Reportedly, 85.5% of all new businesses in South Africa start up unregistered and operate in the informal economy (Williams, 2017). The following describes the informal economy in South Africa (Williams, 2017):

1. Approximately 32.7% of non-agricultural workers are employed in the informal economy, of which more than half (54.4%) are in informal jobs in informal enterprises;
2. 39% of employed women and 29% of employed men are working within the informal economy;
3. The informal workforce comprises of 67% informal employees, 25% ‘own account’ workers, 5% employers and 3% unpaid family workers;
4. 26% of employment within metropolitan areas is informal and is distributed across trade (29%), private households (29%), construction (12%), manufacturing (8%) and services (other than private households) (7%).

When compared to other countries (e.g., India where the informal economy comprises 84.3%, Brazil 42.3%, and China 34.4%), the informal economy in South Africa is less pervasive and found in particular industries (Williams, 2017).

During South Africa’s third quarter in 2018, the informal sector increased in employment by 188 000 when compared to the previous quarter (StatsSA, 2018d). These gains were mostly seen by industries of trade (+75 000), finance and other business services (+67 000), and construction (+48 000) (StatsSA, 2018d). Employment losses within the informal economy for the same period were largely found within the community and social services (decreased by 7 000), mining (-2 000), and utilities (-1 000) industries.

Essentially, the increase of economic engagement in the informal sector means that fewer South Africans are contributing to tax – a key source of revenue for South Africa.

References:

StatsSA. (2018d). Quarterly Labour Force Survey. Available from: https://www.statssa.gov.za/?p=11882

Williams, C. C. (2017). THE INFORMAL ECONOMY AS A PATH TO EXPANDING OPPORTUNITIES. https://doi.org/10.2139/ssrn.2804172