Selective informality: The self‐limiting growth choices of small businesses in South Africa

• Author: Geoffrey WOOD,Christine BISCHOFF
• DOI: http://doi.org/10.1111/j.1564-913X.2013.00190.x
• Published date: 01 December 2013
• Date: 01 December 2013

International Labour Review, Vol. 152 (2013), No. 3–4

Copyright © The authors 2013

Journal compilation © International Labour Organization 2013

Selective informality: The self-limiting

growth choices of small businesses

in South Africa

Christine BISCHOFF* and Geoffrey WOOD**

Abstract. Based on in-depth interviews, this study explores the reasons why many

South African small businesses abide by some aspects of labour law, but not others:

they generally comply with legislated labour regulations, but less so with regula-

tions set by the statutory industry-level Bargaining Councils. Such selective engage-

ment with the system is attributed to employer hostility to unions in the context of

post-apartheid industrial relations. Since a larger workforce attracts closer scrutiny

by the Councils, small rms are reluctant to expand, relying on outsourcing to in-

crease production. The very size of the rm is thus a pliable concept, positioned

between formal and informal norms.

Globally, a key challenge facing governments is to develop a balanced

regulatory framework for small and medium-sized enterprises (SMEs).

This means reconciling three potentially contradictory goals, namely, entrepre-

neurship and employment growth, job quality, and SME growth and formal-

ization – notably by taking due account of SMEs’ ability to sustain regulatory

burdens (Fenwick et al., 2007, p. 9). Most countries either explicitly exclude

smaller enterprises from the application of specic labour standards of general

applicability or promulgate a parallel labour law regime for SMEs. As noted

by Aidis, Estrin and Mickiewicz (2008, p. 658), however, the choices of SMEs

are likely to be shaped not only by centrally enacted laws, but also by locally

determined rules. Ucbasaran et al. (2008) also argue that entrepreneurs ac-

cumulate “assets and liabilities” from past experiences: their attitudes both

to other actors and to the law may therefore be at least partially moulded by

previous experience. This highlights the relationship between past experience,

rm size and different types of employment regulation, which we seek to ex-

plore further in this case study of South Africa.

*

University of Witwatersrand, email: Christine.Bischoff@wits.ac.za. **

University of War-

wick, email: Geoffrey.Wood@wbs.ac.uk. The authors are grateful for the invaluable comments and

feedback on previous drafts from Stuart Ogden, and from the anonymous refereeing process. The

nancial support of the ILO is gratefully acknowledged.

Responsibility for opinions expressed in signed articles rests solely with their authors, and

publication does not constitute an endorsement by the ILO.