On the importance of integrating informal workers in inclusive economic development planning: Evidence from Durban, South Africa
Defining ‘informality’
The term ‘informal sector’ was formally introduced by a British anthropologist, Keith Hart (1973), after a 1971 study of low-income activities amongst unskilled migrants in Ghana. A year later, the International Labour Organisation (1972) embraced the term into the canon of international development literature after publishing their discoveries of profitable and efficient enterprises in the traditional sector in Kenya. Overall, both accounts offered positive outlooks on the nature of non-wage, loosely regulated work that allowed autonomous capacity for generating incomes (Hart, 1973) as well as potential to reduce poverty through employment creation (ILO, 1972). Since then, there has been divergent schools of thoughts and debates on the nature of the informal sector in relation to its formal counterpart and the larger economy, all-encompassing of the many considerations in development policies such as growth, poverty alleviation, and inequality (Chen, 2012). Even though there is the temptation of defining informality by what it is not – formal and regulated; it is more constructive to consider the competing perspectives regarding the informal economy rather than reducing its complexities to a simple dichotomy.
The four dominant conceptualisations of informal economic participation vary around the degree of choice and mobility available to workers. The Dualist view portrays the informal as a collection of marginal, ad-hoc activities that afford income generation opportunities for the poor who are locked out of the formal labour pool (Hart, 1973; ILO, 1972; Tokman, 1978). This view subscribes to a colonialist model of a ‘dual-economy (Boeke, 1953; Lewis, 1954)’, which posits a floor requirement of skills and capital that precludes underdeveloped economies from more modern modes of production. Sceptical of the segregated duality, the Structuralists consider informal enterprises and workers as linked to formal firms as subsidiaries or subordinates whose main function is to reduce input costs (Castells and Portes, 1989). Many of the arguments align with Marx’s (1902) theory of labour exploitation, arguing that under-compensated and under-regulated work is often forced upon the lower classes to feed capitalist competition and growth (Moser, 1978). With a different perspective, the Legalist school draws the division based on formal documentation by the state. It presupposes a wider range of causality for informality, acknowledging that the bureaucracy of formalization weighs more heavily on the poor but also the reality that some enterprises may prefer to remain untethered from legal responsibilities (de Soto, 1989; 2000). Lastly, the more recent Voluntarist camp primarily focuses on entrepreneurs who deliberately seek to avoid regulations, but does not consider cumbersome legal procedures as a barrier to formalization (Maloney, 2004), inferring a high level of flexibility and choice in exercising labour mobility between the sectors.
Given the heterogeneity of informal workers and enterprises, there is merit to each of these perspectives as each school reflects one segment of the labour pool; but the informal economy as a whole is more diverse and complex than the sum of these perspectives would suggest (Chen, 2012). The lack of distinctive categorization and legibility, combined with language like ‘unorganized’, ‘murky’, ‘shadow economy’, or ‘underground’ used in a certain sect of literature (Fields, 1975; Schneider and Enste, 2000; Gërxhani, 2004; cited in Heintz, 2012, p.5), perpetuates the popular notions that informality is illegal at worst or unstructured and obstructive at best. Even accepting that the undesirable factions of informality exist, Guha-Khasnobis, Kanbur and Ostrom (2006) issued a friendly warning against focusing policy interventions only on those grounds. This paper with its partiality towards promoting human-centric development chooses to follow the ILO’s employment-based definitions of informality in the economy, which expands the focus from ‘enterprises’ that are not legally regulated to include ‘employment relationships’ that are not adequately regulated or protected. This framework highlights the status and vulnerabilities of informal workers, which opens up discussions around support strategies rather than restrictive, punitive policies.
The first order distinction to contextualize the types of employment in this ecosystem is between ‘informal self-employment’, defined as labour contributing to informal enterprises, and ‘informal wage-employment’, defined as precarious work for formal or informal organizations that provides compensation but no benefits nor social protection (Chen, 2012). Then, status of employment is an important sub-categorization as it is used to delineate the allocation of authority over the working conditions, as well as the share of economic gains and risks (ILO, 2002). There are diverse classes ranging from self-directed employer to unpaid family contributors, all with different levels of power and vulnerability. Figure 1 shows a holistic, multi-segmented model which captures the spectrum of informality through the lens of labour. This framework accepts the validity of the four major causal explanations – exit from, exclusion from, and entry barriers to formal regulations as well as subordination to or exploitation by formal firms – but only for certain segments of the pyramid, not as a complete set.
