The role of the informal business sector in local economic development with reference to Buffalo City Metropolitan Municipality

Abstract

This study investigated the role of the informal business sector in local economic development with reference to Buffalo City Metropolitan Municipality (BCMM) as one of the possible solutions to deal with socio-economic challenges in the region. This study described the state of the informal business sector, the contributions thereof in local economic development, and the level of responsiveness from local authorities in Buffalo City Metropolitan Municipality. A survey questionnaire was administered to informal business actors in BCMM and semi-structured interviews were conducted with BCMM managers in the Business Development and Local Economic Development Directorates who were purposively selected because of the positions that they hold in the municipality. This study found that the informal business sector is underdeveloped in BCMM, and is imbued with development challenges, namely; support services such as infrastructure (designated municipal trading stalls) and access to financial support and the lack of strategy/policy dedicated to the prioritisation of the needs of the informal business sector. The informal business sector in BCMM is dominated by small and micro businesses. The municipality acknowledges the contributions of the informal business sector in local economic development from a job creation (selfemployment) and poverty alleviation perspective. However, the business environment of the informal business actors requires urgent development and support to stimulate and encourage the gains of this sector and the role that it plays on local economic development.