The importance of the informal economy in its many facets is well recognized. This large and vibrant part of the economy contributes significantly to long term economic growth, job creation and improved livelihoods security. It includes large numbers of micro-manufacturers, retailers, street traders, micro farmers, contractors, waste recyclers and crafters. The formal economy on its own cannot address joblessness, especially within the current context of slow economic growth and high unemployment which have been severely exacerbated by Covid-19.

The national priority on small and micro enterprise is reflected in the National Development Plan (NDP) and by the establishment of a dedicated National Department of Small Business Development (DSBD). The priority has been heightened by the increased economic pressures resulting from Covid-19: “With the re-opening of the economy, the township and village economies require special focus if government is to achieve the aspirations of the new economy post-COVID-19 which were clearly articulated by President Cyril Ramaphosa” (Khumbudzo Ntshavheni, Minister for Small Business Development, May 2020).

MIEs have shown themselves able to adapt more quickly to changed economic and market conditions than many of their formal counterparts. This makes the informal economy an important long-term driver of economic growth, especially under the challenging current conditions. MIEs have significant job creation potential and support large numbers of livelihoods through offering both permanent and part-time jobs which are critical for the livelihoods of the poorest of the poor.

Government’s current economic recovery strategies prioritise MIEs within the context of supporting locally-produced goods and services, however, there remains limited understanding of the informal economy and how it can best be supported. Without effective informal economy support, overall economic growth, poverty, inequality and joblessness cannot be addressed. The IESP is uniquely positioned to respond and support these strategies and thus make a significant contribution to rebuilding the economy and addressing unemployment.

The first three-year phase of the IESP was co-funded by eThekwini Municipality and the Jobs Fund and achieved or exceeded all its key targets with 217 new jobs created, 53 enterprises supported and 180 people trained in various skills. Learning from phase 1 enabled significant refinement of the IESP’s methods and approaches and these have resulted in a significantly and optimised model for phase 2, which is currently in its final year of implementation.

The IESP met or exceeded all of its key target indicators for the pilot phase in respect of enterprise support, job creation and training. Toolkits and knowledge resources were developed and the City’s broader informal economy programme strengthened. Key achievements in the pilot phase included:

• 217 new permanent jobs created with potential of a further 586 in the pipeline
• 53 enterprises assisted in various ways including skills training,
• business plan optimization and mentorship
• 182 enterprises identified, assessed and screened
• 8 toolkits and 23 case studies developed
• 180 people received various types of training
• Participative Economic Action Planning (PEAPs) mainstreamed
• Delivery capacity and enabling collaborations established.

The refined model being utilised in phase 2 of the IESP has proved successful. Business support services are now offered on the basis of a fixed budget per MIE with the value determined by the number of jobs which can be created as per an agreed business development plan. There is careful up-front assessment and screening of MIEs to ensure that only MIEs which meet IESP eligibility criteria are signed up. Amongst other things MIEs must be viable and have good job creation potential.

Some of notable achievements in phase 2 include:

• Job creation: 502 new permanent jobs have been created within 60 MIEs and a potential for the creation of an additional 284 more jobs with identified MIEs. The eventual job creation target is 750 jobs.
• Improved MIE performance: In addition to jobs created, 79 MIEs have achieved improved business performance and 33 MIEs achieved increased financial performance.
• Training: 159 people trained in 33 training events, mostly on-the-ground in the business.
• Assessments, agreements and business development plans: 206 MIEs assessed and 107 Business Development Plans (BDPs) developed. 90 MIE profiles developed. 107 enterprises have been signed up, of which 96 are currently active and receiving business development support.
• Sectoral collaborations have been established in the agricultural, fast food and clothing sectors, enabling participating MIEs to reach their full potential.
• Micro-grants: Fifty-eight micro-grants have been awarded to 47 MIEs (11 MIEs received two micro grants). A total of R1,359,580 has been dispersed to fund mainly production equipment and working capital for raw materials. This has positively contributed towards the growth of the businesses.
• Covid-19 response: Additional funding was sought from the Jobs Fund to assist MIEs respond to the impact of Covid-19 and was approved. Through this additional funding thirty-four COVID-19 micro-grants with a total value of R752,299 have been awarded to assist enterprises with rent, wages and production equipment, and this has contributed towards saving the businesses from closing down and saved jobs. 82 MIEs have been trained in sector-specific workplace health and safety measures and received PPE, 35 MIEs assisted with business recovery strategies, 315 jobs retained since national lockdown started and 26 part-time jobs created within two MIEs. The overall target is to retain 492 jobs and create 106 part-time jobs.
• IESP capacity: The IESP’s capacity has been significantly strengthened with an internal team of 7 people and a panel of 43 outsourced specialists.
• Toolkits: 8 toolkits have been developed to assist in better managing the programme and to assist MIEs improve their record keeping.
• Stakeholder engagement: A successful multi-stakeholder IESP Webinar learning event was held in December 2020. It focussed on four key themes: 1) Financial and non-financial support, 2) Formal versus informal business and the implications, 3) Enabling partnerships for supporting MIEs and the informal economy, 4) Challenges faced by MIEs in the time of COVID19. Click here for the learning event report. The event was hosted by the Municipal Institute of Learning (MILE). A further learning event is planned for mid-2021. In addition, 5 roundtable discussions have been held to enable cross learning and knowledge exchange reaching 90 IESP stakeholders.
• Independent evaluation: An independent evaluation was conducted in 2019 and the results showed that there was a high level of satisfaction within MIEs supported, the programme was relevant to the needs of MIEs (training, access to micro finance, marketing strategies and branding, assistance with new/ optimized business space, mentorship).

