The formalisation of informal businesses in the Durban district of South Africa

Abstract

The current research study investigates the formalisation of informal businesses in the Durban central district of the Kwa Zulu Natal province in South Africa. The Informal sector defined by The Women in Informal Employment Globalizing and Organizing (WIEGO) (2014:05) as small unregistered businesses operating as street vendors and home-based businesses, encounters numerous challenges in operating as well as when transitioning to the formal economy. Therefore, the purpose of this study is to investigate the challenges faced by informal traders in their formalisation process. This study sought to identify and recommend policies to address these obstacles encountered by informal firms when converting from the informal to the formal economy. The population under study consisted of informal traders located in Durban, in the central district. To address the ethics issues, participants identified were protected and the information obtained from the interviews was also treated with confidentiality. The qualitative paradigm as a technique was applied in this study, utilising structured interviews to obtain data. The snowball sampling method assisted the researcher to obtain data. This form of sampling works on a referral basis as data rich sources will recommend other participants to be interviewed. Data was collected till data saturation was reached at 8 participants. Findings from the study suggest that the decision to formalise is motivated by the desire of traders to access financial support for business expansion, as well as to access proper infrastructure. The findings also revealed that the pursuit of a transition to the formal sector is hindered by some obstacles, such as complicated government regulations as well as the financial costs incurred to register a business. Based on the findings, the study recommends that the government prioritizes the provision of proper infrastructure, which includes proper sheltered trading and ablution facilities. The study also recommends that some critical points be considered in order to make the formalisation process less burdensome and that business formalisation education be prioritized by the relevant government institutions.