BHEKI MFEKA: Focus on the informal sector to deal with xenophobia
We cannot take the country forward without applying abundant resources to the mass economy
As we enjoy the festive season and the conclusion of a painful year, despite the victories of the Springboks and Zozibini, we would have again forgotten about what has been defined as xenophobic attacks on foreign nationals on the streets of cities in SA and other African countries in 2019, but also in 2016, and 2008 as well.
The controversy about Nigerian musician Burna Boy and the cancelled concert that was to be staged to build unity among Africans in SA against xenophobia temporarily revived our thoughts on the subject.
The characterisation of these kinds of uprisings as xenophobic attacks is partially correct and has been widely accepted, but the fuller picture would focus on the neglect of the informal or mass economy in SA.
The informal economy in SA potentially could be the biggest sector in Africa in terms of value given the economic base of the country. That on its own, if we are to move forward in unison, is the unexplored mine field. The clues to its vastness are reflected through the interests the sector has attracted from diverse countries such as Pakistan, Ethiopia, Somalia, Bangladesh, India, China, Nigeria, and other countries whose citizens have descended on the streets of SA cities.
The informal sector is is often referred to as the “mass economy”, because of its great size and how many people who participate in it, particularly women and the youth. This economy is very unfortunate in that there is very limited investment if understanding the sector, especially by the government’s economic cluster and the governing party.
Although this is understandable, since the country is still grappling with understanding the formal small business sector, it may take a few more years before we come to a full understanding of this very important sector. The two Competition Commission reports on the retail and telecommunications sectors give us a glimpse of some of the impediments to understanding the informal economy.
In African countries that attained their independence long ago, the most illuminating is Nigeria. They have understood the value of the mass economy, to the extent that the country had to rebase its economy, which led to a phenomenal revaluing that saw Nigeria surpassing SA as the leading economy in Africa in nominal GDP in 2014. The process gave weight to informal productive activities, such as Nollywood and other key components of daily activities beyond oil.
Very few academics and policy practitioners have attempted to understand this sector. Dr Meshack Khosa very early delved in attempts to understand the taxi industry, which was dominated by African males when it boomed in the 1980s. Sustainable solutions to support and grow the sector have yet to be found. Internationally, the groundbreaking work on land in Bangladesh by Muhammad Yunus — the 2006 Nobel Peace Prize winner who delivered the seventh Nelson Mandela Lecture in 2009 — attracted worldwide attention, pointing to the fortune at the bottom of the pyramid. His project remains an inspiration and a challenge for people in developing countries.
Given the ANC’s background and its traditional constituencies, no effort should have been spared by this government in understanding and creating a conducive environment for the mass economy. In 2016, at the peak of the so-called xenophobic attacks, I was approached by a group of highly patriotic former uMkhonto weSizwe soldiers who were concerned about the spate of violence that seemed to be directed at foreign-owned businesses in African locations. They had done extensive research on how to bring about an inclusive SA economy and had brought evidence and a paper they had written for the attention of the government and the executive.
The richness of the paper was mind blowing and a direct answer to the questions on so-called xenophobic attacks. They had clearly identified the neglect of the most important sector for the SA economy, the informal sector, now a feature of contemporary African societies.
This reminded me of the unfinished thesis, or thought provocation, by former president Thabo Mbeki when he drew attention to the existence of two economies in one country. Speaking at a conference in October 2003, Mbeki used a double-storey house as a metaphor for the SA economy. Mbeki had been speaking to a senior manager, who had said SA was like that double-storey house “without a connecting staircase”, he said to laughter from the crowd.
Departing from a prepared text, he said that on the upper level there was a modern economy, which “for all of its problems it is diversifying”. But there was another economy where the poor were trapped, where the people were illiterate, without skills and access to clean water. In a dig at the mainly white opposition, he said the common argument that 6% growth would solve SA's unemployment problem was “not correct”. Even with high economic growth they would not “enter the economy” because of the lack of skills and because people in rural areas could not read or write.
Attempts to convene organised structures of informal traders should be reinvigorated in 2020 to understand their plight better. If we are to grow the economy, we should never treat the informal sector as a “nuisance economy” as has been the case in some metros. Many of us, black people, were educated from income derived from selling candles, chicken feet, vetkoek, paraffin, sweets, and many small items in the streets, schools and work premises.
Whether you talk of backyard mechanics, marijuana and loose cigarette sellers, veggies, fruit sellers and so on there still exists an overwhelming survivalist and entrepreneurial culture in our country dominated by women and the youth. These people carried black families in the past and continue to do so during the harshest of times. This is what mostly motivated me to pursue development economics as a career path.
I am lamenting the lack of attention to this economy because we cannot take the country forward unless we dedicate abundant resources — as we do in rescuing ailing state-owned enterprises — to this sector. This would bring sustainable peace and a chance to reduce inequalities and decisively deal with xenophobia.
• Mfeka, a former economic adviser to the presidency, is economist and strategist at SE Advisor.