Digital Disparity between Formal and Informal Sectors: The Case of South Africa

Godfred Anakpo, Sisonke Phuthumani and Syden Mishi

Africagrowth Agenda, 2023, vol. 20, issue 1, 4-7

Abstract: The COVID-19 pandemic has resulted in a paradigm shift from physical to digital business model. While this transition may be a smooth take off and game changer for businesses in the formal sector, it can be completely opposite for the informal sector businesses due to the different level of digital capability. South Africa economy comprises formal and informal sectors, each contributing significantly to employment, poverty reduction and the health of the economy in general. Understanding the depth of digital disparity between the two sectors and challenges is indispensable step towards facilitating participation in digital economy especially by the informal sector that is often excluded. The purpose of this study is therefore to deepen the understanding on the disparity in ICT use and access between the formal and informal sector in South Africa, identify the barriers to the of ICT use in the informal sector and redress. Finding reveals that while businesses in the formal sector are more resourceful, have high business turnover, relief grand and adequate fund that gave them financial leverage for full digital participation, businesses in the informal sector do not have this luxury and living constant on the face of threats to external shock such as the COVID- 19. Findings further reveals barriers such as digital illiteracy, lack of funds, outages, the possibility of fraud, intimidation by technology, the (perceived) high cost of ICT, inadequate infrastructure prevent businesses in the informal sector from fully embracing ICT. Due to the widely usage of mobile phone, user-friendly technology deployment and business information sharing in local context on these devices can be a game changer for the businesses in the informal sector to participate in the digital economy to address these challenges. Other bold steps such as increasing the awareness of the various benefits of ICT, skills training on ICT , infrastructure and financial support and deploying qualified ICT workers in the informal sector are recommended

Date: 2023
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