Interview: How South Africa Could Become a Model for Formalizing the Informal Economy

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Beauty Mgiqizane, Durban, South Africa
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WIEGO Blog

We spoke with WIEGO’s Organization and Representation Programme Director, Jane Barrett, to better understand the International Labour Organization’s Recommendation 204 on formalizing the informal economy and what progress South Africa has made that we can learn from.

It’s been four years since the International Labour Organization (ILO) adopted an important instrument to guide countries in formalizing their informal economies. The instrument, known as Recommendation 204 (R204), is key at this juncture in time: 61 per cent of the world’s workforce is now informal — a world of work no longer defined by skyscrapers and 9-5 office jobs.

R204 is a 10-page document with nine chapters making recommendations to governments on how to facilitate the transition of workers and “economic units” (including own-account workers) from the informal to the formal economy, and how to prevent the informalization of formal economy jobs.

This is not to say that huge on-the-ground progress has yet been made, but the ingredients for this progress are at least in place.

Including the massive informal workforce in legal and social protective measures is imperative. Steps towards full inclusion should stand at the forefront of any future of work discussions that truly embrace equality.

But how to do that, even with R204’s guiding principles, is the question.

WIEGO’s Organization and Representation Programme Director, Jane Barrett, takes us through how South Africa’s informal workers and policymakers are beginning to work together on this major transition — one she says the country has all the right ingredients to do well but still faces many challenges on the road ahead.

Listen to Jane Barrett speak to WIEGO’s Informal Economy: Social Protection podcast on R204.

Durban street vendor
A cardboard recycler in Durban, South Africa, prepares her collected cardboard. Photo: Asiye eTafuleni

Why is South Africa an interesting case study in formalizing the informal economy?

South Africa is interesting to look at for a number of reasons. First, informal workers across a number of sectors are relatively well organized. There is a national organization of street vendors, South Africa Informal Traders Alliance (SAITA); a national organization of waste pickers, South Africa Waste Pickers Association (SAWPA); a network of local organizations of home-care workers; a trade union of informal transport workers in one region of the country; as well as a number of organizations of fisher men and women in the coastal cities.

The ultimate measures of success for both categories of formalization would be improved and decent livelihoods and remuneration, and no discrimination or exclusions of informal workers from work-related protections, including social protections.

Second, these organizations are represented in a national Task Team, which has the job of monitoring and shaping implementation of R204. This Task Team is comprised of representatives of government, business, the formal trade union movement, and informal worker organizations. It is working according to an agreed “road map” of implementation, which was adopted at a national conference on the transition to formality in 2017. It is accountable to the national tripartite social dialogue forum, called the National Economic Development and Labour Council (NEDLAC).

The existence of the Task Team and its reporting responsibilities create the conditions for progress. This is not to say that huge on-the-ground progress has yet been made, but the ingredients for this progress are at least in place.

Learn about how WIEGO and informal workers have been promoting R204 in Malawi.

What could “formalization” look like in South Africa? What will be the major measurements for success?

Formalization will hopefully take two distinct forms in South Africa.

On the one hand, there are workers who, although they have an employer, are still defined as informal because the employer is non-compliant with employment legislation. There is a struggle to ensure that these workers are formalized through compliance. Compliance is usually brought about through organized pressure and/or legal action and/or government enforcement measures.

This struggle is largely in the hands of the formal trade union movement, including the South African Domestic Services and Allied Workers Union (SADSAWU), which is an affiliate of the International Domestic Workers Federation (IDWF).

Much of the creative thinking and interventions by government ignore those at the bottom and only seek to support those who are already somewhat privileged in the informal economy.

The focus of organizations of other informal workers, in particular self-employed informal workers, is somewhat different. The focus here is on a combination of the following cross-sector interventions: the creation of collective bargaining fora for the recognition and rights of informal workers at a local level; the extension of unemployment insurance and maternity benefits to self-employed workers; the extension of the provisions of the Compensation for Occupational Injuries and Death Act to self-employed workers; and steps to ensure occupational safety and health at work.

At a sector level, additional elements of formalization are possible, such as the provision of infrastructure — toilets, access to water and electricity, and storage spaces — for street traders. In the waste picker sector, examples would be the recognition and registration of waste pickers at the municipal level, accompanied by guarantees of access to recyclables on the streets and on the landfill sites.

