Document: The Informal Economy in Mangaung, Free State

This project was supported under a World Bank-funded study of Pro-Poor Local Economic Development in South Africa. This is a report of the research that was undertaken between from January to February 2005 where a closer look was taken at the informal sector of Mangaung Local Municipality’s economy. The research team comprised of researchers from Khanya- managing rural change now known as the African Institute for Community Driven Development (AICDD) in conjunction with students on LGWSETA Learnerships based at Mangaung Local Municipality LED office.

According to Hartzenburg and Leiman, “the informal economy is defined to encompass all economic activities pursued without the sanction of authorities i.e. those not recorded in the national accounts”. Mangaung Local Municipality sees informal traders as those businesses that are not registered with the Registrar of Business and the South African Revenue Services (SARS).

Mangaung has a population of 645 438. The economy is predominantly driven by services including government, finance, transport and trade. According to the IDP an estimated 48% of men and 52% of women are in the informal employment. In addition many of the services received by local people actually come from the informal sector such as burial societies and traditional healers.

The top priority in Mangaung’s IDP is economic development, a priority derived from planning in all the 43 wards, with a target growth rate of 4.5% and 6000 jobs created. Two key programmes have been defined in the IDP, Economic African Institute for Community-Driven Development Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Growth, and Regeneration of the Central Business Districts (CBDs). The strategies defined to improve economic growth include inward investment, local purchasing, development of target sectors (primarily services and agriculture), SMME development, skills development, and development of the informal economy. A LED Unit has been established but is understaffed.

The case study focussed on the informal sector key role players within Mangaung Local Municipality. A survey was conducted, in the CBDs of Botshabelo, Thaba Nchu and Bloemfontein, interviewing 43 informal sector operators, and some public and private support agencies. Some comparisons are drawn with a survey conducted by the University of South Carolina and UNISA, which surveyed 800 businesses.