Freedom to be enterprising: Job creation in the informal sector

When law-makers make laws they think only about large enterprises and people with formal jobs. They act oblivious of millions of ordinary South Africans, most of whom are poor, black, and dependent on the informal sector. By their excessive laws, they victimise and criminalise able bodied and potentially productive South Africans so that they consume rather than contribute to the country’s wealth. They ignore the reality that in all poor communities, the majority of the people make their livelihood in the informal sector, and every one of them interacts with it on a daily basis.

No one knows how big the informal sector is or even how to define it. It consists of thousands of activities which all have in common that (a) they provide a needed service, (b) if they are successful, they provide jobs and livelihoods for other poor people, and (c) they operate illegally to a greater or lesser extent.

The informal sector makes it possible for many victims of the unemployment crisis to earn an income without resorting to begging or crime. However, most people in it, whether as employers or employees, are there because it is where they want to be. They are ‘entrepreneurs’. Entrepreneurs, who, because of bad laws, are denied the freedom to be enterprising.

Despite political recognition of the existing and potential job and wealth creation role of small business, especially the informal sector, and President Zuma’s declaration that “jobs, jobs, jobs” was to be our top national priority, a tsunami of stifling anti-informal measures have been introduced. The labour laws are the most obvious example of the many laws that make it virtually impossible for micro-enterprises to get off the ground and operate lawfully. Among others are those which govern consumer protection, the granting of credit, giving financial advice, trading and zoning.

If the government is serious about wanting lots of jobs created quickly, if it is serious about what it has been saying since 1994 about relaxing red tape and creating an ‘enabling environment’, it should commission a systematic and critical review of laws and controls affecting small business. It should scrap laws designed with the formal sector in mind, or exempt small business from them.

AUTHOR  Lawrence Mavundla is the President of The National African Federated Chamber of Commerce.This article is an extract from the book Jobs Jobs Jobs published by the FMF and may be published without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Policy Bulletin/ 19 February 2013


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