Micro-economic analysis of the informal sector in the Vaal Triangle area

Abstract

During the last decades, concern over the mounting problems of employment opportunities to absorb the ever-increasing surplus labour, decreasing the inequalities in the distribution of income, and the reduction of poverty, has directed attention to small business and the informal sector. In recent decades, academic attention has been focused on the informal sector's activities in the developing economies. Issues surrounding the informal sector have, since the late 1970's, become important research field for South African scholars. Despite the universal prevalence of research activities or academic studies in the informal sector, no general theory exists that explains the behaviour of individuals acting in the informal sector. This study is a micro-economic analysis of the informal sector in the Vaal Area. The research is supported by a detailed literature study and empirical study in order to establish whether perfect competition exists in the informal sector and to determine factors determining the demand for informal sectors' goods and services. The empirical part of the study was conducted through use of a questionnaire by using various field workers. Data obtained, were analysed by means of statistical techniques, and using the SPSS program. Research findings clearly identified constraints that confront different informal sector businesses in this region. The study also indicated that perfect competition is to be found in this sector. The conclusions reached, enabled the researcher to identify areas for future policy interventions towards developing this sector.