Original Research

Dynamics of trade between the formal sector and informal traders

Cyril Nhlanhla Ngiba, David Dickinson, Louise Whittaker, Claire Beswick
South African Journal of Economic and Management Sciences | Vol 12, No 4 | a189 | DOI: https://doi.org/10.4102/sajems.v12i4.189 | © 2011 Cyril Nhlanhla Ngiba, David Dickinson, Louise Whittaker, Claire Beswick | This work is licensed under CC Attribution 4.0
Submitted: 20 April 2011 | Published: 26 April 2011

About the author(s)

Cyril Nhlanhla Ngiba, University of Witwatersrand, South Africa
David Dickinson, University of Witwatersrand, South Africa
Louise Whittaker, University of the Witwatersrand, South Africa
Claire Beswick, University of Witwatersrand, South Africa

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Abstract

The informal sector in South Africa is a significant, but not well understood phenomenon. One important question relates to the nature of the relationship between the formal and informal sector. This article uses Porter’s five forces model to interrogate the linkages between informal fruit and vegetable traders in the Natalspruit Market (Ekurhuleni) and their formal suppliers, primarily the Johannesburg Fresh Produce Market. While the threat of new products is low, the street traders’ position is weakened by the threat of new entrants, consumer bargaining power and lack of cooperation among street traders. In relation to supplier power, we conclude that while this varies according to a number of factors, the formal sector is dominant over informal fruit and vegetable sellers in this market. This finding rests primarily on the observation that, because of their fragmentation, the informal traders’ collective buying power is not being used in the same way as large formal retailers of fruit and vegetables to obtain better terms of trade with the formal economy supplier.


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