How the special Covid grant helped informal traders to stay afloat

No matter the circumstances and challenges, informal traders were able to parlay the Covid-19 Social Relief of Distress (SRD) grant into supporting and even in some cases, growing their businesses, write Senzelwe Mthembu, Sophie Plagerson, Laura Alfers, Mike Rogan and Lauren Graham.

Informal traders are a ubiquitous sight on the streets of South Africa's towns, cities and villages. Some sell fresh fruits and vegetables; others offer snacks and hot food, while still others give passers-by a convenient spot to buy loose cigarettes, items of clothing and household items like dishcloths and pot scrapers. 

These traders are among the approximately 3 million people who made up the informal sector before the Covid pandemic, accounting for just under 20% of total employment. And, like the vast majority of people in South Africa, they were hit hard by the pandemic and related mitigation measures such as lockdowns. Customers stayed home. Suppliers were either closed or facing stock crunches. 

Shock absorbers 

Their struggles during the pandemic emphasised just how much informal traders act as economic "shock absorbers", in good times and bad. When the price of goods, petrol and transport rise, as has happened in the past few months even as Covid restrictions have totally lifted, traders are immediately affected. They don't have the same negotiating power as formal retailers and have little choice but to pass increased costs on to potential customers. If the customers don't want to or can't pay, they will find another place to shop – and traders will literally watch the business walking away.

Informal traders were among the approximately six million people who qualified during the first phase of the Special Covid-19 Social Relief of Distress (SRD) grant introduced by the government in mid-2020. (Coverage reached 8.5m  in September 2021, and during the follow-up phases of the grant, most informal traders no longer met the qualifying criteria.) The grant amounted to R350 a month and was designed to cushion the blow of the pandemic in extremely vulnerable households.

Several months after the SRD was introduced, the Presidency approached us to assess what effect the grant had for local economies. It recognised that traders' activities represented an entry point into the informal sector and wanted to know how the injection of the SRD into the community was playing out for traders. Were more people buying from them? And what effect did this injection have on their livelihoods? We conducted a qualitative study to answer these questions. 

Our findings reflect both informal traders' own stories and their myriad interactions with local economies. It's a story of resilience, adaptability and a testament to traders' ability to ensure that, to borrow a phrase from the interviewees, "Ukuze itafula lingawi" (The table doesn't fall) - their business survives.

No matter the circumstances and challenges, traders were able to parlay the SRD into supporting and even in some cases, growing their businesses. Given that the SRD (which was extended several times) may soon fall away entirely, it is essential to highlight how this relatively small amount can make a genuine difference among traders – and to local economies. These "shock absorbers" need sustained and sustainable assistance.

Savvy and resilient

We interviewed 57 informal traders in three South African provinces, Gauteng, the Eastern Cape and KwaZulu-Natal. Their ages ranged from early 20s to about 60 and most were women. 

Through their stories, we identified several forward and backward economic linkages. Some informal traders received new customers who may not previously have had income or mobility but were now accessing the grant and could shop at informal traders' stores, which were cost-effective. Other traders were new to the sector - they used the SRD grant to start their businesses. 

More independence 

A participant from Orange Farm near Johannesburg told us that when she asked her sister, an informal trader, for money, her sister suggested she use the R350 SRD grant to set up a stand next to her. She now sells sweets and cigarettes and is less financially dependent on her sister.

We also noted that there were more sustained linkages between informal and formal businesses: the SRD grant allowed them to continue to purchase items from formal businesses, such as local food suppliers; as well as to pay small amounts to other informal workers, such as those that help with setting up and carrying the stalls and items. All of this happened against a dire economic backdrop and were, in many instances, made possible by the SRD.

The nature of their work meant that our interviewees were already resilient and business-savvy before Covid hit. They knew when to save money and when to spend it; they calculated carefully whether the SRD money was best used for household expenses or put towards their businesses. In some cases, traders joined forces to create new stokvels (informal credit unions whose members contribute fixed sums at set times); by pooling their money in this way, members were able to buy stock in bulk every few months. 

One informal trader, a 31-year-old woman from Warwick in KwaZulu-Natal who sells vegetables, told us:

The SRD also brought with it an element of dignity and agency for traders' customers. They were "omahlalela"; literally, “a person who sits” – chronically unemployed and with no source of income. Receiving the SRD allowed these people to begin participating in their local economies. They could take public transport and buy the occasional toiletry or food item from a trader, giving them the opportunity to contribute to their households and to local economies. Traders shared these stories as a way to illustrate how deeply they understand themselves and their businesses to be interwoven with their communities. 

Way forward

Every trader we interviewed had taken a financial knock during the pandemic. This was true even for those who had, before Covid lockdowns, been enjoying sustainable livelihoods from trading. They emphasised that a strong, active economy benefited everyone – not just themselves, but their customers, too. The SRD was not a magic bullet that repaired the Covid economy: it was a useful cushion in a time of multiple economic shocks.

The grant's ability to offer a safety net during a period of deep crisis, we suggest, points to the greater effect it could have in more "normal" times. As a 52-year-old woman who sells cooked food and vegetables in Johannesburg's CBD told us:

- Senzelwe Mthembu is a researcher at the Centre for Social Development in Africa (CSDA) at the University of Johannesburg

- Laura Alfers is a Research Associate at the Neil Aggett Labour Studies Unit, Rhodes University and directs the Social Protection Programme at the global action-research network, WIEGO. 

- Michael Rogan is an Associate Professor in the Department of Economics and Economic History and the Neil Aggett Labour Studies Unit (NALSU) - both at Rhodes University. Since 2011 he has been a Research Associate in the Urban Policies Programme of the global research-policy-action network Women in Informal Employment: Globalizing and Organising (WIEGO). 

- Sophie Plagerson is an independent researcher in the Netherlands. She is also a Visiting Associate Professor: Centre for Social Development in Africa, University of Johannesburg, South Africa. 

- Lauren Graham is the Director of the CSDA at the UJ. She is a development sociologist with a keen interest in how to shift barriers that prevent excluded groups from greater participation in the economy and society.

Original post: https://www.news24.com/news24/opinions/analysis/analysis-how-the-special-covid-grant-helped-informal-traders-to-stay-afloat-20221102