Lest we forget the informal sector during Covid-19
The state must come up with a series of robust interventions that will cushion this segment of our economy before and after the crisis
The coronavirus is carried by people, and their movement enables it to spread exponentially — where one infected person potentially can transmit it to, say, two or three people, who in turn each spread it to two or three others. The real danger is that symptoms take anything from two to 14 days to appear (reports on this vary), so people can spread it unwittingly and that is why it is so difficult to curb its spread.
Semi-formal and informal trading zones are likely to be the hardest hit economically during the lockdown. We anticipate that the lockdown in SA will have to be extended, and the more prolonged it is the more damage it will do to our already fragile economy. A critical concern is that post-lockdown recovery strategies have not been communicated by the government.
Between Covid-19 being declared a national disaster on March 15 and President Cyril Ramaphosa announcing a lockdown starting at midnight on March 26, I visited a few trading zones in small towns, downtown areas and townships.
Wednesday morning, Midvaal, Meyerton municipal clinic. Theme: last-minute medical check-ups and procedures.
One pregnant Malawian lady stands outside a door marked “mother and child”. She speaks little English and does not understand any local languages. The medical staff are on a hunt for anyone who is from Malawi to interpret. There are more than 120 people including children here; it is not even 8am.
The young man I am sitting next to is from Kwekwe, a small town in the Midlands province of Zimbabwe; he raises his eyebrows when I tell him I once passed by his hometown in 2018 — the ice has been broken. He is getting his wisdom tooth extracted before the lockdown. The lady on my left is from the neighbouring township and she is also having a wisdom tooth extracted. She tells me she does not want to be stranded during the lockdown.
Wednesday late afternoon, Ekurhuleni, Katlehong. Theme: no economic safety net
Rasta’s eatery is usually full around this time as patrons come by to grab an early dinner or late lunch. The eatery sells traditional meals. Today, there are two patrons, in sharp contrast to when I was here on March 15. Our eyes meet and he immediately puts his hands together and nods, we cannot shake hands.
“How are you doing today, ntate Rasta?” I say. He points to his two customers and responds by giving me an update. Business has not done well since the lockdown announcement, he tells me. He needs to pay labourers’ wages and feed his family for the next 21 days without the eatery operating. He will be cash-strapped.
Johannesburg, Newtown taxi rank hair salon. Theme: safety net for migrants?
KB is from Nigeria. She tells me her contract is on a no-work no-pay basis. With the lockdown occurring the following day at midnight, she would use the money she made that week to stock up on food. She will be staying with her fellow countrymen and women and relying on social capital to get by. The salon owner, also from Nigeria, tells one of her customers that should the lockdown be extended, the SA government might prioritise citizens more than migrants.
Wednesday early evening, Pretoria CBD. Theme: these vegetables should be sold before lockdown
I usually buy vegetables across from the bus stop; it is convenient for commuters. The difference today is that the street vendors have stocked more vegetables than usual from the Tshwane market. The problem is, if they do not sell by Thursday night they won’t get another chance to sell the perishables.
Thursday early morning and late afternoon, Pretoria north town. Theme: mayhem, earth is closing tomorrow
Retailers are adhering to restricting stores to 100 customers; trolleys and customers are sanitised. Customers are queuing outside, but no-one is keeping to the 1m distancing standard. Shelves are either empty or nearly empty, including those reserved for essential items.
The gas store owner is turning people away because he ran out of gas, but the lady behind the counter gives me a tired smile and advises me to leave my bottle and come back at 4pm. I think she just extended me a favour, but my gas cylinder is only 3kg. Gas is an essential commodity and the store has been granted permission to sell during lockdown. Oom, the owner, has not figured out his lockdown trading hours but he will gauge how the store operates during normal trading hours — clearly his assumption is that customers will not be using public transport. Oom tells me that he can allow only two customers into the store at a time. Failure to comply might result in store closure during lockdown. There is a Coca-Cola 2l bottle filled with green liquid — he tells me he made some sanitiser spray.
Rapid intervention suggestions
These are credible economic concerns synonymous with small businesses and informal operations. Our small towns, township and downtown economies thrive through semi-formal and informal operations. These operations will be closed during lockdown, which will increase economic distress, force company shutdowns, increase labour layoffs, heighten food insecurity and so on. There is a need for interventions for small town, township and downtown-based vendors to get by through the lockdown, irrespective of their nationality and documentation.
Self-employed in the informal sector: rotating savings and credit associations, referred to as stokvels in SA, are prevalent among dwellers and vendors in townships, informal settlements and downtown areas. These should have distribution systems adjusted to ease lockdown economic pressure.
Typically, payouts are either on a monthly basis, whereby one member receives that month’s savings, or the stokvel funding is distributed during specific holidays to all members. For the lockdown period, distributions should be made as if making use of the holiday payout procedure.
Vendors in stock-buying stokvels should consider using a portion of their savings for this period. Traders who are non-stokvel members will have to be given safety nets by the government.
Migrants: When offering government support to households and businesses during the shutdown, we should cater to migrants as well. We should always avoid coming across as being xenophobic. This is a chance for South Africans to exercise humility to all migrants, documented or not.
Business closures; labourers’ protection: some of the businesses in downtown areas, small towns and townships have employees. Owners are responsible for wages and salaries during the lockdown. Some businesses are even tax-compliant.
The government should consider foregoing business VAT payments during the shutdown period; these VAT payables should be paid to employees who might lose their jobs during lockdown or employees who are not paid during lockdown (however, payments need not replace UIF claims).
Tax grants can also be offered to small, medium and micro enterprises (SMMEs) for a set period. These should be directed to labourers as wages and salaries.
There is a need for emergency government aid:
- Small town, downtown and township-based registered businesses losing a set percentage of revenue due to the shutdown should be granted permission to apply for employee wages relief.
- The same applies for people who are self-employed but have no labourers.
Overall, a post-lockdown strategy from the government is urgently needed. Failure to secure and implement one might lead to an economic collapse and, in all probability, to social unrest as unemployment surges (which might increase by at least 1.1-million due to Covid-19).
We cannot deny that the formal sector, particularly the banking sector, might be the quickest way to revive the economy. However, in so doing, we dare not neglect the semi-formal and informal sectors.
• Thosago is a policy analyst at Intellidex.