Women in South Africa are disproportionately affected by unemployment and poverty and must often find alternative means for their livelihoods. Many rely on informal employment as their primary source of income. A policy brief based on findings from HSRC research in Sweetwaters, KwaZulu-Natal, points to underlying structural and socio-economic constraints shaping gender differences in learning and innovation. By Pilela Majokweni, Il-haam Petersen and Setsoheng Mayeki.

Lungile Ngcobo, Mandisa Mkhize, Nomasonto Mkhize, Nokwanda Zondi and Zintle Mthethwa developing story content during a digital storytelling workshop, which aimed to gain insight into the innovation activities of specific informal businesses that operate in the hair and beauty services industry. Photo: HSRC.

The latest South African general household survey showed that female-headed households have higher poverty levels than their male counterparts. Women are disproportionately affected by unemployment, with approximately 35.5% of women unemployed compared to 32.6% of men. Additionally, as reported by the United Nations Conference on Trade and Development, unequal gender norms and structural barriers contribute to women’s lack of access to resources, credit and financing. Women also face higher barriers to entry and, therefore, require more support such as technical assistance, access to infrastructure, capacity building and links to markets.

HSRC research in Sweetwaters, KwaZulu-Natal (KZN), shows that the rate of innovation is high among informal businesses as they continuously implement changes to survive and remain competitive. However, research on gender differences in innovation and entrepreneurial development is limited. Overlooking these disparities leads to inadequate support for women-owned businesses.

Gender differences in informal businesses in Sweetwaters

Of the 990 informal businesses surveyed in the 2017–2018 South African Informal Sector Survey in KZN, a slightly larger proportion (56%) were men-owned (Figure 1). Informal food services accounted for the main economic activity, with 28.2% of business owners in this sector being women, while 22.8% were men. On the other hand, the building services sector was dominated by men-owned businesses (23.2%) compared to women-owned businesses (19.2%). On average, men-owned businesses reported more than double the annual earnings from selling their goods and services. Gender-based discrimination and unequal access to resources and opportunities may also be factors that contributed to the lower turnover rates for women-owned businesses.

Figure 1. Gender differences in the economic activities of informal business owners in Sweetwaters, KwaZulu-Natal (2017–2018)

Data source: CeSTII 2017–2018 IIS Survey

High rates of innovation regardless of gender

Most informal businesses (approximately 92%) were innovation-active, meaning most had engaged in innovation activities, including ongoing and abandoned activities in 2017 and 2018. Only 8% of the businesses reported no innovation activity during this period (Figure 2). The high rate of innovation is not surprising, as the challenging and unpredictable nature of the informal business environment calls for constant creativity and adaptability. Furthermore, the informal nature of these businesses allows for fewer regulatory barriers, providing more room for experimentation and innovation.

Figure 2. Innovation-active and innovation-inactive informal businesses (%) in Sweetwaters, KwaZulu-Natal (2017–2018)

Data source: CeSTII 2017–2018 IIS Survey

Innovation by women: more organic and reactive

The survey found that innovation activities were mainly customer-driven, but women-owned businesses reported more organic and reactive forms of innovation. Besides customer demand, bringing in tools, machinery and equipment (Figure 3) was the second most common innovation activity adopted by the informal business owners (women = 42.2%; men = 67.2%), and the third was bringing in new suppliers of raw materials and tools (women = 41.5%; men = 53.6%). However, men also tended to engage more in structured and intentional innovation activities, such as training staff to introduce changes (36.2%) and bringing in know-how or other types of knowledge (32.5%). In comparison, women who tended to engage in more organic and reactive forms of innovation. “Happy accidents” is the only innovation activity where women- and men-owned businesses were approximately on par.  

Figure 3. Innovation activities (%) of informal business owners in Sweetwaters, KwaZulu-Natal (2017–2018)

Data source: CeSTII 2017–2018 IIS Survey

Learning-by-doing and imitating

Informal business owners, regardless of gender, tended to develop new goods and services through learning by doing and imitating other businesses.

More men (42%) used knowledge gained through everyday operations to develop new goods and services compared to women (27.8%), as seen in Figure 4. Also, slightly more men used traditional (17.7%) and technical knowledge (9.6%) than women (14.7% and 5.7%, respectively). About a fifth of the women-owned businesses reported developing their product innovations “by chance”.

Figure 4. Knowledge used (%) to develop new goods/services in Sweetwaters, KwaZulu-Natal (2017–2018)

Data source: CeSTII 2017–2018 IIS Survey

Innovations locally linked 

For women-owned businesses, the survey showed that the novelty of their innovations was strongly linked to the local area. 

