Eastern Cape shows largest Informal sector employment figures

Statistics South Africa defines the Informal Sector (excluding agriculture) as having two components:
1. Employees working in establishments that employ less than five employees, who do not deduct income tax from their salaries/wages; and
2.  Employers, own-account workers and persons helping unpaid in their household business who are not registered for either income tax or value-added tax.

A provincial breakdown of informal and formal sector employment for Quarter 4: 2010, Quarter 3: 2011 and Quarter 4: 2011 as well as quarter-to-quarter and year-on-year changes are illustrated in the table and text below.

Formal and informal sector employment by province, quarter 4: 2010- quarter 4: 2011  

Source: Stats SA: Quarterly Labour Force Survey, Quarter 4, 2011

Although there were many changes in employment between the quarters, the most significant changes where year-on-year; i.e. between quarter 4 of 2010 and quarter 4 of 2011. As seen with national figures, formal sector employment increased by 4.9% between 2010 and 2011 while informal sector employment shrunk by 4.1% during the same period.

In 2010 Gauteng had the largest formal and informal sector employment with over 3 million and over 540 000 jobs respectively.  While in 2011 Gauteng still had the largest number of formal sector jobs with 3.2 million, its informal sector shrunk by 10.1% from the previous year. 

KwaZulu-Natal had the largest informal sector in 2011 with 509 000 jobs, it was also the province with the highest increase in the sector with 14.9%, while Limpopo was the province with the highest increase in formal sector employment with 15.5%. On the other hand North West had the highest formal sector shrinkage with 7.2%.

The Eastern Cape experienced the highest shrinkage in the informal sector with a decrease of 16.1% in jobs; on the contrary, as mentioned above, KwaZulu-Natal experienced the highest growth in the informal sector with a 14.9% increase.

Seemingly, there is a relationship between formal and informal sector employment, however it is not a very dynamic one. For example, two provinces (KwaZulu-Natal and Mpumalanga) had increases in both sectors year-on-year. On the other hand, two provinces (Free State and North West) had shrinkages.

However, it seems the trend between 2010 and 2011 was that the informal sector shrunk (in five provinces) while the formal sector grew in four provinces, this was also the case nationally. This more ‘dominant’ trend could suggest that between 2010 and 2011, more workers and small businesses moved from the informal to the formal economy.  However, these figures also show that the informal sector remains a crucial part of the South African economy, generating up to one third of jobs in some provinces, and therefore also an important focus area for local government policies and programmes.

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By Nachi Majoe, LED Network Facilitator, nachi@led.co.za