Enforced informalisation: The case of liquor retailers in South Africa

After a decade of unsuccessful efforts to migrate informal businesses to South Africa's formal economy there remains little understanding of the dynamics in this sector, especially as regards micro-enterprises. International literature discusses 'exit' and 'exclusion', holding that poor law enforcement is the reason for the persistence and growth of the informal economy. Through examining the informal liquor retail (shebeen) sector, we demonstrate that enforcement actually produces informality in this sector. Illustrated with examples from one of our sites in Delft South, Cape Town, the article describes key aspects of shebeen business practice, including the responses to greater law enforcement. Notably, instead of closing shop or facing the hurdles of compliance, the great majority of shebeens continue to evade the law by downscaling their activities. This finding has implications not just for liquor policy in South Africa, but for understanding both theories of formalisation and theories of the informal economy. © 2013 Development Bank of Southern Africa.