Benefits and limitations of the informal economy in promoting sustainable and inclusive local economic development: A Stellenbosch case study

Thesis (MPA)--Stellenbosch University, 2016.ENGLISH SUMMARY: Poverty, inequality and unemployment are major challenges facing South Africa. The government is struggling to create jobs in the formal economy, as economic growth rates are low and falling. The informal economy, on the other hand, provides livelihoods to thousands of people, but it is poorly understood and therefore poorly supported. Within the context of the developing world, promoting and supporting the informal economy is imperative. This study therefore sets out to: (i) investigate the benefits and limitations of the informal economy in promoting sustainable and inclusive local economic development; (ii) assess Stellenbosch Municipality’s approach to the informal economy and the impact this approach has on livelihoods and local economic development and; (iii) review a number of comparative cases to find best practices. The study is informed by both a literature review and a case study methodology. The case study methodology includes document and newspaper analysis and interviews whilst a review of comparative case studies is used to draw lessons from other municipalities. The study found that despite several ways in which the informal economy could contribute to sustainable and inclusive local economic development, it is generally disregarded or undervalued in such discussions. Furthermore, Stellenbosch Municipality’s approach to the informal economy has had a negative impact on the participants’ livelihoods and local economic development through its top-down approach and the exclusion of the informal sector in the LED process. However, Stellenbosch Municipality is now looking at implementing ways to engage and support the sector. The findings suggest that the local economic process of Stellenbosch has the potential to create a vibrant informal economy to meet all local requirements for reducing poverty, inequality and unemployment in a way that also restores the environment.AFRIKAANS OPSOMMING: Armoede, ongelykheid en werkloosheid is groot uitdagings in Suid-Afrika. Die regering sukkel om werk te skep in die formele ekonomie aangesien ekonomiese groei laag is en daal. Die informele ekonomie, aan die anderkant, verskaf ‘n lewensbestaan aan duisende mense, maar dit word nie voldoende verstaan en gevolglik nie voldoende ondersteun nie. Binne die konteks van die ontwikkelende wereld is ondersteuning van die informele ekonomie 'n noodsaaklikheid. Dus stel hierdie studie ten doel om i) die voordele en beperkings van die informele ekonomie te ondersoek betreffende die bevordering van volhoubare en inklusiewe plaaslike ekonomiese ontwikkeling; ii) Stellenbosch munisipaliteit se benadering tot die informele ekonomie en die impak daarvan op die lewensbestaan en plaaslike ekonomiese ontwikkeling te bepaal; en iii) 'n paar vergelykende gevalle van goeie praktyke te bekyk. Die studie is ingelig deur beide ‘n literatuur oorsig en ‘n gevallestudie metodologie en 'n gevalle studie metodologie. Die gevallestudie metodologie sluit dokument en koerantanalise en onderhoude in terwyl 'n oorsig van vergelykende gevalle studies gebruik is om lesse te leer vanuit ander munisipaliteite. Die studie het bevind dat die informele ekonomie oor die algemeen verontagsaam en onderskat word ten spyte van verskeie maniere waarop dit kan bydra tot volhoubare en inklusiewe plaaslike ekonomiese ontwikkeling. Verder het Stellenbosch munisipaliteit se benading tot die inforrmele ekonomie ‘n negatiewe impak gehad op die deelnemers se lewensbestaan en plaaslike ekonomiese ontwikkeling as gevolg van hul bo-af benadering en die uitsluiting van die sektor uit die Local Economic Development (LED) prosesse. Die Stellenbosch munisipaliteit kyk nou egter na die toepassing van maniere om die sektor te betrek en te ondersteun. Die bevindings doen aan die hand dat Stellenbosch plaaslike ekonomiese proses die potensiaal het om 'n dinamiese informele ekonomie te skep wat voldoen aan alle plaaslike vereistes om armoede, ongelykheid en werkloosheid te verlig op 'n wyse wat die omgewing sal herstel