The ultimate measures of success for both categories of formalization would be improved and decent livelihoods and remuneration, and no discrimination or exclusions of informal workers from work-related protections, including social protections.

Read about a new international labour standard that protects vulnerable workers from violence and harassment in the workplace.

What are some of the major challenges to implementing international instruments, such as R204, at the national level?

We have found in South Africa that one of the major challenges to implementation is a combination of ignorance on the part of government officials (that is, that they simply have never heard of R204 and still have to be informed and educated on it) and a tendency of government to have a bias towards small businesses as opposed to informal workers.

There remains a struggle to get most government officials to recognize self-employed workers as making a significant contribution to the economy. It is assumed that such a contribution can only be made by up-scaled businesses.

But it is not enough just to know about R204’s existence. The trick for membership organizations is to find ways of using it to convert grievances about conditions of work into demands to local and national government.

Much of the creative thinking and interventions by government ignore those at the bottom and only seek to support those who are already somewhat privileged in the informal economy. We have to keep educating government officials on the inclusive scope of R204. For this reason, we have started to include government officials in some of the workshops on R204 that we have been running for workers’ organizations.

Read about how a street vendor used R204 to change policy in Costa Rica.

Durban street vendor
Mabel Ntuli is a street vendor selling clothes in Durban, South Africa. Photo: Jonathan Torgovnik

How do informal workers and their organizations need to prepare for this process?

It is not only government officials who need to be informed and educated on the content of R204. While the national leaders of the various sectoral organizations are now well familiarized with R204, lower down in the ranks there is still a lot of work to be done. Spreading the word throughout the membership ranks is something to which the organizations have to put their mind.

The establishment of collective bargaining forums, especially at local government level, is a pre-requisite for making progress in implementation.

But it is not enough just to know about R204’s existence. The trick for membership organizations is to find ways of using it to convert grievances about conditions of work into demands to local and national government. This requires focused discussions with the members in which their problems are aired and then crafted into demands and proposals to be placed at the appropriate doors.

The process cannot stop at formulating and placing demands, however. There have to be agreed processes of negotiation to agree on how to proceed. For this reason the establishment of collective bargaining forums, especially at local government level, is a pre-requisite for making progress in implementation. The Task Team referred to above is currently in discussions with the government about establishing pilot collective-bargaining fora in two agreed cities.

Read more strategies for collective action.

Have there been any noteworthy achievements to date in implementing R204 in South Africa?

The achievements to date have largely been about process. For example, the establishment of the national R204 Task Team, and more recently, agreement on two cities, Mbomela in Mpumalanga Province and Johannesburg, where collective bargaining fora will be piloted.

When informal workers start to feel more secure in the work, when their incomes start to improve, and when they can enjoy the social and legal protections that formal workers enjoy, then we can really start talking about achievements.

In the waste picker sector, a national set of guidelines for the recognition and integration of waste pickers at the local level have also been agreed upon. The next and hardest steps will be to negotiate changes at a national and local level that will make a material difference to the lives of informal workers. When informal workers start to feel more secure in the work, when their incomes start to improve, and when they can enjoy the social and legal protections that formal workers enjoy, then we can really start talking about achievements.

This is not to say that informal workers are not already making inroads to formalization in their day-to-day struggles for issues such as access to toilets, the provision of infrastructure such as storage space, fairer registration and/or licensing processes, etc. However the big changes that are needed will only come about once the agreed processes of formal recognition, consultation and negotiation have started to kick in.

What benefits could formalization have for both workers and South Africa as a country?

If the working lives of informal workers improve through some or all of the intervention measures outlined, this will have a significant knock-on effect on the economy as a whole. More money in the pockets of informal workers will mean more demand for consumer goods and services, which in turn should help boost formal employment.

If the working lives of informal workers improve through some or all of the intervention measures outlined, this will have a significant knock-on effect on the economy as a whole.

In addition, if social and legal protections are extended to informal workers, they are likely to become significantly more productive and secure in their work, compounding the increased livelihoods. We are looking at a potential virtuous circle of individual, collective and national benefits.

Read more about R204 and formalizing the informal economy.

Feature photo: Beauty Mgiqizane is a trader at Berea Station in Warwick, and a volunteer with Traders Against Crime, which has helped reduce theft and assault in the area. Photo credit: Jonathan Torgovnik

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