Inside South Africa’s informal economy

In 2013 there were 1.5 million people running an informal business in South Africa, according to the Survey of Employers and Self-Employed (SESE) released by Statistics South Africa (Stats SA).

The sector, according to Stats SA, accounts for 5% of the country’s GDP, remaining pretty much stagnant over the past decade.

The report found that in 2013, as many as 52.3% had a turnover of R1,500 or below in the month prior to the survey, and only 14.6% had sales above R6,000.

Net profits for 64.9% of businesses were also low, at R1,500 or lower in the month prior to the survey, and only 9.2 % of businesses made net profits above R6,000.

The SESE, which is conducted every 4 years, collects information about non-VAT registered businesses, most of which are in the informal sector.

Men vs women

In 2013, larger proportions of informal businesses operated by men compared to women had the highest levels of turnover.

Men comprise 55.4% of the sector, up from 39% in 2001.

Whereas 18.6% of businesses operated by men had turnover of R3,001 – R6,000 in the month prior to the survey, only 9.6% of women had that level of turnover.

As many as 19.5% of male operated businesses, compared to only 8.5% of those operated by women, had turnover above R6,000 in the month prior to the survey.

The Agriculture industry had the largest proportion of people running informal businesses that had a turnover of R0 – R750 (46.6%) in the month prior to the survey.

In contrast, 35.2% of people running informal businesses in the Transport industry had turnover of more than R6,000.

Individuals running informal businesses
Individuals running informal businesses

The vast majority of people running such businesses (over 95%) had only one business.

The proportion of people who had such businesses for five to ten years and ten years or longer increased over the period 2001 to 2013.

Length of time business operated
Length of time business operated

The research indicated that 87% – 93% of individuals who ran informal businesses did so without a licence or permit.

Licence to operate
Licence to operate

The main reason why people decided to start an informal business was due to unemployment – ranging from as many as 60.6% who reported this reason in 2001 to 69.2% in 2013.

As many as 79.1% of respondents did not have a current/transactional or savings account, while only 19.7% had bank accounts.

The survey also highlighted the educational profile of those people in the industry.

Educational profile
Educational profile

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Inside South Africa’s informal economy