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Second Best? Trends and Linkages in the Informal Economy in South Africa


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  • Richard Devey
  • Caroline Skinner
  • Imraan Valodia

    (School of Development Studies, University of KwaZulu-Natal)

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    The idea of a ‘second economy’ has become a feature of recent government economic policy. In this paper we focus on one important element of the second economy – the informal economy. We analyse the nature of the informal economy in South Africa, providing some descriptive statistics and analysis to highlight the nature and extent of the informal economy. Given the present prominence of the ‘second economy’ concept, we provide some analysis of the efficacy of current government support measures to the informal economy, concluding that these are few and far between, patchy and incoherent, and largely ineffective. We then examine linkages between employment in the formal and the informal economy arguing that, contrary to the views of the President and the ANC, there are in fact fairly close linkages between the formal economy and the informal economy. Finally, by way of conclusion, we use the evidence provided in the paper to comment on the accuracy and relevance of the ‘second economy’ concept.

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    File Function: First version, 2006
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    Bibliographic Info

    Paper provided by University of Cape Town, Development Policy Research Unit in its series Working Papers with number 06102.

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    Length: 27 pages
    Date of creation: Feb 2006
    Date of revision:
    Publication status: Published in Working Paper Series by the Development Policy Research Unit, February 2006, pages 1-27
    Handle: RePEc:ctw:wpaper:06102

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    Related research

    Keywords: South Africa: 'second economy'; informal economy; formal economy;

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    1. Peattie, Lisa, 1987. "An idea in good currency and how it grew: The informal sector," World Development, Elsevier, vol. 15(7), pages 851-860, July.
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