The aim of this document is to inform debate amongst Councillors, local government officials and civil society organisations on the informal economy. For this purpose, it provides a conceptual framework and identifies lessons from both national and international experiences. The paper highlights and analyses the dynamics of the 'informal economy' (nationally and internationally), and proposes different policy options to enable municipalities to creatively engage with processes of informalisation.
The next section presents a profile of the informal sector in South Africa and highlights key informalisation trends and processes. In presenting this overview, it becomes clear that the informal sector harbours highly ambivalent and even contradictory potentials. In part, and in the interest of formulating appropriate policy interventions, this calls for a much clearer conceptualisation of the informal economy. Section 3 therefore focuses explicitly on defining the 'informal economy' and comments on the processes that are driving informalisation. This is followed by an overview of theoretical and policy perspectives on informalisation trends, processes and dynamics in South Africa in Section 4. A series of key problems that constrain the ability of the informal economy to grow in dynamic, positive ways is identified, accompanied by case studies on how other countries have negotiated and addressed the constraints. Policy recommendations are furnished at the end of each section for consideration by the Department of Constitutional Development. The final section of the paper summarises key policy recommendations for how municipalities can configure their development planning tools and frame local economic development strategies in ways that build on the potentially positive developmental energies of informalisation.