A recent study by WIEGO gives insight into the challenges facing informal traders in the Global South. Fellow of the Bertha Centre for Social Innovation and Entrepreneurship, Zarina Nteta highlights the key findings and relates it back to Cape Town's context.

Informal trade is a characteristic element of many African cities, yet it still resists easy explanation and classification. Women in Informal Employment Globalising and Organising (WIEGO) – a global network of activists, researchers and policymakers concerned with improving the status of women in the informal economy – have produced a study that explores the various conditions of street vendors in Accra, Ahmedabad, Durban, Lima and Nakuru.

The study – Informal Economy Monitoring Study Sector Report: Street Vendors (PDF) – gives insight into three challenges, namely: infrastructure and planning; government policy and practice; and economic variables. These three challenges form a web of limitations to conducting business as an informal trader and, although common to all the cities studied, have differing weights across the contexts. By understanding these challenges, we can begin to better explore improved infrastructural, policy and sector practices.

An African city

The burial of the "world-class" cities lens has catalysed the growth of the Cape Town Partnership's work under our banner "People make places". We have moved beyond a reductionist view and come to embrace the complexity of cities as social constructs, taking an empathetic view on all the composite systems.

Like many other cities in the Global South, Cape Town is negotiating the tension between regulation and informality. Informal trade is a major contributor to Cape Town's local economy, and the WIEGO study recognises that public space (such as Greenmarket Square and St George's Mall) and street trading (as on Adderley Street), are important to any city's fabric. Informal trade provides an opportunity to absorb unemployment, and for consumers, provides an alternative to formal retail. If we embrace informality in Cape Town, we can begin to appreciate and harness the potential of informal trade.

For further reading on how informal trade fits into the Cape Town Partnership's Central City Development Strategy (PDF), read:

• Rory William's view from the street: The hidden economy
• Regulation vs informality: How do rule-bound cities accommodate diversity?

The three challenges to that realisation:

1. Infrastructure and planning

The study confirms the importance of a fixed place to trade as a priority shared by most traders. Consistency in trading location is economically significant, as returning patronage is a large portion of any trader's clientele. Thus, displacement due to construction of beautification projects in public spaces and urban developments like public transport can cause disruption to business for informal traders.

Further, city services and public amenities need to be in place to support trading conditions. Water, sanitation, waste removal, shelter and storage are important fixtures to have for informal traders, who often occupy public spaces.

In Cape Town, it is important to maximise our public spaces and infrastructure, if not to meet the needs of citizens experiencing public life, then to create more dignified working spaces for informal traders. This can be addressed through the pairing of efficient informal trade management and enabling policy. The study echoes the need for this to be inclusive and participatory, between the public sector and traders.

2. Government policy and practice

A commonly discussed outcome of informal sector regulation is that it provides a framework but often does not allow access to and leverage of that framework by the participants themselves. Additionally, regulation can hamper the dynamism and flexibility that allows certain informal economic activity to exist.

In most cities, licensing and permission to access a legitimate place to trade is seen as onerous. Bureaucratic obstacles flow into issues around abuse of power and harassment. Traders don't feel prioritised as a part of the city's landscape and often find it challenging to negotiate the policy and regulation processes. Often, they are left with no other coping strategy but to absorb the financial costs of this. The crippling cost of bureaucracy can be compounded by macroeconomic variables that can affect trading conditions.

To understand the importance of enabling policy, the general profile of an informal trader is instructive. The study found that informal traders are of working age, the primary breadwinners and involved in informal trade as a core means of income. This broadens the impact of disabling policy, as it affects the livelihoods of families reliant on this income.

So, it is important for policy to reflect the sector and avoid abstract constraints that effectively cause traders to make a loss rather than grow their microenterprise.

3. Economic variables

Trade input costs can impact current stock and profit margins. This is both a start-up and ongoing challenge for informal traders, who often deal with rising prices for goods by increasing their credit facility. These market concerns and commercial risks, which include competition from formal retail, are exacerbated by trading levies.

Traders are expected to pay levies and fees for various administration processes, which are ultimately related to the use of public space and amenities. Nonetheless, if the funds are seen to be serving the sector, most traders agree that the costs are justified.

To meet the demands of trading, traders need to borrow from banks and moneylenders. Challenges in accessing capital was common among traders. The study noted this irony in informal trade, additionally around the exclusion of traders from business law and microenterprise definitions, yet constant interaction with the private sector persists for many traders.

Jodi Allemeier highlighted how informal trade is beginning to be viewed by the City of Cape Town, even in the name change of the Informal Trade Summit to the Microenterprise Summit. These are incremental steps to recognising the unique offering of informal trade in our cities, a recognition that must strike the balance between regulation and emboldening trade.

Where to from here

The intersection of formal and informal is apparent when observing trade in any city. The WIEGO study highlights these commonalities across different city contexts and reinforces the growing complexity of varied economic activity in Global South cities.

This year will see the Cape Town Partnership refocus on the cultural and economic layers of the Central City Business District through our City Walk project. We continue to work closely with the City of Cape Town's Business Area Management team on facilitating informal trade in the CBD. As we further develop our understanding of the city's multiplex economy, we are not only looking at partnering on a CBD that works for the businesses housed in buildings, but also the microenterprises on the street.