[COVER PAGE]

Geography research:
Role of informal sector
on the economic growth
of Tshakhuma

Dummy #2
 RESEARCH PAPER: ROLE OF INFORMAL SECTOR ON ECONOMIC GROWTH

TABLE OF CONTENTS
1. Introduction ................................................................................................................. 3
1.1 HYPOTHESIS ........................................................................................................ 3
1.2 AIMS AND OBJECTIVES ...................................................................................... 3
2. Background of research................................................................................................. 4
2.2 GEOGRAPHICAL LOCATION OF AREA OF STUDY ..................................................... 4
2.2 LITERATURE REVIEW .............................................................................................. 5
3. Data collection ............................................................................................................. 6
3.1 SCOPE ................................................................................................................... 6
3.2 SAMPLING METHOD ............................................................................................... 6
3.3 MAIN SOURCES OF DATA ........................................................................................ 6
3.4 DATA HANDLING .................................................................................................... 7
4. Analysis and synthesis of data ....................................................................................... 8
4.1 PRIMARY DATA ANALYSIS .................................................................................. 8
4.2 DISCUSSION AND SYNTHESIS OF ANALYSIS .................................................. 11
5. Recommendations and solutions ................................................................................ 15

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 RESEARCH PAPER: ROLE OF INFORMAL SECTOR ON ECONOMIC GROWTH

1 INTRODUCTION
1. Introduction
1.1 HYPOTHESIS
The informal sector of Tshakhuma Market Centre is an important aspect for economic
growth of the area. Its presence and activities contribute to the overall growth of the area
as it includes unregistered businesses and informal employment which furthermore
increases the skills development, infrastructure development, quality of public
transportation, living standards and employment opportunities for the people in the area.
This stimulates economic activities.

1.2 AIMS AND OBJECTIVES

1. Find out the role of the informal sector on the primary sector which involves agricultural
practices or in simple terms farming.

2. Discover the role of the informal sector on the secondary sector of the area which involves
infrastructure development.

3. Elaborate on the role of the informal sector on the tertiary sector that involves the skills
development, public transportation, employment and other services rendered.

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2 BACKGROUND OF RESEARCH
2. Background of research
2.2 GEOGRAPHICAL LOCATION OF AREA OF STUDY
The study is conducted in the Limpopo province of south Africa, focused on the Vhembe
district. In order to gain comprehensive and specific data about the influence of informal
sector on economic growth, a geographical location that is well substantiated was chosen.
This study provides a focus on the tshakhuma local area. The Tshakhuma site is adjacent
to one of the largest rural fruit and vegetable markets in the province and allows for a
number of community-focused opportunities to occur.

The market is situated in the Makhado municipality of the Vhembe district

approximately 17 kilometres west of Thohoyandou on the Louis Trichardt road. Its
geographical location by coordinates is 23°03'43.9"S 30°18'21.6"E

The Tshakhuma Fresh Produce Market plays a crucial role in the local economy. It
provides a platform for trading the fresh produce of the local farms including fruits and
vegetables. It is able to function beacause it is found between some of the biggest towns
in the VDM which are Thohoyandou and louis Trichardt.The market offers quality fruits as it
is nearby Levubu farms which constantly supply fresh fruits. Some of the fruit at the market
is directly from the local households

Tshakhuma Fruit Market was established over 20 years ago, and still remains the only 24-
hour fruit market in South Africa. The market hosts around 280 fruit traders

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2.2 LITERATURE REVIEW

The informal sector refers to business activities that are unregistered and which provide
services without a licence (Pillay et al., 2023: pg. 148). Unlike formal enterprises, these
ventures evade taxation and governmental oversight, allowing sellers to keep a greater
portion of their earnings (A.G. Aguilar, E.P. Campuzano, 2009). Constituting approximately
60% of total employment in South Africa, the informal sector thrives due to factors such as
low employment rates, rapid urbanization, and heightened demand for affordable goods and
services (Ndabeni et al., 2013: pg. 16).

