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Center Publication

South Africa—Public Policy

by René Carapinha

May 2010—Against the background of one of the worst unemployment problems in the world, South Africa’s informal, mostly unregulated, work serves as the means of survival for many. However, limited social welfare protection is leaving these workers—nearly 30% of South Africa’s workforce—vulnerable.

Currently in South Africa:

  • An estimated 29.6% of the South African workforce is active in the informal economy.
  • Workers aged 15-19 and 65 and older are more likely to be working in the informal economy.

Multiple factors have influenced informal work in South Africa:

  • High levels of unemployment, low skill and education levels, and lack of highly skilled laborers primarily amongst previously disadvantaged groups (direct consequences of the discriminatory and oppressive policies of the Apartheid regime).
  • Wage inequalities by race are also severe by international standards (another result of Apartheid).
  • Since the lifting of some apartheid restrictions in 1994, such as those imposed on street trading, informal labor has accelerated.
  • Increased international competition, especially impacting the South African clothing industry, has caused a great deal of decentralization and subcontracting.

A major critique of the post-apartheid labor policy framework is its inability to address the challenges posed by the informal economy. Areas of greatest concern include fair compensation, job security, opportunity for training and development, and industrial relations. Policy efforts have included:

  • South Africa’s Basic Conditions of Employment Act, which, in practice contributes to employment losses and increasing poverty especially among low skilled workers.
  • The Labour Relations Act, which does not promote the right to workplace forums at workplaces with less than 100 employees, effectively excluding 98% of farm workers and more than 60% of firms in wholesale and retail trade.
  • Sector Education and Training Authorities (SETAs) and the National Skills Fund, which seek to provide training opportunities. However, training providers are often reluctant to service those in the informal economy. The reasons include the lack of profitability because workers cannot cover the costs, the low levels of education of workers, their mobility and thus difficulties of accessing workers, the need to develop non-traditional methods and the fact that many trainers are afraid to enter the areas where people need to be trained.

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