Instead of comparing to what it is not, one way to understand the informal economy is by studying its parts and their unifying elements, acknowledging that contemporary literature has yet to uncover all of its complexities. Here, the focus is on the dimension of labour as it is applicable to the subsequent sections on inclusive development policies. The common denominator across the conceptions and categorisations is that informality exists beyond the usual reach of state’s governance (Guha-Khasnobis, Kanbur and Ostrom, 2006), lacking formal recognition, protection, and support. The authors meant to invoke ‘governance’ in its theoretically ambivalent nature – with a balance of carrots and sticks – but in reality, the presence of regulation can be mutually exclusive from protection. It is possible for a street vendor to expect very little support while receiving sanctioned harassment from the authorities (Heintz, 2012). The repeated emphasis on risks and vulnerability in the definitions and the WIEGO model above is meant to bring awareness to the power imbalance within the informal economy as well as the importance of reciprocity in designing policies. A productive conversation on governance and inclusive development must include voices from many segments of the informal economy to ensure a fair representation of needs and challenges experienced across this disadvantaged population.
The informal economy and inclusive economic development
Productive employment is one of the basic ways through which individuals can contribute to societal gains. The latest ILO (2018) statistical report indicates that more than 61% of the world’s labour, around 2 billion workers, make a living in the informal economy; thus, it is difficult to imagine a model of inclusive economic development without considering those in informal employment. The relationship between informality and growth is still under scrutiny by economists, as there currently lacks sufficient data backing the correlation between informal activities and positive trends in macroeconomic indicators (Elgin and Birinci, 2015). Within the advocacy circles (e.g. WIEGO and IIED), the focus is on the ‘inclusive’ factor rather than GDP or GNI. They believe that the formal and informal are interconnected components both contributing to the overall economy, and that supporting the working poor in informal employment is a key pathway to reducing poverty and inequality (Chen, 2012; Cichello and Rogan, 2017). Brown, McGranahan, & Dodman (2014) advised that a more equitable engagement with the informal economy is critical for low-income countries in pursuit of inclusive sustainable development. More targeted studies are in the works to support these normative claims; but as we wait for more accurate and reliable data on informal value creation to become available, it is worthwhile to keep working towards inclusivity and poverty reduction, accepting that development policies are inherently normative.
Informality was initially considered to be a temporary phenomenon, believed to fade out as economies develop (Hart, 1973). This viewpoint concurred with highly influential models by two Nobel laureates, Arthur Lewis (1954) and Robert Solow (1957), a combination of which suggested that low-income countries would eventually accumulate enough capital for technology to increase labour productivity while also generating enough modern jobs to rescue surplus labour out of informality. In reality, the share of informal jobs in total employment can increase even in countries with respectable rates of per capita GDP growth (Heintz and Pollin, 2005), suggesting that informality continue to be an integral element of developing economies in terms of job creation. Evidence from Latin America and East Asia shows that rather than the formal sector absorbing the informal, the reverse is true in times of transition or crisis. The intrinsic flexibility of the informal economy opened up opportunities for those who lost formal jobs due to economic instability (Tokman, 1984; Lee, 1998). This counter-balance relationship, tested and verified using a sample of 56 countries, led Loayza and Rigolini (2011) to conclude that the informal economy is actually a valuable safety-net for the global economy. Increasingly, there is renewed interest in deciphering the dynamics of the informal economy, especially because it has grown in scale rather than diminish as previously expected (Jütting and Laiglesia, 2009; Stuart, Samman and Hunt, 2018).
