Informal economy in promoting local economic development: the case of Mangaung central business district

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Modirapula, Tshalofelo David
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University of the Free State
The number of people who are unemployed and living in poverty in South Africa has significantly increased, while inequality remains a pressing challenge. These challenges are exacerbated by the inability to create sustainable jobs in the formal economy. In contrast, the informal economy has been a sector where people have opened their businesses, and others have found employment. This study investigates how the informal economy can promote local economic development. In addition, the study aims to assess the approach of the Mangaung Metropolitan Municipality towards the informal economy and how this has impacted on the livelihoods of those making a living in this sector. The researcher employed a qualitative approach to understanding the phenomenon of the informal economy. Data was collected through semi-structured interviews, and the respondents in the study were purposefully selected. The selected sample for the study comprised 23 participants and included municipal and government officials, informal traders operating in the Central Business District of Mangaung, and those in the Batho location. The interviews with all respondents were audio taped, and a thematic analysis strategy was used to identify and organise themes and identify mistakes in the collected data. The study found that although the informal economy can contribute towards sustainable and inclusive LED in Mangaung, the sector's development needs to be supported. In addition, the information economy should be included in integrated development and budgeted for in the LED strategy. Furthermore, the approach of the Mangaung Metro needs to be more balanced and focused on the informal traders operating in the CBD and in the location. As a result, this has negatively impacted on the livelihoods of informal traders and highlighted separate development. The study recommends that the Municipality creates an environment that is conducive for informal businesses and that informal businesses operate as industrial clusters that can help create jobs and reduce poverty and inequality, in line with the goals of LED.
Dissertation (MDS (Development Studies))--University of the Free State, 2023
Informal economy, informal sector, local economic development, poverty, unemployment, livelihoods, inclusive, sustainable