Western Cape Department of Economic Development and Tourism

Western Cape Department of Economic Development and Tourism Research Study to Critically Examine the City of Cape Town’s By-laws in Relation to the Informal Sector Shaneel Bachoo Senior Researcher & Consultant 20 March 2013

Presentation Outline Terms of Reference Introduction Methodology Presentation of the Findings Conclusions Recommendations

Terms of Reference The following deliverables were requested from the service provider (Mthente): Undertake desktop research on the informal sector; Provide international best practice case studies; Interviews with key stakeholders and a focus group discussion with traders; Research report that details all regulatory constraints; Deliver a draft report for approval by DEDAT; Presentation to DEDAT and key stakeholders.

Introduction & Rationale Economists in South Africa are mindful of the key role that the informal sector plays in the country’s overall economic development. The City of Cape Town is committed to supporting informal trade and to eradicating red tape issues that informal traders face. In light of this, the Western Cape Government Department of Economic Development and Tourism (DEDAT) commissioned Mthente Research and Consulting Services (Pty) Ltd to undertake a study that examines the by-laws that govern informal trade, with the aim of determining whether or not they promote the economic development of the city’s informal trade sector. Two by-laws in particular are reviewed, and these are: (1) the Informal Trading By-Law of 2009 and (2) the By-Law Relating to Streets, Public Places and the Prevention of Noise Nuisances of 2007.

Methodology In accordance with the key deliverables and the terms of reference, the research methodology comprised of three distinct components: A desktop phase.This includes four international case studies (Botswana, Zambia, United States of America, Australia). Interviews with key stakeholders.Four key stakeholders (City of Cape Town officials) were identified and interviewed. A focus group discussion with informal traders.Ten traders formed part of a focus group discussion. Refer to Chapter 2 in the full report for more on the Methodology

Scope and limitations Critique of the City of Cape Town’s Informal Trading By-Law provided. Very little information on the By-Law Relating to Streets, Public Places and the Prevention of Noise Nuisances of 2007. With the focus on the economic development of informal traders, the lack of information on the By-Law Relating to Streets, Public Places and the Prevention of Noise Nuisances of 2007 did not impact significantly on the study. Finally, because the Informal Trading Policy and By-Law are so closely linked, many of the recommendations relate more closely to the policy than to the by-law.

Structure of the Report Chapter 1 introduces the study Chapter 2 outlines the methodology used for the study Chapter 3 deals with the legislative framework around informal trade. Chapter 4 deals with the international case studies. Chapter 5 presents the challenges faced in regulating informal trade and a critique of the by-laws. Chapter 6 deals with the conclusions. Chapter 7 outlines the recommendations. Refer to the full report for more on all these chapters

Lessons from case studies The following are not recommendations per se, but are rather learnings that the City may or may not want to use based on the case study analysis: Countries like Botswana and Zambia, which do not have a comprehensive informal trading by-law, rely too heavily on other forms of legislation to regulate informal trade, and this makes regulation complicated. Australia subsidises signage and focuses a lot on creating uniformity. This contributes to beautifying trading areas. New York City allows for the informal trade of certain items to be done without a permit. Some countries have more stringent permit application processes than others. Zambian regulation allows for flexibility in permit fees, which could benefit poorer communities. Public-private partnerships (i.e. between the state and private sector), which could support or provide opportunities for informal traders are encouraged in Zambia.

Informal trading By-Law The types of informal trading permitted by law (Section 3). Adopting of trading plans and public participation in this respect (Sections 5 and 6). Details around permits fees(Section 8). Transfer of permits (Section 9) Obligations of owners of non-City property which has been demarcated as an informal trading area (Section 10). Guidelines and policies (Section 15) Law enforcement (Section 18).

Informal trading Policy “It defines an integrated and holistic approach for all departments within the City of Cape Town; It clarifies the Council’s policy to all relevant stakeholders; It forms the basis for the By-Law that will regulate Informal Trading in the City; It provides a basis for resource allocation decisions; It establishes the basis for a monitoring and evaluation process, with clearly defined key objectives.” The policy clearly defines the City’s supportive stance with regard to informal trade in the City.

Informal Trade - Vital Role Informal trade plays a vital role in the economy. All interviewees and participants acknowledge the vital role that informal trade plays in the City’s economic development. “The informal trade sector contributes something like R40 million to the economy and that is a significant contribution, but the public does not acknowledge that contribution, it’s hidden.” Manager, Business Areas Management

By-Law promotes economic development Stakeholders believe that the Informal Trading By-Law supports the economic growth of informal traders, but the traders themselves disagree. While the stakeholders believed that the Informal Trading By-Law promotes the economic development of informal traders, the traders themselves were not of the same opinion. Informal traders felt that the by-law is more of a controlling document, which does not tangibly benefit them economically. “It is like a dictatorship. They decide where you should and should not trade.” Informal trader

Policy needs to be updated The Informal Trading Policy needs to be updated. The Informal Trading Policy needs to be updated, based on the testimony of a key stakeholder, who indicated that some of the information around roles and responsibilities contained in section 4 of the policy is outdated. Also, the policy fails to stipulate the precise mechanics through which capacity building will be addressed by the City. Moreover, evidence from the case studies suggest that the notion of subsidised benefits for traders (e.g. signage, storage areas, shelter, etc.) should be considered when drafting an updated Informal Trading Policy.