The debate is still out on whether informality could be a driver of growth. Loayza and Rigolini (2011) substantiated the claim of the safety net, but did not find evidence of its contribution as a growth engine. Elgin and Birinci (2015) investigated the relationship between the size of the informal economy and GDP growth using a much larger dataset of 161 countries over 60 years. The regressions yielded mixed results; but apart from big picture relationships confirming that the dynamics of informality on a macro level is highly context-dependent, such high-level quantitative analysis does not sufficiently portray the multifaceted interactions between the informal activities and economic growth. The first limitation is that GPD does not capture the majority of undervalued or unrecorded work. Another issue in both studies is the limited quantification of the informal economy. One used share of self-employment in the labour force as proxy (Loayza and Rigolini, 2011), which is a convenient and popular method but left out all the informal wage-workers. The other calculated the size of the informal sector as a percentage of GDP using a general equilibrium model defined by exogenous factors, which abstracted even further from reality (Elgin and Birinci, 2015). Growth and value creation are popular measures of economic development, but the particular challenge with this line of quantitative approach is the lack of clear metrics and capacity to accurately capture the important dimensions of informal economic activities.
Furthermore, national macroeconomic trends are affected by an array of global, often confounding factors that are beyond the sway of any single policy. The inclusive development discourse would be better served with a more targeted analysis on the role of the informal economy in distributing economic welfare to the poor. Cichello and Rogan (2017) analysed data from the South African National Income Dynamics Study and found that informal wages are negligible compared to formal salaries, but the poverty reduction effectiveness per informal job is 63% of that of formal employment because the informal economy hosts a larger portion of those under the poverty line. A closer look into the decomposition of impacts on different types of employment revealed the expected inversion of the WIEGO vulnerability pyramid – the jobs at the bottom with highest poverty risks are those with the highest ratio of poverty alleviation potential to absolute income. Simply put, the formal economy is still the primary contributor to national poverty alleviation due to its size and higher rates of remuneration, but the informal economy deserves attention because it is effective in providing needed income to those in deep poverty. Support for the informal economy can come in many forms: from improving the ease of doing business for informal enterprises, which could create as many jobs per firm as small formal business (Chandra et al., 2002), to providing a welcoming marketplace for informal traders to expand and innovate (Philip, 2010). It is beyond the scope of this discussion to present and evaluate polices, but the sections below will cover one specific case from South Africa to illustrate the importance of integrating informal workers into the planning and implementation process.
The dynamism of informal work in Warwick Junction, Durban
Formal and informal trading in Warwick precinct could be traced back to 1872 when Indian immigrants started setting up shops and later opened a bazaar on the main boulevard. The burgeoning economic hub attracted African immigrants from the outskirts to Warwick, which conveniently served as the public transportation gateway between the rural West and Durban metropolitan area. By the 1930s, Warwick Junction was the dominant shopping, trading, and business destination for a large portion of Durban’s population (Dobson, Skinner and Nicholson, 2009). The period of mid to late 1900s was a battle of survival for informal workers when the apartheid ideology was in power. Black African enterprises and workers were pushed out of the city due to “the most sophisticated sets of anti-street trader measures anywhere in the developing world (Rogerson and Hart, 1989, pg. 32)”. Until the late 1980s, local authorities kept a tight rein on informal trading, and street vendors were often violently harassed (Lund & Skinner, 2004). Despite the oppression, the community of traders supported one another and the historical Warwick Area Triangle now holds a special place in history as one of the few places in the country that remained “mixed” during Apartheid – by extension serves as a symbol of persistence for the urban poor in South Africa (Maharaj, 1999).
Currently, Warwick Junction is a combination of indoor and outdoor markets connected by strips of curb-side vending that all together support between 5000-8000 informal workers. The products being sold vary from beadwork, traditional arts and crafts, traditional cuisine, fresh produce, entertainment merchandise, clothing, accessories, and traditional medicine. The community of traders is extremely heterogeneous, and the only visible segregation is spatial grouping by product type. The working population is diverse with many types of informal employment, though some workers are more visible than others. In a small sample survey, Mkhize et al. (2013) found that upon first response, all the interviewed traders at Warwick claimed to be own-account workers, but later in the questionnaire 28% reported at least one paid employee and another 16% reported help from at least one unpaid family member, which meant that more than 1/3 of the sample had been an employer at some point. Richard Dobson (personal communication, 2018), the co-founder of a local NGO, mentioned they have estimated that each visible vendor at the market employs either labour or services from 3-5 ‘invisible workers’ in the ecosystem. Like most vibrant informal economic space, Warwick Junction supported a range of informal self-employed workers as well as informal wage-workers, all interacting with one another with an organizing logic that might not appear immediately intelligible to outsiders.
