The role of informal sector in poverty alleviation in Mtubatuba, KwaZulu-Natal

Abstract

In the developing world, especially in Africa, informal sector businesses in rural areas, have been found to be the engine driving in poverty alleviation and in creating employment opportunities, economic development and poverty reduction. Although the government of South Africa has embarked on various interventions to address the growing problem of poverty and unemployment rate that is facing the country especially in the rural areas. As a result, many unemployed people and poor households venture into informal sector to escape poverty especially those people who live in rural areas where there are less job opportunities. It is against this background that this study attempts to document the role of the informal business sector in poverty alleviation in rural areas. The following objectives were implemented in order to achieve the intention of the study: to document the profile of informal business traders in Mtubatuba Local Municipality, assessing their knowledge in operating a business and the challenges they face, examine the contribution informal enterprises contribute to rural households in alleviating poverty. A multi-stage sampling technique was adopted to randomly select 180 controlled informal traders. A mixed research method was used on this study where, field observations, key informants and open-ended and closed questionnaires were used to gather the information. Analysis of the data was done with Statistical Package for the Social Sciences. The outcome of the study revealed that informal traders in KwaMsane and Mpukunyoni are from 40-45 years old on average and about 74.5% are female. Most of entrepreneurs came from a background of poverty. The most dominating type of businesses around the study area was tuck-shops. However, the sector is still confronted with various challenges that are obstructing it growth, sustainability and profitability. About 90% of entrepreneurs responded that they are breadwinners in their households meaning that their business income is the only source of income for their families. The study therefore recommends that the state and policy-makers need to recognise and involve entrepreneurs in drafting of policies so that these businesses can grow.