Beyond the Formal Economy: Empowering South Africa’s Grassroots Entrepreneurs

Beyond the Stats, a Story of Resilience:

 South Africa’s unemployment rate is often headline news — sitting at 32.9% as of Q1 2025, and a staggering 43.1% when discouraged work-seekers are included. But beneath these sobering figures lies a quieter truth: millions of South Africans are already working. They’re not showing up in official stats. Why? Because they’re building and sustaining the informal economy.

From spaza shop owners in Limpopo to coffee vendors in Gauteng, these self-made entrepreneurs are creating livelihoods where formal jobs don’t exist. It’s time we recognized them not as a gap in the system, but as key drivers of inclusive growth.

South Africa’s Hidden Economic Engine

The informal sector isn’t fringe. It’s foundational.

According to Statistics South Africa, 19.5% of all employed people in 2024 worked in the informal sector — that’s nearly 3 million people. The number of informal micro-businesses has grown to 1.9 million, up from 1.5 million a decade ago.

And the real impact may be even bigger. While official GDP contributions from informal business hover around 6%, broader global studies suggest South Africa’s informal economy could be generating as much as 20–25% of national output — tens of billions of rand moving through local economies every year.

This is not just survivalism. It’s real business. And it’s changing lives.

Who Are These Entrepreneurs?

The informal economy is incredibly diverse — spanning industries, demographics, and locations.

• Demographics: Roughly 89% of informal business owners are Black South Africans, and the sector is seeing a rise in older participants aged 35–64.

• Women-led businesses: For many women, informal trade is not just a choice — it’s a necessity. In 2023, 58.9% of female traders said unemployment was the reason they started their business.

• Where the work happens: Gauteng (28.9%), KwaZulu-Natal (16.8%), and Limpopo (15.8%) lead the country in informal economic activity.

• Beyond just trading: While retail still dominates, the sector is expanding into services, construction, transport, and digital micro-enterprises.

A chart indicating the Informal GDP split by province:

A particularly revealing stat: 28% of informal businesses operate from the owner’s home, showing how blurred the lines are between work and daily life in this sector.

The Barriers They Face

Despite their scale and significance, informal entrepreneurs face major challenges that limit their growth and access to opportunity.

1. The High Cost of Training

Formal training can be prohibitively expensive. Government-supported programs estimate R53,213 per person for a short skills course — more than some traders make in a year. Even “free” training comes with hidden costs: transport, materials, and most critically, the income lost by taking time off.

2. No Time to Learn

For informal traders, time is money. A single day away from a stall can mean no food on the table. Multi-day training programs, no matter how valuable, are often impossible to attend without putting the business — and household — at risk.

3. The Digital Divide

In an era of e-commerce, mobile banking, and online learning, many informal traders are being left behind. Internet access in townships is patchy, and digital literacy is a major barrier — especially for older entrepreneurs unfamiliar with smartphones or online platforms. A Cape Town study even flagged “digital incompetency” as a critical growth blocker.

4. Lack of Accreditation

More than half of informal business owners haven’t completed matric. Most short courses they can afford don’t offer formal certification, which means their skills aren’t recognized when applying for funding, tenders, or formal sector jobs. Recognition of prior learning (RPL) exists, but uptake remains low.

A Success Story: From Container Coffee to National Brand

A compelling example of what’s possible when informal business is nurtured is Platō Coffee.

Founded in a shipping container in Centurion just a few years ago, this small coffee stand has grown into a 58-outlet franchise, with 350+ employees across South Africa. The founders reinvested profits, scaled their model, and proved that a township side-hustle can become a formal job-creating powerhouse.

Their journey highlights a crucial truth: informality isn’t a dead end. With the right support, it’s a launchpad.

W&RSETA: A True Champion of the Informal Sector

Supporting informal entrepreneurs requires more than good intentions. It demands tailored training, practical support, and recognition of the unique constraints these businesses face.

Enter the Wholesale and Retail Sector Education and Training Authority (W&RSETA) — a public institution that’s become a national leader in this space.

What They’re Doing Right:
Since 2017, W&RSETA has trained thousands of informal traders through its Informal Traders and Micro-Enterprises Development (ITAMED) programme.

What sets this initiative apart is its accessibility — training is delivered directly within communities, where people live and work. These one-day workshops are designed with the realities of informal traders in mind, focusing on practical, essential skills like stock management, customer service, marketing, and basic budgeting.

W&RSETA’s approach is effective because it respects how informal businesses operate. It’s responsive, inclusive, and built around real-life constraints. This is what impactful public-private development looks like — and we salute them for it.

What Needs to Happen Next

The informal sector doesn’t need to be fixed. It needs to be recognized, supported, and empowered. Here’s how:

1. Rethink Learning Models

Night classes, mobile learning via WhatsApp, various forms of e-learning, and recognition of on-the-job experience can bring skills training to the sector at scale—without forcing traders to choose between income and education.

2. Invest in Infrastructure

Digital access is no longer optional. Affordable data, reliable Wi-Fi, and community tech hubs can open doors to modern business practices.

3. Rebrand the Narrative

The informal economy isn’t the “wild west.” It’s a hub of innovation, job creation, and micro-capitalism at its finest. Stories like Platō Coffee prove that today’s hawker can be tomorrow’s CEO.

Fueling the Future, One Hustle at a Time

At FUEL, we believe in telling Africa’s stories of growth — and few stories are more powerful than the one playing out every day in South Africa’s informal economy. These are the traders, vendors, builders, and dreamers who are quietly holding up our communities, one transaction at a time.

They are not a policy problem. They are a development opportunity.

So to the millions of informal entrepreneurs across South Africa — and to those championing their progress, like W&RSETA — we salute you.

You’re not waiting for change. You’re creating it.