The coronavirus pandemic has absorbed almost every bit of our attention over the past few months. While many of the relief efforts in South Africa centred on trying to cushion the blow to formal businesses, initial responses largely neglected those operating outside of the formal economy.

To its credit, government responded to criticism and suggestions and launched various measures from increasing existing social grants to creating a new Covid-19 Social Relief of Distress grant of R350 a month for six months. In addition, informal food traders could resume sales. But no plan is perfect, especially those quickly cobbled together under extreme pressure. The question remains whether enough is being done to help South Africa’s “unseen economy” to survive.

Kasi economy hobbled, but still working to survive

GG Alcock, author of Kasinomic Revolution, says the kasi (township) informal economy has been less affected by Covid-19 than the city or suburb-based informal economy. “This is due to the fact that the lockdown has kept workers from travelling into cities, plus reduced working points where traders sell,” he says. For example, food trucks at construction sites have shut down, whereas spaza shops continue to operate.

“From a kasi economy perspective, some sectors have been permitted and others have been able to operate under the radar,” says Alcock. “For example, even under higher lockdown levels, hair salons in a street have operated behind closed doors for neighbourhood customers. Many kasi fast-food outlets have operated behind closed doors, even serving food to the police and army patrolling the streets.”

Registration requirements hamper response

The nature of the informal economy is that it is not part of formal systems. This doesn’t mean that it doesn’t operate in a systemised manner – on the contrary, parts of it are as slickly organised as any corporate business in South Africa.

Informal economy businesses are those that are not working via traceable payment systems. Many operate in a cash environment and in the absence of bank accounts and tax registration. And yet, to access Covid-19 relief funds, government requires informal economy businesses to become registered in some way.

For example, to qualify for the Spaza relief fund, businesses must register with CIPC, SARS and UIF. They will also have to keep financial records for submission. Bulk-purchasing discounts will only be available from pre-approved suppliers.

Informal food traders are permitted to trade, but only once they’ve been issued a licence. For this, they first need to have a valid permit.

Even handing out food parcels has been riddled with bureaucracy. There have been reports of food donations languishing in municipal offices because government insists that all parcels comply with Sassa standards. Some parcels that are not “big” enough have therefore not been distributed.

...parts of it are as slickly organised as any corporate business...

Building solutions for a sector we don’t understand

Dr. Marc Wegerif, lecturer in Development Studies at the University of Pretoria, believes that one of the major challenges impeding government’s relief efforts aimed at the informal economy is that government (along with much of the corporate private sector) doesn’t understand it. “The City Deep Market in Johannesburg is the biggest fresh produce market in the country,” he says. “Last year, it moved about R7.9 billion worth of fresh produce. Speaking to the agents there, they’ve all been saying 50% or more of their trade is with informal sellers. That’s almost R4 billion of fresh produce being sold in the informal sector in the Johannesburg area per year.”

It is an illustration of just how much the trade within small informal sector businesses adds up. After all, the sector is estimated to employ some 3 million, and a survey by African Food Security Urban Network found that more than 70% of households surveyed in lower income areas within Johannesburg source food from informal markets or roadside stalls at least once a week.

“We’ve seen with Covid-19 that, despite saying food is an essential service, the government essentially forgot about or ignored the so-called informal part of that food delivery,” says Wegerif. Even once they had changed the regulations to include informal sector businesses, he says that on the ground there isn't the same level of respect for informal traders. This is a problem from the lowest level of officials through to ministers.

Policies tend to be developed for the formal economy and then, as an afterthought, adapted to (sort of) work for the informal economy. However, there are often double standards involved. As Wegerif points out, there is a huge fuss made about foreign nationals operating spaza shops, but the same criticism is not levied at corporate businesses, even where they are majority owned by foreigners.

...food security is at major risk, particularly for the poor... 

Crisis upon crisis – an impending food security disaster

In its policy brief, Food in the time of coronavirus: Why we should be very, very afraid, PLAAS, the Institute for Poverty, Land and Agrarian Studies, cautions that South Africa’s food security is at major risk, particularly for the poor, and not just during lockdown but for the foreseeable future, too.

“It’s really important to understand that the food security crisis in South Africa is a money crisis,” Prof. Andries du Toit, director of PLAAS, says. “It’s not a crisis of how much food can be produced. We’ve got enough food at a national level, but what we don’t have is the ability for people to buy that food on the supermarket shelves.”