The network of transactions and relationships at this junction is a complex internal system resulted from decades of isolation from the rest of the city, which affects who travels through, what products can be offered, and the consumption patterns (Carré, 2014). Apartheid segregation and its legacy created an artificial limitation on the customer base, predominantly very low-income urban residents and commuters from the townships. Even though the foot traffic of commuters passing the transit hubs at Warwick is very high, the scope of growth is restrained by the fact that vendors could only sell goods and services affordable for people in the same income brackets as themselves. Unable to expand outwards geographically or upwards economically, a fair share of enterprising workers looked to specific niches to serve the needs of others in the community. The internal network grew by adding layers of overlapping and interconnected business opportunities, but also became much harder to record and quantify since these jobs are by nature more ‘invisible’ and erratic than conventional vending. The disadvantage of such dynamism is the lack of reliable statistics to inform decision makers who are unfamiliar with the markets (i.e. most government officials) the state of this informal economy.
With or without hard data, there is a treasure trove of qualitative information from the community themselves. Each of the nine markets in Warwick Junction has at least one person, more often a council, acting as representatives who keep track of communal affairs and negotiate for the collective (Richard Dobson and Patrick Ndlovu, personal communication, 2018). Besides location-based organisations, there are professional associations that were formed to support those of the same trade. One example is the Siyagunda Barber Association, which offers a range of financial and personal services for contributing members, from revolving loans to translation services, court assistance, and funeral services (Carré, 2014). Professional associations are vital to the social and economic stability of informal workers, particularly in their roles as internal arbitrators and external representation opposing repressive authorities. Some even provides the necessary comfort of fraternity to those extremely marginalised, like what Siyagunda is for the community of migrant barbers working in South Africa as refugees (Carré, 2014). From the perspective of policy researchers, these organized entities are tremendously valuable partners with extensive knowledge, experience, observations, and connections. Always, one must be aware of the internal politics and power dynamics when consulting those who claim to represent the masses; but a genuine and perceptive approach to these partnerships is one effective way to reach others in the community to start a successful collaboration towards a true common goal.
Success stories of co-creation and collaboration
One shining example of co-creation and successful relationship building in Durban is the Warwick Junction Renewal Project, which was initiated by the Municipality in 1995 to capitalize on the forward momentum of change post-Apartheid. The project was mandated to focus on safety, cleanliness, and employment opportunities, amongst other issues. The dedicated Project Team first channelled resources into a beautification project to show congeniality, and then established a number of Area-based Working Groups that involved equal participation from the relevant governmental departments, neighbouring formal businesses, the workers’ unions (e.g. the Self-Employed Women’s Union, the Informal Traders Management Board), and representatives from various guilds and associations (Skinner, 2008; Dobson et al., 2009). Fully aware of the turbulent past between the state and the community, the project managers believed that respectful recognition and legitimate consultation were key to co-create this space with its users. A local organizer at the time confirmed that “the manner in which informal traders and other key stakeholders were engaged was qualitatively different from the type of consultation that is more often seen when project managers try to secure buy-in (Horn, 2004, pg. 211).” Discussions were based on concrete projects, which created a productive environment that led to impactful results like the establishment of a cardboard recycling centre for waste-pickers and the renovation of a previously open-air market to accommodate more traders in a mixed-use communal space.
