In search of South Africa’s ‘second economy’

Since 2003, South African policy discourse about persistent poverty has been dominated by the notion that poor people stay poor because they are trapped in a ‘second economy’, disconnected from the mainstream ‘first world economy’. Based on research conducted in Mount Frere in the rural Eastern Cape, and in Cape Town’s African suburbs, we argue that a process of simultaneous monetisation, de-agrarianisation and de-industrialisation has created a heavy reliance on a formal sector in which employment is becoming increasingly elusive and fragile. Fieldwork suggested high levels of economic integration, corporate penetration, and monetisation even in the remote, rural Eastern Cape.

Within this context, survival relies on complex practices of reciprocity in spatially extended urban-rural networks, and on widespread, elusive, economically crucial but fragile forms of informal economic activity and self-employment. Rather than being structurally disconnected from the ‘formal economy’, formal and informal, ‘mainstream’ and marginal activities are often thoroughly interdependent, supplementing or subsidising one another in complex ways. Instead of imagining a separate economic realm, ‘structurally disconnected’ from the ‘first economy’, it is more helpful to grasp that the South African economy is both unitary and heterogeneous. Rather than ‘bringing people into’ the mainstream economy policymakers would do better to consider ways of counteracting disadvantageous power and supporting the livelihood strategies that are found at the margins of the formal economy.

Abstract based directly on the original source