Thami Mazwai, executive chair of Mtiya Dynamics and research fellow at Nelson Mandela University, is making a direct case: South Africa’s failure to integrate hundreds of thousands of informal producers and traders into the formal economy carries substantial costs, and incremental fixes will not close the gap.
Writing in a column for TimesLIVE, Mazwai frames informal-sector integration as a policy priority that can no longer wait. His argument is grounded in a blunt assessment of what existing state support mechanisms have actually delivered: limited results, despite years of institutional effort and legislative frameworks designed to nurture enterprise development.
The backdrop includes recent shifts in pan-African economic thinking. At the Africa Pension Fund Institute indaba held in Cape Town, Mazwai observed a growing consensus that the informal economy should be treated as a foundation for national economic growth across the continent. Young professionals from five African countries, including South Africa, have begun advancing this perspective through the newly launched Rooted Insights Africa initiative.
Mazwai draws on the economic philosophy of Justin Yifu Lin, a former World Bank economist who argued that sustainable development must build on a nation’s natural resource endowments, including its human capital. That framework shapes Mazwai’s reading of how other economies have succeeded where South Africa has struggled. China, he notes, integrated small businesses and informal sector operators into its mainstream economy through deliberate strategies, including “sharing economy” approaches that formalized previously unstructured commercial activity.
The structural problems run deep. In 2010, then Minister of Trade and Industry Rob Davies commissioned a review of state support for small businesses. The resulting recommendations called for a dedicated coordinating body under the presidency, one with authority to oversee programmes across multiple ministries and ensure coherent implementation. What followed instead, under President Jacob Zuma, was the establishment of the Ministry of Small Business Development. Mazwai argues that ministry lacked the cross-departmental reach necessary to drive meaningful change, leaving fragmented support systems in place.
The human cost of that fragmentation is measurable. Data from the Finscope 2025 Survey shows that 23.2 million South African residents live on less than 1,400 rand per person per month. More than 18 million people borrow money to afford their next meal. These figures reframe informal-sector integration not as an abstract policy goal but as a concrete operational challenge affecting millions of households.
By contrast, Mazwai’s assessment of existing policy instruments is pointed. Small-business support programmes and the enterprise and supplier development component embedded within the broad-based black economic empowerment framework have not generated sufficient economic impact. The gap between policy intent and actual outcomes is wide enough, he suggests, that adjusting current structures at the margins will not close it.
His position reflects a broader shift in how development economists view informal economies. Rather than treating informal activity as a temporary or marginal phenomenon to be gradually regulated into the formal system, this emerging perspective recognizes informal sectors as legitimate economic engines capable of generating employment, income, and growth when properly connected to formal structures.
For South Africa, the implication is that meaningful progress requires more than new ministries or fresh programmes grafted onto existing institutional frameworks. It demands systemic coordination, policy coherence, and a fundamental reorientation of how government agencies approach small-business development. Whether the political will exists to build that coordinating architecture, rather than simply add to it, remains the open question.