Economic development can be defined as an increase in a country’s wealth and standard

of living. For example, improved productivity, higher literacy rates, and better public
education are all consequences of economic development in a country (BYJU'S, 2024). The
economy itself can be subdivided into three sectors namely; the primary sector, secondary
sector and the tertiary sector. The primary sector is concerned with the extraction of raw
materials from the natural environment (Pillay et al., 2023: pg. 149). Examples include
farming and forestry. The secondary sector comprises of activities that process and change
raw materials into useful goods, Also referred to as ‘value added goods’(Pillay et al., 2023:
pg. 149). Lastly, the tertiary sector involves the provision of services to the wider community,
examples include trade and transport (Pillay et al., 2023: pg. 149).

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3 DATA COLLECTION
3. Data collection
3.1 SCOPE
In pursuit of a proper investigation with valid results that can attest for or disapprove the
hypothesis, a sound methodology to obtain various primary and secondary sources of data
that are both qualitative and quantitative was followed. From these collected data an
educated response on the role of the informal sector on the economic growth in the area of
Tshakhuma can be correctly accredited.

3.2 SAMPLING METHOD

Random sampling was chosen to prevent biasing of information. A specific location was
however predetermined as the area of interest: informal business in and around the
Tshakhuma fruit markets.

3.3 MAIN SOURCES OF DATA

The research encapsulated both primary and secondary data. The main primary (first hand
data) that amounted for the most raw data obtained was questionnaires. 10 questionnaires
were handed out randomly to a predetermined population of informal business people in
the area of Tshakhuma. The questionnaire was designed in such a way that both
qualitative and quantitative data that could be used in the judgment of the thesis would be
collected. Annexure A is a copy of the questionnaire handed out.

Another source of primary data that we utilised was raw observations. A visit to the
Tshakhuma Fruit Market was made in which data such as density, functioning and
demographics of the vendors and their markets themselves were made. This was of great
help in generalising the entire sampled population in order to ease our approach to them.

The third source of primary data consists of e-mails sent out to municipal heads (surname
and name). The information from the emails would help us make a qualitative and/or
quantitative description of the role of the informal sector (if there is any) on the economic
growth of Tshakhuma (if there is any).

Secondary data was also made use of in the research. The secondary data was first
tested through a programme that had designed to ensure its validity, relevance and
authenticity. This was done by ensuring that the authors were trusted, accredited and had
no history of felony, and by ensuring that the data collected was at most 10 years old and
thus still some-what relevant today.

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Various sources of secondary data were explored, but the most useful proved to be
University research such as the research done by the Tshwane University of Technology
on the informal sector and challenges of development in south Africa. Online articles were
also considered as well various textbook of relevant grade and curriculum. All secondary
data sources are clearly referenced in the bibliography of the research.

3.4 DATA HANDLING

A systematic approach to collecting, storing and processing data was utilised. In the entire
process, secrecy was emphasized to prevent leaking of information that would otherwise
jeopardise the research. All individual primary data sources were processed separately
into a synopsis that would ensure easy analysis of the data. Secondary data was specific,
in that it was utilised in a specific part of the research (as can be seen through in-text
referencing) and thus no system of storing and processing was necessary.

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4 DATA ANALYSIS AND SYNTHESIS

4. Analysis and synthesis of data
4.1 PRIMARY DATA ANALYSIS
All respondents to the questionnaires were permanent residence of Tshakhuma, 40% of
which are in the informal sector due to unemployment, 30% due to lack of education and
the other 30% due to unspecified reasons. Below is a summary of the gender and age
distribution of the informal business owners:

The graph of number of Percentage of women

and men at Tshakhuma
sellers at Tshakhuma Centre Centre
and their ages
10%

4
Number of sellers

3
2 4
3
1 2
1
0
less than 35-55 55-65 over 65 90%
18 Female
Age range
Male

Figure 1 bar graph of age distribution (left) and pie chart of gender distribution (right).

From the above graphs it is evident that it is mostly females of middle age involved in
informal businesses.

The informal business sector of Tshakhuma has proved to be extensive and very influential
as it offers a vast variety of products and services. The most common goods traded
included fruits (bananas, mangoes, and avocadoes), vegetables (wild spinach and black
jack), peanuts, atchar, cooking equipment (pots and wooden spoons) snacks(sweets,
braaied chicken feet and russians). Services provided included car washes and clothes
thrifting.

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The influential role of this primary sector in employment was also determined. The pie
chart below indicates the share of the number of employees in the informal businesses.

Figure 2 pie chart of no. of employees in each informal business.

The sample was asked to quantify their normal monthly income. The following recordings
were made:

The monthly income of sellers at Tshakhuma Centre

more than 5 000

Montly income (in South Africam Rands)

2 500 - 5 000

1 000 - 2 500

less than 1 000

0 0,5 1 1,5 2 2,5 3 3,5 4 4,5

Number of sellers

Figure 3 bar graph of average monthly income made.

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The sample was asked about the economic ability of their usual target market, the responses
are summarised in the bar graph below:

Based on responses collected from ten participants in this study, it was found that they
believe they have a moderate influence on the youth in their area. They mentioned being
able to provide jobs and food for unemployed youth. However, they also expressed
concerns about some young people remaining unemployed and possibly turning to a life of
crime. This shows that the participants have a realistic view of their impact on the
community and recognize the challenges faced by young people in finding stable
employment.

From the responses of the sellers, it was recorded that out of ten sellers, six sellers
employed five or more employees. This figure was obtained from a car wash business in
the Tshakhuma Centre. Car washes require many employees for greater manpower and
effective productivity of the business, thus generating more income. Three sellers
employed 3 to 4 employees. This figure was obtained from sellers who earn a greater
income in the Tshakhuma Fruit Market and have a relatively big business that requires
more manpower. Only one seller was able to employ 1 to 2 employees because they do
not earn sufficient income to pay many employees and their business is small.

All respondents confirmed the growth in various indicators of economic development.

Namely they attested for the improvement in infrastructure, service delivery, growth of
businesses and services and increased employment opportunities. This is explained fully
in the discussion of results below.

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4.2 DISCUSSION AND SYNTHESIS OF ANALYSIS

INFLUENCE ON PRIMARY ECONOMIC ACTIVITIES
When looking at the aspect of farming or agriculture, the likes of farm grown fruits and
vegetables are common at the market place at Tshakhuma Market Centre. Bananas and
Avocados along with wild Spinach and Black Jack are the recent trend of the area
according to the results of the research done. This in turn becomes a positive factor for the
Tshakhuma Yukon farms as production of more Bananas will be essential as they are of
great demand due to many vendors relying on these primary sources of food in order to
make income through selling them. Furthermore the Tshakhuma market centre has had an
immense impact on the primary sector mainly in the agricultural aspect and this has led to
the further economic development of this sector and the area itself.

Despite facing challenges such as variable demand, weather conditions, and competition,
these vendors provide accessible and affordable fresh produce to urban and rural
communities. Additionally, they contribute to local economies and provide employment
opportunities for themselves and sometimes for family members or assistants.

However, Tshakhuma Market Center vendors may also face issues such as lack of access
to formal financial services, infrastructure, or legal protections. Nonetheless, their
resilience and adaptability are notable, as they navigate through various obstacles to
sustain their businesses and meet the needs of their customers, this is according to (Will
Keton, January 2024)

The Tshakhuma Market Center also gives an opportunity for sellers to learn essential skills
and knowledge on organic produce that would be required for formal sectors ( Anthesis
2023) such a the Elim farms. This means that formal agricultural businesses will have
accesses to many skilled workers who will insure maximum yield from the work this further
increases the effectiveness of the primary sector.

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INFLUENCE ON SECONDARY ECONOMIC ACTIVITIES

The Tshakhuma center significantly impacts the secondary sector in different ways. Firstly,
the economy in the sector causes arise in the demand for goods and services and this
creates opportunities for secondary sector businesses such as construction and
manufacturing to supply products needed by the vendors and their customers. Additionally,
the information as a catalyst for local entrepreneurship, fostering the growth of small scale
manufacturing enterprises that produce goods for sale within the information economy
such as achaar made by the vendors. Furthermore, the informal sectors contribution to job
creation and income generation enhances purchasing power within the community and
this boosts the demand for secondary sector products and services. Specifically, the
establishment of the Tshakhuma Mall not only improved infrastructure but also provided
opportunities for secondary sector businesses to thrive by supply and goods and services
to meet the needs of the mall visitors, including both formal and informal sector
consumers. Overall, the Tshakhuma Center plays a crucial role in driving economic activity
in the secondary sector by stimulating demand, fostering entrepreneurship and creating
linkages with formal businesses contributing to broader economic development in the
area.

