The informal sector as a source of household income: The case of Alice town in the Eastern Cape Province of South Africa

Abstract

The role of entrepreneurship in economic development has been extensively studied in the richer Western (i.e. first world) countries, but it could be argued that entrepreneurship is even more vital in developing countries. The informal sector in developing countries not only makes a significant contribution towards gross domestic product, but is a major potential source of entrepreneurship, hence a source of income too especially for the less educated and less skilled. This study explores the impact of the informal sector in the lives of the people of Alice town and attempts to suggest ways of making this sector an even better source of income for them. Through the study, the attempt is to prove that the promotion of informal sector activities or at least the elimination of regulations and stifling restrictions could open up a source of income which the poor urban households such as those in the town of Alice can use to escape poverty. The paper further highlights all the different types of challenges faced by the traders within this sector and ends by making a number of possible policies that could be used to overcome these challenges and make the sector an important source of livelihood. Key words: Informal sector, income generation, poor urban households, economic development, employment creation.