Breaking down barriers faced by South Africa’s informal economic sector is one way to tackle the sluggish economy, according to Prof Haroon Bhorat of the School of Economics at the University of Cape Town (UCT).
According to Stats SA’s employment statistics for the first quarter of 2025, full-time employment decreased by 55,000 or 0.6% quarter on quarter from 9,503,000 in December 2024 to 9,448,000 in March 2025. This was due to decreases in the trade, community services, mining and business service industries.
Part-time employment decreased by 19,000 or 1.7% quarter on quarter from 1,150,000 in December 2024 to 1,131,000 in March 2025.
The latest Quarterly Employment Statistics (QES) survey was released this week. The sample size is about 20,000 VAT-registered businesses.
The QES report is an enterprise-based survey conducted by Stats SA, with samples drawn from private nonagricultural businesses such as factories, firms, offices and stores as well as from national, provincial and local government entities.
It differs from the Quarterly Labour Force Survey (QLFS), which is a household survey. Stats SA says these two surveys have their strengths and limitations.
Bhorat says the QES report is a good trend indicator. “It’s a really good barometer for trends in formal employment, but it’s not a barometer of total employment in the economy.”
He says the moderate decline in employment is consistent with the low-growth environment in the country. This is also reflected in the decline in jobs in the retail sector, as it shows consumption is under stress.
“Our problem is that growth rates are just way too low. That then speaks to the structural features of growth.” To improve the formal sector, says Bhorat, infrastructure needs to be fixed.
“It’s rail, roads and ports that are dysfunctional at the moment. It used to be energy; we sort of resolved that, but it’s not completely gone.
“We spend a lot of time thinking about poverty and inequality reduction in the context only of supporting households — grants and social assistance — and not enough in terms of supporting the supply side of the economy, namely firms.
“The employment tax incentive is the only supply-side policy we have that is in place and [that] works,” he says.
“A lot of our extraordinarily high unemployment rate has to do with an informal sector that’s way too small,” says Bhorat. Most other countries have a much larger informal sector.
You need to allow people to get a small, tiny little piece of the economic pie in our cities
— Haroon Bhorat
“You need to allow people to get a small, tiny little piece of the economic pie in our cities. That can be anything from selling oranges to fixing motor cars. The throttling of the informal sector is a big part of the constraints to employment generation,” he says.
Stats SA has been in the spotlight recently, with Capitec Bank CEO Gerrie Fourie arguing that the unemployment figure could be closer to 10% rather than the official 32.9%. Fourie, it was suggested, was likely referring to the QLFS, which was released in May.
“To grow South Africa, we need to understand what is happening there [in the emerging market]. If we really had a 32% unemployment rate, we would have had unrest. If you go to the townships, most people have back rooms to rent out, everyone is doing something. If we are talking job creation, let’s go out and encourage these entrepreneurs,” Fourie said.
Bhorat, who is also the director of the development policy research unit at UCT, says the QLFS is based on about 30,000 households. “If you take a look at any other country, including northern countries, they have a similar sample size to ours for a much larger population.” The US only surveys about 60,000 households out of a population of about 340-million.
“The structure of that survey is clear. It’s very thorough in terms of picking up anybody who may have any form of economic activity.” Bhorat says it is wrong to assume that what happens at a local level translates to a 1:1 relationship at a national level.
To bring down unemployment, he says South Africa needs to break down barriers to the informal economy. A recent survey of informal traders in Cape Town highlights what they need to improve their businesses. This includes lockable storage facilities, shelter, security, water, public toilets and electricity.
Crime is another big issue facing the informal sector. The World Bank noted in 2023 that about 10% of informal businesses are exposed to economic crime annually. Informal sector firms have little to no theft insurance.
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