Click here for more PowerPoint summary

Click here for the latest IESP Newsletter

Click here for the IESP brochure

The IESP Ph3 commenced in August 2022 and is co-funded by the Jobs Fund, IDC, and eThekwini Municipality.

The provision of customised and specialised business support services is the core function of the IESP. These services are provided to each enterprise based on the basis of an agreed business development plan tailored to the particular potential and needs of each business. The value of funding provided to each MIE is determined by the number of new jobs which can be created. Services are provided may include:

• Profitability and cash-flow analysis;
• Record and book-keeping;
• Workspace access and optimization (e.g. layout);
• Accessing financefor working capital or capital acquisitions;
• Markets and selling: e.g. identifying and accessing new markets, establishing new business collaborations;
• Human resources management and compliance;
• Product/service and production: e.g. refinement, re-development, differentiation, improved manufacturing methods;
• Logistics: e. bulk ordering direct from wholesalers, shared transport to market;
• Legal and compliance: e.g. income tax, VAT, health safety, etc.;
• Procurement: e. of raw materials or input services;
• Training and skills developmentincluding ‘IsiQalo’ (basic business skills) and on-site sector skills training (e.g. ‘cut make and trim’, machinist training; product design; factory layout.

Click here for the MIE brochure

The IESP makes use of small, strategically allocated micro-grants (typically R25,000 in value) to well-performing MIEs in cases where the grants can help overcome specific barriers and support further job creation. The grants supportive in nature and providing funding is not core focus of the IESP. If MIEs require substantial funding then this has to be obtained from other sources (e.g. from micro-finance lenders or in the form of government grants) and the IESP may assist MIEs in this regard.

To date the IESP has provided 92 micro-grants totalling R2,111,880 to 59 MIEs. The typical value of each micro-grant is R25,000, although in some instances one MIE has received more than one grant. These grants have played a significant role in supporting business development and job creation. 58 of these grants were normal IESP grants and 34 were special Covid-19 grants to support MIE recovery.

The extent and economic impact of Covid-19 was unprecedented. MIEs and the informal economy were hit as hard as the formal economy. Many MIEs faced significantly reduced demand for products and services and had to make rapid business adjustments in order to survive. Many MIEs faced increased production costs as the prices of inputs and overheads increased including the additional costs for the provision of PPE for employees and sanitizers for walk-in customers needed in order to comply with Covid-19 regulations.

PPT accordingly obtained additional funding from the Jobs Fund in June 2020 in order to provide additional support to MIEs in order to save businesses and jobs, refine and adjust business plans (including refocussing business activities into new niches), assist MIES to comply with new regulations, and establish appropriate Covid-19 health and safety measures and PPEs in businesses. This work has included the following:

