The Informal Sector and Economic Growth of South Africa and Nigeria: A Comparative Systematic Review

Abstract

The informal sector is an integral part of several sub-Saharan African (SSA) countries and plays a key role in the economic growth of these countries. This article used a comparative systematic review to explore the factors that act as drivers to informality in South Africa (SA) and Nigeria, the challenges that impede the growth dynamics of the informal sector, the dominant subsectors, and policy initiatives targeting informal sector providers. A systematic search of Google Scholar, Scopus, ResearchGate was performed together with secondary data collated from grey literature. Using Boolean string search protocols facilitated the elucidation of research questions (RQs) raised in this study. An inclusion and exclusion criteria became necessary for rigour, comprehensiveness and limitation of publication bias. The data collated from thirty-one (31) primary studies (17 for SA and 14 for Nigeria) revealed that unemployment, income disparity among citizens, excessive tax burdens, excessive bureaucratic hurdles from government, inflationary tendencies, poor corruption control, GDP per capita, and lack of social protection survival tendencies all act as drivers to the informal sector in SA and Nigeria. Several challenges are given for both economies and policy incentives that might help sustain and improve the informal sector in these two countries.

An assessment of budgeting and budgetary controls among small and medium-sized enterprises: evidence from a developing economy

“…While South Africa is Africa's largest economy, some contextual peculiarities emphasise its adoption in this study. First, its business environment is mostly informal (Etim and Daramola, 2020), with implications for the perception of budgeting and budgetary control among entrepreneurs. Second, the country has multiple cultures, and its economic agents believe in deep-rooted local traditions that conflict with Western ideologies, e.g., the Ubuntu notion is inconsistent with the West's shareholder wealth maximisation idea.…”

Urban Informal Food Traders: A Rapid Qualitative Study of COVID-19 Lockdown Measures in South Africa

“…Decision makers often marginalize the informal food system by failing to consider it as part of a job-creating market and disregarding its contribution to local food security [24]. Moreover, informal traders are not recognized or protected under labour legislation and social protection policies [25]. The informal sector is associated with socio-economic vulnerability [26] and occupational risk hazards [27], due to inadequate working conditions, such as limited access to water, sanitation and hygiene, as well as low and inconsistent daily incomes.…”

“…During initial 'hard' lockdown periods, informal food traders were not regarded as 'essential service providers' and therefore not allowed to operate [14]. This meant that large numbers of vulnerable informal traders suddenly became economically inactive [25]. Later, when permission to trade was granted for informal food traders [45], foot traffic at vending sites significantly reduced due to mobility restrictions, thereby affecting informal businesses [39].…”

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“…In the specific case of Nigeria, the International Monetary Fund (see Medina et al 2017) indicates that the Nigerian informal economy grew at the rate of 8.5% between 2015 and 2017 and accounted for 65% of GDP. This figure had not changed much prior to the onset of the global pandemic in 2020 (Etim & Daramola, 2020). Therefore, the informal sector in Nigeria, like many other African countries, presents a significant sector that has helped to absorb unemployment in the labor market -albeit still a marginalized segment of the economy.…”