Recession and the informal sector in South Africa

Abstract

Despite the recent avalanche of writings investigating the informal sector, scant consideration has been accorded to the impact of an economic recession upon the growth and complexion of the informal sector.The object of this paper is to reflect upon the likely consequences of economic recession upon the South African informal sector in light of the extant international literature. Two different sets of processes are identified as impacting upon the growth and composition of the informal sector. The first suggests that the growth of the informal sector is the consequence of the lack of expansion of the formal sector. The second argues that much of the expansion in the informal sector is directly linked to its integration with formal sector enterprises. Under recessionary conditions, it is suggested that the growth of the informal sector may occur as a refuge from destitution but that the complexion of the informal economy will shift and be dominated by activities of a more ‘socially unacceptable’ nature.