• Covid19 workplace risk mitigation planning, education and implementation support for 106 MIEs: 86 MIEs trained on the ground at the workplace and received information material including posters and templates for screening registers, support provided in implementing safety measures (e.g. relating to workplace distancing, sanitary practices, infection control, public transport, segmenting workforce, protecting workers who have high Covid19 vulnerability due to age and/or co-disease factors).
• Identification of additional MIEs who require recovery support: 18 additional MIEs at-risk of closure and job shedding have been identified and screened, 11 assessments conducted, 7 signed up and full support provided including covid19 workplace health and safety training micro grants used to buy new production equipment and working capital needed for raw materials.
• Provision of Covid19 safety materials to 106 MIEs (10 masks and two 250ml sanitising sprays per MIE): 86 MIEs have received 10 masks and two sanitiser sprays each during health and safety training.
• Covid19 MIE business recovery (planning, support and implementation) for 75 MIEs: 35 MIEs have been assisted with business recovery planning and implementation. Strategies developed include new product development/refinement, identification of new markets, development of marketing material especially for social media use, advice and assistance to apply for micro grant support.
• Covid19 micro-grants to stimulate and enable businesses to restart or remain operational: 34 of 36 micro-grants have been provided to MIEs, with a total value of R752,299. These micro grants have been used for replenishment of working capital (e.g. payment of salaries, rent, and purchase of stock/materials) and helped MIEs restart their businesses and retain jobs.

A total of 86 MIEs have been reached through covid19 support and 96 MIEs remain in business. The support has led to the retention of 315 jobs and 26 new part-time have been created as a result of opportunities arising from covid19. There is a need for the IESP to continue providing this support for as long as the Covid19 pandemic persists (subject to available funding).

An independent impact evaluation (mid-term) was conducted in 2019 and the following findings were made:

• Performance - In all respects the IESP was found to have performed well in terms of achieving its objectives and fulfilling its design parameters.
• High levels of satisfaction - Overall high level of MIE satisfaction with IESP support provided.
• Relevance - the programme was relevant to the needs of MIEs in the following areas: training, access to micro finance, marketing strategies and branding, assistance with new/ optimized business space and mentorship.
• Skilled team of specialists add value - Strong, committed business development specialists add value to business growth. Financial support alone does not automatically result in job creation unless coupled with business support services.
• Qualitative positive impacts (in addition to job creation) include: Trust - renewed trust in government supported enterprise programmes; Hope – MIEs with renewed hope and confidence to overcome obstacles; Motivation – MIEs motivated to achieve more ambitious objectives.

Click here for a PowerPoint summary of the independent mid-term evaluation

The IESP is currently actively and urgently seeking funding for a next, third phase. The current phase comes to an end in September 2021. It is important to secure funding well in advance of this date in order to retain the current skilled and committed project team who have accumulated extensive specialist skills and who will be difficult to replace. Securing additional funding is thus a high priority in order to sustain the positive momentum that has been built.

The need for the IESP to continue has become even more important following Covid-19 given the significantly worsened economic and unemployment situation. Covid-19 has affected most businesses in both the formal and informal sectors, resulting in economic slowdown and substantial job losses. The IESP has the methods, tools, collaborations and capacity already in place to provide the necessary support to MIEs. The IESP has a proven track record and can support MIEs in an effective and cost-effective manner.

Collaborations and capacity

The IESP is a collaborative effort. PPT works closely with the Municipality (including the Economic Development and Business Support Units) and other stakeholders. Collaborations are important in establishing the necessary relationships and capacity to successfully deliver the Programme. These collaborations include:

• IESP core team: The IESP has an experienced, well-established and skilled core team which includes: a Programme Manager (Bawinile Peters); three MIE specialists who provide direct support to MIEs (Gugu Ngcobo, Tholiwe Ngidi and Vuyiswa Sogoni). All team members were carefully selected based on prior experience and have gained significant additional knowledge of the informal sector and MIEs over a period of several years working in the IESP.
• A Panel of Specialist Service Providers: The panel of specialists is key to the IESP’s business model. It includes a range of specialist individuals and private sector entities with specific skills sets e.g. accountants/CAs, business coaches, procurement, HR, contracting, legal etc. The panel will be significantly expanded in the next phase.
• Productive NGO partnerships: These are also important and add value to the support provided to MIEs. Currently IESP collaborates with Fair Food Company (a non-profit company), Africa Ignite and on phase 1 Newlands Mashu Learning Centre and various Agrihubs in eThekwini. These are a key and unique feature of the IESP which afford it significant, niche-focussed capability.
• Development Finance Institutions (DFIs) are also regarded as important. There are several existing DFIs who can make loan finance available to MIEs. It is noted that efforts to establish a dedicated small loan facility for IESP-supported MIEs (with reduced ‘red tape’ and smaller loan sizes) emerged as being non-viable after significant efforts were made in this regard. Currently MIEs need to meet the requirements of existing DFIs in order to access loan funding.