An exploration of the differing administrative skills and trading practices of local and foreign micro businesses operating in the informal sector within eThekwini Municipality

Abstract

The informal sector in South Africa plays a significant role in alleviating current high levels of unemployment and it has become an economic alternative not only in eThekwini but in the whole of South Africa. The motivation for the study was thus to understand the informal trading practices employed by local and foreign informal traders and something of their impact on the community life and economy of eThekwini, focusing specifically on the administrative practices of different groups of traders, local and foreign. In reaching this aim a set of related issues were investigated in order to be in a position of fully understanding the current situation. This enabled the making of informed recommendations concerning the administrative, economic and educational support structures that could enabled better trading practices. There was a need to understand the requirements of informal traders, the nature of their business practices, and the regulatory context of this sector. The research involved a case study using a mixed methods approach. Questionnaires and follow-up interviews with both local and foreign traders and with their customers were used as the data collection instruments. The study explored the administrative skills and practices of both foreign and local informal traders trading in eThekwini; the experiences of foreigners as regards their reception by local traders; and the perceptions of end consumers concerning the goods and services offered by both groups. The administrative strengths and weaknesses in this business sector were identified. The findings indicated that there is a potential for the informal business sector to become a major role player in sustaining the livelihoods of many people – however, there are constraints that prevent informal businesses from prospering. These include: administrative weaknesses amongst the traders themselves, and local policies and bylaws which fail to provide sufficient support for trading, along with continued harassment by law enforcement officials, bribery demands, and confiscation of traders’ goods. The findings reveal that the location of any business is very important for maximizing the number of customers available and that re-locations by the authorities are often damaging in this respect. Despite some good experiences, the findings showed overall that traders do not have adequate shelters to prevent their goods from getting damaged, nor adequate security. The perceived greater success of foreigners was found to be a point of division and tension between the two groups. Differences in their business practices appeared to be a central issue at the heart of the divisions and therefore a factor in the persistence of xenophobia in the country. The findings indicated that foreign traders’ administrative practices are learned informally but that, as indicated in the literature, they are generally more effective than those of local traders. Unlike local traders, foreigners collaborate with each other, for instance buying in bulk from a specific foreign wholesaler, and uplifting each other by lending capital to start other businesses, trusting that the loans will be repaid once the new businesses prosper. The study also shows that informal trading has created a number of employment opportunities for local South Africans as well as foreigners, and that foreign traders provide services which are appreciated by their customers. It also reveals that most traders, both foreign and local, do not use formal accounting systems and that the business training currently offered by the municipality is not ideal. Foreign traders tend to learn from practical experience but often seek formal certification in South Africa that can allow them to operate freely within the law. The study therefore recommends that institutions of higher learning, local business owners, and the private sector partner with informal traders to provide intensive relevant training, directly designed for groups offering common services. Local traders should also be prepared to consider foreign practices where these have proved successful. The study also recommends that all stakeholders need to be part of committees drafting /amending Municipal traders’ bylaws, thus including informal traders themselves. A committee that includes informal traders, municipal officials, legal experts, ordinary citizens, and university representatives could be formed to deal decisively with the issues, policies or bylaws affecting both local and foreign informal traders.