Product innovation in both men- and women-owned informal businesses was primarily focused on introducing new products to their respective businesses and local areas rather than creating new products altogether. Women-owned informal businesses (57%) tended to introduce more innovations within their local areas, while men (47%) tended to introduce innovations that were novel to the industry but not necessarily new to the country (Figure 5). Differences in access to resources such as funding and technology may play a role in shaping the types of product innovations that men and women business owners can introduce.

Figure 5. Product innovation novelty of informal business owners in Sweetwaters, KwaZulu-Natal (2017–2018)

Data source: CeSTII 2017–2018 IIS Survey

Using technical and scientific knowledge

There were notable gender differences in the modes of innovation (Figure 6). The main strategy used by both men and women-owned informal businesses was learning by using (71.3% and 66.5% respectively). The biggest difference was in the use of science, technology and innovation (STI) modes of innovation, with more (18.1%) men-owned informal businesses using technical and/or scientific knowledge to inform their innovation activities than women-owned businesses (9.9%). Men also tended to rely more on learning by observing and learning from others by imitating (41.7%) or through interaction (28.7%). In contrast, women-owned businesses relied on searching, that is, seeking out external information and resources (8.7%) more than men (5.8%).

Figure 6. Modes of innovation (%) among informal business owners in Sweetwaters, KwaZulu-Natal (2017–2018)

Data source: CeSTII 2017–2018 IIS Survey

Different factors can influence the choice of innovation mode. One possible explanation for the higher percentage of men using the STI mode is that they may have more access to technology and formal education, which can facilitate the adoption of new technologies and the use of technical knowledge. In the study, women reported lower levels of education. Women face more constraints in terms of access to education, technology and resources, which may limit their ability to innovate using more sophisticated modes such as STI and interaction.

A need for gender-inclusive policy

The HSRC’s Innovation in the Informal Sector survey in Sweetwaters forms part of a larger project, initiated in 2017, to develop a programme for measuring innovation in informal businesses. The project addresses a gap in innovation measurement, to complement the well-established formal sector Business Innovation Survey that the HSRC conducts on behalf of the Department of Science, Technology and Innovation, providing an evidence base for the national innovation policy.

The findings from this HSRC survey motivate the need for gender-conscious and inclusive policy approaches to better support informal sector innovation. A gendered lens illuminates the unique experiences, needs and challenges of women-owned businesses in rural towns, villages, townships and other resource-poor informal settings. This provides new insights for public policies promoting the mobilisation of science, technology and innovation for gender inclusivity. More specifically, policymakers can:

• Improve access to financial resources, technology and training for women-owned businesses, including microfinance programmes, grants and subsidies.
• Promote support systems tailored to women-owned businesses, such as incubators, mentorship programmes and networking events, and customise training to meet the education and skill needs of women-owned informal businesses.
• Invest in further research exploring the intersections of gender, innovation and informality to inform targeted and inclusive policies and programmes.

In addition to a gender-sensitive approach, informal businesses also require support to leverage their advantage of strong local and traditional knowledge, which must be combined with technical know-how and scientific knowledge. For example, one of the women entrepreneurs who owned a fast-food café selling healthier versions of traditional foods participated in a training and support programme to strengthen her technical cooking skills and build her business. The programme was offered by a big business in the food industry. We must promote learning through interaction with formal businesses, education and training and other support organisations. Women-owned businesses, in particular, can benefit from such support as they tend to dominate sectors, including informal food services and textiles, where traditional and local knowledge provides a competitive advantage.

Interventions aimed at supporting women-owned informal businesses also need to consider the structural and socio-economic constraints, including access to education, financial support and other resources, that influence innovation and learning in these businesses. In this way, women-owned informal businesses may be supported to be more intentional rather than passive and reactive in using innovation in their businesses.

To fill a gap in entrepreneurship skills training and support to informal businesses, the HSRC conducts training workshops with informal business owners. It has produced an Informal Business Innovation Toolkit and My Business Innovation Planner (MyBIP) app, providing research-based guidelines, templates and interactive tools. MyBIP can be downloaded free of charge from the Google Play Store. 

Contacts:

For more information, please contact the Project Lead, Dr Il-haam Petersen, at ipetersen@hsrc.ac.za. The project resources are available on the project website. For updates on MyBIP and informal business innovation events, follow the MyBIP WhatsApp channel.