...the kasi economy is embracing e-commerce...

While the Covid-19 grant introduction was encouraging in that it’s the first time that able-bodied, working age people have been included in social protection measures, and was seen by some as a step towards a universal basic income grant, Du Toit says that R350 per month is simply not enough.

On top of this, application proved cumbersome. In a piece for GroundUp, Jeremy Seekings outlines challenges in simply getting the Sassa application system live. Applications can be made through email, WhatsApp or mobile phones through USSD codes. Within four days, more than 3.5 million applications were received.

Supply side challenges for small farmers

While government has set up a grant for distressed farmers, it applies to those with a turnover of between R20,000 and R1 million a year, cutting out true subsistence farmers at the bottom end of the triangle. It’s also only open to farmers registered on the Department of Agriculture’s databases. Du Toit says this data is outdated, and many rural or small-scale farmers who need help are not registered.

He says while government addressed certain aspects of the food supply chain, others were not considered. For example, small-scale fisheries were prohibited from transporting and distributing their fish directly to locals.

“One thing that I think needs to be said very loud and clear now is that while it’s necessary to have a process of sensible formalisation in the township economy, you can't use the Covid-19 regulations as a way of achieving those aims,” he says. “We’re in a situation where millions of people are looking at going hungry. Anybody who is an essential service should be allowed to trade under sensible conditions (like wearing a mask and adhering to social distancing).”

The informal sector as an engine for recovery

For all the scary scenarios facing us, there are glimmers of hope. South Africans are an enterprising bunch. Within two days of lockdown moving from level five to level four, there were hawkers selling a range of fashionable fabric masks at traffic lights.

Despite challenges of high data prices, Alcock says the kasi economy is embracing e-commerce. “Small kasi bakeries shifted to Facebook to advertise their bread, using WhatsApp orders, almost immediately after lockdown started,” he says. “Borotho Bakery in White City in Soweto is a case in point. Customers were invited to send a location pin and order. Borotho Bakery has trolley delivery teams who then delivered the bread.”

Once fast food deliveries were permitted, kasi entrepreneurs were quick to make a plan. “Some, like Bafokeng Shisanyama and Chicken Fototo, have delivered sophisticated order platforms,” says Alcock.

The #datafree platform has arrangements with South African and Nigerian mobile network operators whereby advertisers pay for the mobile data people use to access affiliated apps and websites. For example, Malaicha.com is a product offered by financial services business Hello Paisa, which allows Zimbabweans living in South Africa to order and pay for food in South Africa, for delivery to their families at home.

Order Kasi in the Western Cape is delivering hot food, vegetables and other items in the township, while Gauteng has set up an online permit registration system for hawkers and spaza shops. The take-up has been remarkable,” says Alcock.

Payment remains a hindrance to e-commerce, admits Alcock. “Several e-wallet solutions are being rolled out – Ukeshe, Zarga, Selpal, Cellbux. They are, however, generally closed loop wallet systems, and a true mobile payment platform is currently not available. WhatsApp is rolling out payment in India and there are parties I am working with in South Africa who are working with Mastercard and WhatsApp to potentially launch this in South Africa. This solution would potentially assist with the social grant problem where millions of social grant recipients are queueing at ATMs to draw cash.”

What can the corporate private sector and individuals do to help?

  • Do your bit personally. Buy your tomatoes from the table-top veggie seller and not a supermarket. Purchase fabric masks from the woman making and selling them on the roadside rather than from a large online retailer.
  • Develop connectivity solutions. Alcock says the informal and township economy is ready for e-commerce, but data costs remain a limiting factor.
  • Realise the true value of the informal economy and respect its role in value chains. Wegerif says that many businesses interface with the informal economy without realising it. For example, a supermarket store in a large mall may employ staff who need to get to work using a taxi, or who buy their lunch from an informal curb-side fast food business across the road from the shopping centre.
  • Develop better solutions for informal economy businesses. From financial services products to supply chain management, formalised businesses who sell to informal ones need to relook their products, payment terms and business models to help the informal economy to restart and to survive. Alcock suggests measures like stock on consignment, rotating credit, negotiable terms, and bulk discounts as starting points. 

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