for five years had an active health education programme to upgrade the skills and working environment of street traders.  Through a system of incentives traders are encouraged to attend, be accredited and be registered. It has also actively negotiated around specific issues such as relocation of muthi markets, and the sale of potentially hazardous plastic drums.

4.2.4        Durban has supported innovative pilot programmes in urban renewal, and in area based management. In this respect, it has used municipally owned land creatively as an asset for innovation. The Warwick Junction Urban Renewal Project, and the Cato Manor Development Association’s work, in particular, stand at the international cutting edge of negotiated, inclusive management practices. 

4.3       Resource allocation 

In addition to the costs associated with the personnel allocated to institutional support described in 4.2, other budget support has been given.

4.3.1        The N&SCLCs have allocated significant resources - about R45 million over the last three years - to developing satellite markets and providing infrastructure such as shelter and water in the central city.

In 1997/98, R26.6 million was spent on informal economy capital projects.  Four fifths of this was spent in the CBD.  In 2000/2001, both North Central and South Central committed to a substantial increase in allocations to economic development.

4.3.2        Infrastructure policies such as the rates lifeline tariff (those whose houses are valued at less than R20000 pay no rates; those valued at between R20000 and R50000 pay R20 per month) are of direct help to poorer, home based workers. 

4.3.3        The Durban Metro, and the N&SCLCs, earmarked specific funds for the development of the beachfront (which includes the craft workers) and the muthi market.

4.3.4        The Central Transitional Council (fore-runner to Metro) and the N&SCLCs were among the stakeholders in the formation of the Thekwini Business Development Centre (TBDC), a Section 21 (not for profit) company. Metro and the N&SCLCs (through ITSBO) provide an annual grant to the TBDC, as do other funders. TBDC has specialised in assisting small operators (mainly in the construction industry) to increase the scale of their services, and it has assisted in craft development.

4.4       Critical problems and challenges

Real progress has been made with managing informal trade in some parts of the central city, and there has been political support for this. Large parts are now in fact regulated. However, a number of critical problems and challenges remain.

4.4.1        Despite improvements, there are still strong negative perceptions of informal traders. Many people associate street traders with the high crime rate, and with littering in parts of the central city.

4.4.2        Efforts to support the informal economy are to a large extent fragmented and unco-ordinated.

4.4.3        The procedures surrounding licensing and permits for street vendors are complex, cumbersome, and costly. These pose high costs in time, to traders, and do not act as incentives to formalise.

4.4.4        With regard to the development of some of the satellite markets, the lack of planning about location, security issues, infrastructure, and also the lack of a consistent site allocation policy, means that valuable assets, built by the N&SCLCs, are being wasted, or are not being used to their best potential. Also, there was limited consultation and participation in developing some of the satellite markets. 

4.4.5        There are tensions around the status of foreigners seeking to work in Durban.

4.4.6        Relations between formal and informal businesspeople, and between their associations, are often strained and hostile.

4.4.7        Various councillors and officials have dedicated time to discussions and negotiations with organisations of street traders. In some places, good and respectful relationships have developed. However, negotiations have seldom been guided by a clear policy or terms of reference. They were not sustained, and were seldom properly recorded. As a result, relationships between local government and organisations of informal workers have often been frustrated, rather than developed.

4.4.8        Further, there is a great deal of in-fighting in organisations of informal workers, and sometimes between competing organisations within the same built market.

4.4.9        The political transition in South Africa has led to the need for capacity building and human resource development for all parties – officials, councillors, formal businesses, and workers in the informal economy.

5               PROMOTION OF DIVERSE ECONOMIC OPPORTUNITIES

The first point of departure in the policy for the informal economy is that local government should promote the creation of job opportunities. The local government should encourage and promote a diverse mix of markets and trading opportunities, where sites come to be valued as economic assets.

A diverse mix of built markets and street trading sites is part of the overall strategy of creating different opportunities and small steps along the ladder between the very informal and the very formal parts of the economy. More built markets should be encouraged, and especially in the formerly under-developed residential areas, where the planning for markets should relate to the supply coming from home based work.

Key levers for change, management and support will be planning, the allocations policy, the registration process, and the rentals policy.

5.1       Planning

New markets and trading opportunities must be properly planned, bearing in mind the economic needs of traders, the need for more vibrant land use, and the need for orderly town, spatial and transport planning, as well and health and safety.

Current Situation: