South Africa’s G20 Presidency in 2025 presents a significant opportunity to set up a national dialogue amongst key role players in the informal sector to unpack best practices in supporting informal MSMEs and begin to chart a concrete and implementable informal sector support programme and kick-start a formal coordination mechanism for the informal MSME sector in South Africa.
The South Africa National Development Plan (NDP) identifies the MSME sector as a key contributor towards achieving South Africa’s vision 2030, to eliminate poverty and reduce inequality. The NDP envisages that the MSME sector will by 2030 contribute 60-80% of South Africa's gross domestic product (GDP) and unlock an estimated 90% of the 11 million expected new jobs. While the development of the sector has been addressed in several policy initiatives since 1994, most of these initiatives assume formality resulting in sub-optimal outcomes in the informal sector which contributes significantly to both GDP (estimated at 18%) and employment (estimated at was 5,3 million people on a full-time and part-time basis).
Among the factors supporting the substantial size of the informal sector include the near-stagnant economic growth (estimated at 2,04% annually as of 2021) resulting in a lack of employment opportunities and regular job-shedding by corporates and formal SMMEs. The informal sector provides services and goods beyond the reach of the formal sector or government services. This is particularly evident in communities, or part of communities, where such services and goods are needed but are not readily available. The sector, therefore, plays a bridging role in the South African economy, and this is a permanent feature of the national economy.
It is considering these that in 2023, FMT in partnership with the World Bank (WB), conducted research to understand the South African informal MSME sector (including the extent of awareness and use of financial and other support services), and assess the global informal MSME sector frameworks and formalisation pathways with the aim to develop a set of recommendations to inform future government policy on the informal MSME sector in South Africa thereby improving the sectors sustainability and contribution to the economy.
The recommendations emanating from the research report are spread across 5 pillars; _Pillar One-Policy approach; Pillar Two-Identification, registration and onboarding; Pillar Three-Access to finance; Pillar Four-Business support and Pillar Five-Enabling taxation framework_ and 13 priorities which are aimed to increase the efficiency and sustainability of the sector while creating simple pathways to formalisation for those minority segments that find it useful.
This session aims to present key findings from the FinMark Trust report and obtain re-actions from a global audience and learnings and to start a dialogue that will have continuity and an action plan.
