South Africa has a jobs crisis. In the fourth quarter of 2018, 6.14 million people were out of work, an unemployment&nbsp;<a href="http://www.statssa.gov.za/publications/P0211/P02114thQuarter2018.pdf">rate of 27.1%</a>, which is one of the highest rates in the world, along with sub-Saharan African countries like&nbsp;<a href="https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?view=chart">Lesotho, Mozambique and Namibia</a>.



South Africa’s labour market has another important distinction. Only about three million people who are working – about 18% of all employed (<a href="http://www.statssa.gov.za/publications/P0211/P02114thQuarter2018.pdf">16.53 million</a>) – are in the informal sector. That’s much lower than other developing countries. For example in India and Ethiopia, up to 50% of those with jobs are employed in the informal sector. The figure is as high as 90% in Ghana and Mali.



There are two schools of thought around the role and value of a country’s informal sector. Some argue that it’s an important alternative to the limited opportunities available in the formal sector; a survivalist strategy that allows those without much formal education to work and earn money. In addition, others argue, the informal sector is also an important space for entrepreneurs.



But there are some who disagree, arguing that employment in the informal sector tends to be poorly paid and precarious. A mere 20% of informal sector employees are hired permanently, compared to 70% of those in the formal sector.



Little is known about how many people transition between the two sectors, a phenomenon called “churning”. Addressing this knowledge gap is important for a number of reasons. These include the fact that informal workers may be spending some time in the formal sector, getting valuable skills and work experience to boost their chances at formal employment, with the hope that they eventually settle permanently in the formal sector, which would be good news.



Conversely, knowing whether there’s a high rate of transition from the formal to the informal sector would be cause for concern because it would suggest high rates of retrenchment and fewer formal job opportunities.



<h4 class="wp-block-heading">The data</h4>



We set out to understand “churning” between South Africa’s formal and informal sectors. To do this we analysed data from the country’s National Income Dynamics Study – a study that was conducted four times between 2008 and 2015 by the Southern Africa Labour and Development Research Unit based at the University of Cape Town’s School of Economics.



We found there was a lot of movement between the informal and formal sectors during these years. But there were very few instances of people making successful, lasting transitions from informal to formal sector employment.



This emphasises South Africa’s skills mismatch. The formal sector requires skills that those in the informal sector simply don’t have. More education and support is necessary to bridge this gap.



Our data were drawn from the National Income Dynamics Survey, which is the first national household panel study in South Africa. It examines the living standards of individuals and households over time.



By analysing data from the four waves of the study we were able to make some key findings about churning, and about the informal sector more broadly. These included:



<ul><li>Only 8% of those surveyed were inactive (7%) or unemployed (1%) in all four waves – that is, throughout the seven-year period. About 54% were employed in one to three waves, meaning they worked transitorily but not continuously;</li><li>only 3% worked in the informal sector in all four waves;</li><li>only 12% always worked in the formal sector during the seven years under review; and,</li><li>8% of individuals worked throughout the seven years under review but transitioned between the two sectors.</li></ul>



These results clearly indicate that a high proportion of the labour force participants have been in and out of employment (which is not surprising, given the country’s high unemployment rate), some workers enjoy the privilege of always working in the formal sector, and most importantly, churning between the informal and formal sectors definitely takes place to some extent.



The findings also emphasised how precarious the informal sector is. For instance, 67% of those who started off working in the formal sector in 2008 remained there seven years later. This suggests that for those who initially secured work in the formal sector, retrenchment likelihood is not as high as perhaps anticipated. The retention figure in the informal sector was just 39%. Only 27% of those in the informal sector successfully transitioned to the formal sector.



The country’s many social inequalities were evident in the data. Black women without school leaving certificates aged between 25 and 44 years were most likely to remain in the informal sector. Highly educated white men living in the urban areas of Gauteng and KwaZulu-Natal provinces were most likely to successfully transition from the informal to the formal sector.



<h4 class="wp-block-heading">Filling the gaps</h4>



Given what we’ve learned from this research, how might the government and policy makers deal with those who “churn”?



First, the country’s education system must do more to produce skilled labour in the areas the economy requires. Formal firms could help here, by providing assistance and information on what skills are needed and how to develop these. This implies that strengthening the partnership between industry and universities is important, as this would help those who are able to access higher education.



Those who don’t go on to higher education, or don’t complete their secondary schooling, also need to be helped. The government should more actively provide workshops and specialised assistance to enhance entrepreneurship skills and advise small informal firms on growth strategies. These incentives will assist in their growth, long-term sustainability and successful transition to the formal sector.



In addition, larger, more established formal firms can also play a role by helping to develop and train informal sector workers and providing expert guidance to informal firms. This assistance can be incentivised through tax reductions and the prospects of a larger collective market via the informal sector.



Lastly, the government should continuously alleviate the numerous barriers to the informal economy. These include limited credit and training opportunities, poor infrastructure and the red tape that makes it difficult to start a business.



