An analysis of municipal approaches to incorporating the informal economy into the urban fabric : a comparative study of Msunduzi Local Municipality (Pietermaritzburg) and Hibiscus Coast Municipality (Port Shepstone)

Abstract

This study is necessitated by the emergence of the notions of a developmental approach towards the informal economy within urban governance. Using the case-study methodology to draw a comparative analysis between Msunduzi Local Municipality and Hibiscus Coast Municipality, the study highlights various key challenges facing the development of the informal economy in South Africa. The study reveals that there has been a slight shift towards a developmental approach, for instance, where some level of infrastructure investment and skills support has become a part of the intervention strategies for the informal economy. However, it is argued that local government lacks adequate institutional arrangements, and is characterized by an underdeveloped policy and legislative environment with regards to the development of the informal economy. These issues at the local government level are exacerbated by a lack of direction at the national level in terms of structuring the outcomes of policy, legislation and the institutional environments in addressing the dual objectives of poverty alleviation and economic development through the informal economy. At the local level, these factors have subsequently led to unstructured, uneven and uncoordinated interventions, which have collectively hampered the development of the informal economy. This has also been aggravated by the wider struggles of stakeholders such as urban elites, political interests and informal traders’ agencies at the local level, competing to influence urban development and policy for their preferential gains. Furthermore, the state continues to determinedly institutionalise global economic competitiveness between its cities and towns in the pursuit of reaching ‘world class’ standards. This leaves local governments ill-equipped to deal with the socio-economic issues and challenges of developing the growing informal economy as an unfunded mandate. Moreover, the political ambivalence at all levels of government is fundamentally limiting the creative assimilation of alternative urban configurations that meet and synthesize the diverse needs of both formal and informal economy actors in reimagining a hybrid economy. Finally, the study raises key recommendations around the need for a deeper democratization process which attempts to overcome the barriers to more deliberative policy making and implementation. This also includes the need for aligned national, provincial and local government policy and legislative frameworks for the development of the informal economy. These should outline clear implementation plans and mechanisms, and the coordination and integration of interventions between various stakeholders as a multi-disciplinary approach.