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INFLUENCE ON TERTIARY ECONOMIC ACTIVITIES

Since 1994 the informal trading sector has been growing in South Africa. Though defined
as informal, and remaining largely unregulated, the sector has played, and continues to
play, a significant role in creating jobs and enhancing the spirit of entrepreneurship in our
country, besides helping many citizens to be financially self-reliant. This part of study
focuses on the impact informal traders in the Tshakuma market in Limpopo Province,
South Africa, the main objective being to explore the nature and extent of the contribution
of these traders to the development of the tertiary economy.

Contribution of informal sector to tourism development in the area

The main aim of this research was to explore and determine the extent of the contribution
of informal traders to tourism development in the VDM area, with a specific focus on the
Tshakuma market. The findings revealed informal trading to be playing an important role in
tourism development in the area. It was found that tourism in the VDM to have expanded
significantly in recent years particularly in the vicinity of the market. The findings indicate
both the potential both for the informal trading market to be a pulling factor for the Kruger
National Park and other tourist attractions in the area. informal traders has the potential to
directly and/or indirectly attract tourists of various kinds and with different interests to an
area and in this way to assist tourism development. According to Du Preez (2008),
tourism has developed over time and has been influenced by changes due to political,
economic, socio-cultural, technological, legal, and environmental factors.
The United Nations World Tourism Organisation (UNWTO, 2009) has come up with a
working definition of tourism as “simply persons staying out of their normal area of stay for
not more than one consecutive year for leisure, business and other reasons for travelling.

Historically travel for education and learning in addition to travel as a practice

confirming the status and power of the aristocratic and/or wealthy class has, since the 18th
century, been an important motive for travelling/touring, and many tourism activities were
in their initial phase responses to tourists’ curiosity (Abubakar, Shneikat & Oday, 2014).
(Sharma, 2015) argues that in recent times educational tourism has come to involve
tourists traveling to a destination as a group – often with an informed guide - with the
primary purpose of engaging in a learning experience directly related to the destination.
The VDM can be said to be one of the areas to which tourists travel to study the unique
nature and history of this district and its peoples. This tourism mostly takes place during
festive seasons when most workers are on vacation leave and during school recess at a
time when families can arrange trips together.

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The results clearly indicate a positive contribution of informal traders towards tourism
development in the area which was the setting of the case study. part of the attraction of
the tourism destination under study was the opportunity to buy from- and interact with -
informal traders. The informal traders indicated that they saw themselves as playing an
important role in tourism development, especially in the attraction of tourists to a tourism
destination such as the VDM and its surroundings. All 10 informal trader respondents
indicated this perception regarding their role as a sector through the services and products
that they sell to tourists. They saw themselves as enhancing the experience and
enjoyment of the destination for tourists.

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5 RECOMMENDATIONS AND SOLUTIONS

5. Recommendations and solutions
To address the crucial role of the informal sector in local economic development, a varied
approach is essential (Smith et al., 2023). Firstly, advocating for policies that streamline
the formalization process and provide easier access to financial services can legitimize
informal businesses and integrate them into formal markets (Jones, 2021). Also, investing
in targeted skill development programs tailored to the needs of informal sector workers can
enhance their productivity and innovation capacities (Brown & Garcia, 2022). Moreover,
ensuring equitable access to resources such as land and technology, coupled with
implementing social protection measures like healthcare coverage and pension schemes,
can mitigate vulnerabilities associated with informal employment (Johnson, 2020).
Collaborative efforts among informal sectors, formal businesses, and government
agencies can foster knowledge sharing and collective action towards sustainable
development (Robinson & Nguyen, 2019). By implementing these recommendations,
stakeholders can unlock the full potential of the informal sector, contributing significantly to
local economic growth, poverty alleviation, and inclusive development (Brown et al., 2018).

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