Exploring business owners’ perspectives of transition from the informal to the formal sector in a selected group, South Africa

Abstract

This study seeks to explore business owners’ perspectives when considering embarking on the transition journey from an informal to a formal business within a selected South African context. A wider understanding is sought of what is perceived as an informal business and a formal business by the business owners trading at the markets of the Aardklop National Arts Festival (that will be referred to as Aardklop in the remainder of this study) in South Africa. The fourth industrial revolution and the COVID-19 pandemic have pushed many informal business owners into survival mode, and subsequently having to get back into the market is a challenge, which led to an exploration into business owners' perspectives on the transition process from the informal to the formal sector. The study is based on a qualitative research approach outlined within an interpretive paradigm. An exploratory research design was adopted for the study. A sample of 10 participants led to data saturation after they were purposefully selected and consented to voluntarily participate. The data for the study were collected through semi-structured interviews both face-to-face and via Microsoft Teams. Thematic analysis was conducted with the aid of Atlas.ti as a tool. Three main themes were generated from the data with sub-themes under each main theme. The main findings were that informal businesses offer flexibility and passion-driven work, and formalisation can lead to long-term growth and a more substantial contribution to South Africa's economy. The choice between informality and formality depends on individual goals and preferences, and both paths have their unique challenges and rewards. The study concludes with managerial implications and recommendations that the researcher learned from the study. These recommendations might lead the way in supporting entrepreneurs’ transition from the informal to the formal sector of the economy contributing to unemployment and job creation.