Communication & capacity building Informal traders want better communication between themselves and the City. Traders feel that the lines of communication between the City and themselves are not open enough (Section 5). Media reports during the 2010 FIFA World Cup period provide partial support for this. “They [the City] don’t communicate with you when there is an event. It’s like you must just pack up and go... Like they inform you at ten to ten for ten [They tell you at 9:50 that you need to be out at 10:00].” Informal trader The capacity building of informal traders is an area that requires attention. Moving traders along the continuum to more formal trade is identified as a need. “There is a business support department. They have access to partners like Seda [Small Enterprise Development Agency] who they refer people to, but very few [people] use it... It does not reach out to informal traders on the ground. It’s just there if they want to use it and very few use it.” Manager, Business Areas Management

More space for new traders More space for new informal traders is needed. According to stakeholders and traders, space for new informal traders in the City is very limited, and this is a key problem facing City officials (Section 5), a finding that is supported by academic research conducted in the City. “There is just not enough space for new traders. We have a waiting list that stretches back to 2006. This is the biggest challenge in my view.” Area co-ordinator, Business Areas Management

Permit application process The permit application process must be assessed regularly. Findings from the case study analysis demonstrate that permit application processes vary significantly from country to country, and are influenced by regulatory procedures and risk factors. This suggests that permit application processes should also be as dynamic as the regulation and risk factors that influence them.

Infrastructural needs The infrastructural needs of informal traders requires attention. The infrastructural needs of informal traders in certain areas require attention (storage, shelter, electricity, etc.). A recent study in Mitchell’s Plain also suggests that inclement weather conditions often significantly affect informal trade activity. “The City can maybe assist with infrastructure, like a roof and storage areas.” Area co-ordinator, Business Areas Management

Conclusions (1) The By-Law Relating to Streets, Public Places and the Prevention of Noise Nuisances of 2007 is not seen as a regulatory document that stifles the economic growth of informal traders. Evidence for whether or not it promotes the economic growth of informal traders is inadequate. Informal traders disagree with the notion that the Informal Trading By-Law promotes their economic development. Traders feel that the communication channels between the City and themselves are not open enough (Sections 5 and 8.6.5), especially with regard to events and the prohibition of trade during events. Refer to Chapter 6 in the full report for more on the study conclusions

Conclusions (2) There is not enough space for new informal traders to be accommodated for (Section 5). Capacity building needs to be addressed both within the Informal Trading By-Law as well as in the Informal Trading Policy (Preamble of the by-law; Section 15). More attention needs to be given to traders’ individual needs when developing trading plans (Sections 5 and 6). The permit application requirements and process should be reviewed periodically so that it is in keeping with current risks and regulations, without being too bureaucratic (Section 8).

Conclusions (3) The infrastructure needs of informal traders in certain areas require attention (storage, shelter, electricity, etc.) (Section 5; Section 15). Evidence from the case studies suggests that the City of Cape Town’s approach to informal trade regulation through a City by-law is in line with best practice, since it succinctly highlights the “do’s and don’ts” for all parties concerned. The Informal Trading Policy should be updated in terms of the roles and responsibilities outlined in section 4 of the document, as well as based on the recommendations made in this report.

Recommendations (1) Amend the Informal Trading By-Law to allow for better communication between the City and Informal Traders (Section 5 and 8) A “beefed up” approach to communication is recommended, which could involve the use of leaflets or fliers in addition to the existing communication channels to communicate certain types of important information. For special events (Section 8.6.5) it is recommended that a specific (yet conditional) time frame is attached to such communication around when traders need to vacate the area. Similar to the previous point, a specific, yet conditional, time frame regarding the City’s response to trading plan requests is recommended (see Section 5.5). Alternatively, the City should stipulate that it will communicate regularly with such an individual until a final response is provided. Refer to Chapter 7 in the full report for more on the recommendations

Recommendations (2) The Informal Trading By-Law and Policy need to better address how the issue of capacity building will be addressed (Preamble of the by-law; Section 15) Provision should be made for properly planned and executed skills development within the informal sector, an issue that relates directly to the Informal Trading Policy through section 15 of the Informal Trading By-Law. Moving informal traders along the continuum to more formal trade will also create much needed space for new informal traders, thereby promoting informal trade on the whole within the City. As a practical suggestion: Persons applying for permits could be offered two options: (1) the presently available option (see section 8 of the by-law), or (2) a fixed term option that stipulates that the permit will only be valid for a fixed period, after which the trader must move into a formal enterprise should he wish to continue his business. Refer to Chapter 7 in the full report for more on this recommendation

Recommendations (3) Pay more attention to the specific needs of traders when developing a trading plan (Section 5; Section 15) Section 5 of the by-law, which deals with trading plans, should specify how decisions will be made with regard to the size of bays allocated to traders considering the type of goods they trade in. This will also aid in giving traders a feeling of being involved in the process. Where necessary, amendments to the Informal Trading Policy are recommended in this regard.

Recommendations (4) Explore ways in which trading areas could be enhanced through subsidised benefits (Section 5; Section 15) The Informal trading By-Law could stipulate that uniform signage will be subsidised by the City in certain trading areas. Moreover, with the lack of storage facilities posing a problem for traders in certain market setups, more “lock up and go” facilities are recommended. Finally, inclement weather conditions that negatively impact on informal trade suggests that shelter-like structures are needed in highly affected areas. The details around the implementation of such amendments should be a point for discussion in City management meetings.

Recommendations (5) Revisit the permit application process from time to time to ensure that it addresses current risks without being too bureaucratic (Section 8) The case study analysis demonstrated that risks that motivate stringent application processes are dynamic. Hence the notion of a standardised “one size fits all” application process that can be used from year to year is not desirable. The application process associated with permits should therefore be reviewed periodically.

Recommendations (6) The Informal Trading Policy should be updated in line with the recommendations made in this report (Section 15) Various recommendations made in this report have implications not only for the Informal Trading By-Law, but also for the document upon which the by-law was formed – the Informal Trading Policy. Hence, in considering these recommendations, DEDAT should guide the City on how the Informal Trading Policy should be updated.

Western Cape Department of Economic Development and Tourism