Policy considerations for the management of informal business in a fast growing city : a case study of Polokwane Municipality.

Abstract

A county's level of development is measured by poverty, unemployment and inequality. Strategies and development plans must address these three elements. The informal sector is an important part of the economy, contributing to the social and economic development of countries. Despite its importance, the management of the informal sector has not taken central place in most countries, probably because there is still the subconscious belief that the sector will disappear if sufficient levels of growth are reached. The sector is still being viewed as temporary and transitional. Research has however shown that the sector is permanent, and that there are those who enter the sector by choice (voluntary informal employment) and those who participate in the sector involuntarily. Despite the reason for participation, the sector should be taken seriously as it continues to grow and is permanent. As a result of the permanent nature of the informal sector, debates have moved from focusing only on informal enterprises to include the workers themselves, thereby giving birth to the notion of informal economy. The most visible activity in the informal economy is street trading. Street trading is a source of livelihood for the majority of the urban poor, but if not properly managed, can be problematic. Actually, street trading is associated with various urban management problems such as crime, grime, dirtiness, and many other issues, in some instance badly affecting the ability of the formal sector to grow. Due to its direct effect on the formal economy and communities, as street traders use public space, the study focuses on the management of street vendors. The study argues that while it is true that street vendors are a contributing factor to most urban management challenges in urban areas, the main cause is lack of proper systems and processes designed to manage the sector. The study argues further that the problems associated with street vendors are a symptom of systematic problems in public institutions, especially municipalities that are mandated by the Constitution to manage street trading. It maintains that the majority of the problems associated with informal trading can be addressed by adopting relevant policies that would guide and delimit the actions and behaviours of both the public officials and the traders. Such policies should, however, not equate management to regulation as has been the case. The policies should instead be developmental in nature, thereby recognising and acknowledging that street trading is an important component of the economy. This is not an easy task. The most fundamental challenge is the conflicting objectives between the street vendors and the authorities. While the street vendors focus on their right to trade, the local authorities focus on the right to enforce safety and health regulations. It is therefore important for municipalities to adopt a balanced approach to street trading as a phenomenon. This fact is also exacerbated by local authorities' limited understanding of the size and the contribution of the informal sector generally, and street vendors in particular, to the economy. This results in the adoption of public policies, urban plans and other development plans that counter rather than support the informal economy. Another critical finding that emerged from the study is that street vendors are generally not organised, and therefore have limited bargaining power. Due to this fact, they are unable to participate in the decision-making processes of the authorities even when decisions that affect them are taken. Even in instances where there are trader's associations, it has been indicated that they are weak and unable to assert any influence. On the local authority's side, the lack of proper traders' organisational structures makes it difficult for the municipalities to engage them and jointly develop strategies that will enable the sector to grow and become sustainable. It is therefore important that the authorities play a critical advocacy role with regard to the issue of association. Although various organisations such as SEWA, StreetNet or WIEGO are present, this is at local level, and hence their effect has not been felt. Another element that has emerged is that street vendors are harassed and do not enjoy any benefits, even in areas where it is legal to engage in street trading. One contributing factor to this could be that the management of the sector is not properly institutionalised. The study argues that where proper institutional mechanisms are put in place, and roles clearly defined, the sector is better managed and supported. Singapore, for example, established a hawker's department to deal with issues of licensing, support, monitoring and personal hygiene. This approach enabled Singapore to manage the sector better. Analysis of the policies of various municipalities in South Africa indicated a shift in this regard. The municipalities analysed acknowledge the fact that management of the sector requires a multidisciplinary approach, and have attempted to clearly define the institutional model for managing the sector. The question, however, would be if the state of street vending in some of the cities continues as it is, whether the lack of effectiveness of the policies is due to lack of resources and capacity to implement such policies or whether the policies are not appropriate for the environments which exist. The conclusion arrived at indicates without any doubt that the informal economy is here to stay, and is a critical component of the economy. It is therefore important that like the formal economy that is regulated and protected, the informal economy, is managed in a way that can make it one of the levers to address poverty, unemployment and inequality. The study also concluded that the formal economy remains the backbone of the economy. As a result, the informal economy should not be regarded as a solution to the problems in the formal economy. Instead, the informal sector is complementary and supplementary to the formal economy. As a result, it is prudent to have proper polices and strategies that put the informal economy at the centre and not at the periphery of economic development. Indeed, such policies and strategies should not affect the formal economy negatively. The recommendations provided in the study indicate that when developing a policy for managing street trading, such a policy should be developed taking into account the various policy-making stages. The municipality should also conduct a thorough environmental analysis in order to determine the external and internal factors that will affect the policy in order to develop an implementable and effective policy. The study concludes that issues such as infrastructure provision, safety, organisation, proper institutional model and capacity-building are critical intervention mechanisms that can enable the municipality to manage street vending effectively. Once these issues are addressed, the municipality will be able to manage street trading effectively.