&#8211;Moegammad Faeez Nackerdien Lecturer, University of the Western Cape



&#8211;Derek Yu Associate Professor, Economics, University of the Western Cape



-The Conversation



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South Africa’s Informal Sector: Why People Get Stuck In Precarious Jobs

The best way to experience Rwanda’s business environment is to take a walk up Kigali’s immaculate central business district (CBD) or down the small shopping streets of Kacyiru.
The ‘land of a thousand hills’, with its sprawling green valleys and vistas, has seen many ups and downs in its history, but this is a nation visibly on the move – more construction cranes the size of skyscrapers, more global hotel brands setting up, and a classy convention center that lights up the night sky in rainbow colors.
Beneath this veneer is a hardworking young population eager to be protagonists of their country’s progress.
At the Union Trade Centre, a popular hub for young coffee-lovers and mall-hoppers in Kigali’s CBD, Mois, an entrepreneur in his mid-20s running a shop selling African bric-a-brac, welcomes you with a smile that makes the afternoon sun pale in comparison.
He points to his gleaming jewelry collection – contemporary pieces made out of what looks like brass, but isn’t.
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Mois makes them himself, out of used padlocks from the scrapyard, and old coins, which he melts and upcycles into jewelry. His creations are in demand in the US and the Netherlands, he says.
A qualified civil engineer, he has more knowledge about alloys and metals than most jewelers.
“I have a proper professional degree,” says the unassuming Rwandan. “But what I do now is my passion, one that makes me money, and helps the co-operatives I work with.”
<div id="attachment_35731" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-35731" class=" wp-image-35731" src="https://www.forbesafrica.com/wp-content/uploads/2018/03/Mois-225x300.jpg" alt="" width="300" height="400" />Mois (Photo by Irankunda Yves Jean Sauveur)</div>
While the country records growth of 8%, it’s this spirit of “not just money, but meaning” that echoes through the contoured landscapes of Kigali.
In the heart of Kacyiru, down KG 5 Avenue, are more examples of small, medium and micro enterprises – one-storied shops that have survived for decades.
From a 71-year-old grandmother who helms a grocery store to the starry-eyed salesgirl selling cheap moccasins, and charming salons, gaming bars, resto-bars and Afro-chic boutiques, the street is a smorgasbord of experiences and a subset of Rwanda’s informal economy.
Off the same street and on to a dirt road, we meet Jacques Nkinzingabo, a “street photographer” sporting dreadlocks and a hat. The red-brick building we meet in has a large exhibition space out at the back by a patch of lawn where Sawa, Nkinzingabo’s adorable German Shepherd pup, is goofing around.
On the studio’s white walls are numerous photographs recording Rwandan life.
Nkinzingabo was born a week before the genocide against the Tutsi in 1994, and as a photographer, wants to now portray “new Rwanda” to the world. His visitors are mostly tourists who book on vayando.com, to meet with the country’s skilled entrepreneurs, instead of visiting the standard tourist attractions.
“The image that tourists have of this country is Hotel Rwanda,” says Nkinzingabo, referring to the hit 2004 film on the Rwandan genocide.
“But I want to reframe the country to show where we come from; I want to show them how we live, dress, cook and lead our daily lives.”
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Since signing up with Vayando over two years ago, Nkinzingabo says it has helped him connect with tourists and locals. He makes about $300 a month on average through this partnership.
Scott Wilhelm, Vayando’s co-founder, is an American who has been in Kigali three years now. A social entrepreneur from Chicago, he was a Peace Corps volunteer in El Salvador until 2006.
With his business partner Jason Seagle, he set up Vayando, “a tool for curious travelers and a marketplace for entrepreneurs”. Rwanda appealed to them for its “stability, security and progressive approach”.
Tourists, mostly from America and Europe, book the experience online, at about $100 per customizable experience, and meet at the Kigali city centre – “by the elevator outside of Nakumatt”.
“We take them to places they wouldn’t go, to neighborhoods within the labyrinth close to town. These are people looking for meaningful experiences,” says Wilhelm.
<div id="attachment_35732" style="width: 510px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-35732" class=" wp-image-35732" src="https://www.forbesafrica.com/wp-content/uploads/2018/03/Jacques-Nkinzingabo-300x200.jpg" alt="" width="500" height="333" />Jacques Nkinzingabo (Photo by Irankunda Yves Jean Sauveur)</div>
Those like Nkinzingabo are a part of Vayando’s trusted network of entrepreneurs.
“Jacques sets the price and gets 100% of what he asks for. We add 30% for our charges. It’s an alternative revenue stream for entrepreneurs and primarily, a networking opportunity,” says Wilhelm.
“We drive bookings to entrepreneurs… we want them to have a 13th month of income.”
<a href="http://www.forbesafrica.com/woman/2018/03/15/something-to-wine-about-2/" target="_blank" rel="noopener">READ MORE: Something To Wine About</a>
A short drive away is the bustling Gisozi, and the assaulting smell of wood and paint – this is the area that sells woodwork, construction materials and hardware.
<div id="attachment_35733" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-35733" class=" wp-image-35733" src="https://www.forbesafrica.com/wp-content/uploads/2018/03/Irenee-Gumyushime-200x300.jpg" alt="" width="300" height="450" />Irenee Gumyushime (Photo by Irankunda Yves Jean Sauveur)</div>
As you walk up an uneven road, with deep tyre marks in the mud, you pass cows and curious onlookers. This is the rustic route Vayando customers take to meet Irenee Gumyushime, known as ‘Magic Hands’ in these parts.
There are broken pieces of glass and wood shavings on his dusty shop floor. Gumyushime is crafting a bed out of pinewood. He acquired a diploma in civil engineering but chose to be a carpenter.
“They say I touch the wood and it turns to wonder,” beams Gumyushime. He can speak English which is a boon for Vayando’s overseas customers wanting to hear about the 29-year-old entrepreneur’s life.
“This shop mainly caters to expatriates,” he says. “They bring their own ideas and I customize furniture for their spaces. I get to meet international tourists, and make some money on the side. They learn from me; I learn from them.”
Walking back to the city center, more heartening stories unravel along the way, even as Rwanda’s informal economy winds down after a long, productive day.

Tag: informal sector

FORBES AFRICA SOCIAL MEDIA

South Africa’s Informal Sector: Why People Get Stuck In Precarious Jobs

Land Of A Thousand Ideas