Both of those projects aimed at improving working conditions and reducing costs by implementing a dual intervention combining infrastructure refurbishment and programmatic support. The cardboard buy-back centre was first an idea proposed to tidy up the streets but then evolved into a full-on project to support more than 500 waste-pickers to organise, lighten the workload, and negotiate for fair compensation. The Self-Employed Women’s Union had raised issues concerning the lack of storage and the fact that the wholesale buyer was cheating them with a faulty scale. SEWU leaders convinced the Department of Solid Waste of their contribution to citywide environmental management – diverting about 30 tons of cardboard a day from the landfill – and so the Project Team was able to negotiation a plot of public land to establish a consolidated centre. Mondi, a multinational paper recycler, joined the planning discussion and offered to fund new scales, containers, and carts because they benefitted greatly from the informal collection system. With new equipment and the backing of the state, the previously exploited waste-pickers were able to negotiate a 250% price increase from the middleman.
With a different set of actors, the second example of Brook Street Market also showcase another win-win solution brokered by the Project. The previously hectic open-air informal marketplace received a major makeover with roofing for weather projection and new demarcated trading spaces for permitted trading. This time the proposal came from a Muslim community who had a long running agreement with the traders to use their space for ceremonies once a year. They funded most of the cost, but it was that Area-based Working Group who negotiated the design, terms of use, and new rental agreement acceptable by everyone. The traders who co-designed those bylaws benefitted from receiving formal trading permits and lower monthly rental for vacating the space when required. The Project Team was able to add design elements that then became storage site, new ablution facilities, and communal space for the other informal workers in Warwick. After completion, the new Brook Street Market stood proudly as a beautiful connector between the adjacent markets and between the traders and their surrounding communities.
Comparing to the apartheid-style governing mechanisms, the Warwick Junction Renewal Project exhibited a clear transition (Grest, 2002), showing real commitments to integrating those who were once discarded. This meaningful collaborative experience led the Project Team to appreciate the entire ecosystem in addition to the individuals within. They internalized early on that “Warwick is a living organism; there is relationship between the walking distance between different modes of transport, the number of taxis, the proportion of formal retail to informal retail, and the density and composition of traders. The detailed consultation and careful project interventions have led to an equilibrium that works (Dobson et al., 2009, pg. 130).” The logic of informality would have been lost if each municipal department had made decisions from their isolated offices. The inclusion of marginalized voices revealed invaluable insights, but it would be amiss not to appreciate the role of the state in meeting demands with proper implementation. The true achievement of the Project was not just the participation of informal workers, but the way in which the invited stakeholders were able to some alignment of interest that inspired joint actions. What the government viewed as cleanliness, the waste pickers viewed as equality, and the recycling firm viewed as supply-chain investment. It illustrated a rare case where development goals from above and below met alongside the triple alliance of public-private-civic that Tendler (1997) and Sanyal (1994) had found to be a highly effective model of synergistic planning and governance in the global South.
The way forward for inclusive development
Remnants of what Scott (1998) termed “high modernism” still exists in some policy and planning circles, a canon in which visual order is equated with functional order (Roy, 2005). The irregularities and illegibility of informality contrast sharply with the regularities and certainties of the economic lives of those in power to implement change (Kanbur, 2014). In response, many scholars have argued that policy makers and development practitioners should, in fact, learn from those we don’t quite understand – learning from the global South, from the poor, and from informality – in order to address contemporary global issues (e.g. Sanyal, 1990; Bradlow, 2015; Robinson, 2011; Carolini, 2018). The examples from Durban are testaments that when marginalized agents are given the chance to participate and share knowledge, their insights and perspectives can advance our understanding of what is ‘good’ development. Formalization is often the first idea associated with improvement and modernisation, but in many cases, the larger development goals can be better achieved if workers could remain flexible and informal but with the appropriate protection and support. The inclusion of those in informal employment in economic development planning benefits workers, giving them a chance at better working conditions and poverty reduction, as well as formal businesses and the state who reap profits and other unquantified gains from that labour. One constructive way to move inclusive development forward is to be mindful of empty engagements in participatory planning (Sihlongonyane, 2015), and to open up possibilities “to speak from somewhere else, [and] to think otherwise (Robinson and Roy, 2016, pg. 184)” to find the real values and interest that unite communities collaboratively.
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