When poverty and inequality are denied, communities like this become invisible- again. (Photo: Supplied) 
This article is a direct response to an op-ed written by Steuart Pennington - Unemployment, poverty and inequality, published on 16 June 2024.
We all thrive on hope. However, Steuart Pennington’s article, drawing on statements by Capitec CEO Gerrie Fourie and informal sector commentator GG Alcock, paints a surprisingly rosy picture of South Africa’s socioeconomic landscape. It suggests that unemployment may be closer to 10% rather than the 32.9% reported by Stats SA, and that poverty and inequality are similarly overstated.
Wouldn’t it be wonderful if that were true?
As someone trained in economics, who has walked with communities at the sharp edge of deprivation for two decades, I long for those numbers to reflect reality. However, I also recognise the profound danger of presenting guesstimates as fact, especially when spoken by respected voices and published on reputable platforms. Words shape belief. Statistics shape policy. When distorted, they not only mislead our understanding but also our collective response.
1 “41% of unemployed youth earn R15,000 a month”?
Not true. Not even close.
In this article, Pennington included in his summary that there are “41% of unemployed youth hustling at R15,000 per month”. I fail to see how he jumped to this conclusion from the earlier quoting of the African Response survey that “41% are hustling making up to R15,000 a month through income-generating activities”. “Up to” suggests that R15,000 is the upper limit, rather than the average. Moreover, the sample size in the African Response survey was just 603 unemployed young people, half of whom live in Gauteng (South Africa’s wealthiest province), 74% of whom are female and only 37% of whom live in townships. Extrapolating the findings of this report to represent the income activity of all unemployed youth nationwide is statistically unjustifiable.
2 Informal economy = 26% of GDP?
No – and that’s not what the EY Shadow Economy Report says.
Pennington conflates the informal economy with the “shadow economy” as defined by EY. The shadow economy includes “all illicit, unrecorded, and criminal activity” (small and large scale), not just the honest hustle of informal traders. Could it be that Capitec CEO Gerrie Fourie has also failed to remove such activities in his calculations of the informal sector, based on his customer base? The figure Pennington cites for South Africa from the EY Shadow Economy Report (26% of GDP) is not only an estimate, but one that EY explicitly cautions against using without further in-depth analysis. The report emphasises on page 30 that all country estimates are based on econometric modelling applied as the best fit for all the countries in the sample, rather than the individual countries represented. It is irresponsible to cite such figures as fact – especially without engaging with the methodological caveats.
No – Pennington’s GDP figures are incorrect
Pennington claims that “based on these numbers alone, it would seem that the informal sector could be approaching R1-trillion (25% of GDP) per annum”. However, South Africa’s nominal GDP in 2024 was R7.3-trillion, not the R4-trillion he seems to have used to calculate 25%. Even accepting his questionable figures, a R1-trillion informal sector would amount to less than 14% of GDP. Since Stats SA already includes the informal sector at 6% of GDP, this would appear to be a differential of only about 8% with current Stats SA calculations.
3 GG Alcock’s informal sector estimates: real or rough guesses?
Pennington claims that “GG Alcock has comprehensively researched the size of the informal sector” to calculate his figures of that sector. Alcock’s books, Kasinomics and Kasinomic Revolution, contain inspiring stories and helpful observations. However, they do not constitute rigorous, transparent economic research. Nowhere does Alcock outline how his figures were arrived at. Many of his estimates – for example, that spaza shops generate R190-billion annually or that the informal fast-food sector (claimed to be R90-billion annually) surpasses the formal one by nearly R20-billion – are based on limited samples and what appears to be far-fetched extrapolations.
In Kasinomic Revolution, Alcock estimates that one successful woman earning R6,000 a month from selling sweets at a school can be multiplied to claim 200,000 similar cases nationwide. But this is not economic modelling – it’s hopeful multiplication.
Where I work in KwaZulu-Natal, those selling at the schools typically turn over about R300 to R400 a day, with gross margins of 5% to 40% (depending on their produce), and net profit for the month seldom exceeds a few hundred rands in total. The disconnect between Alcock’s estimates and my lived experience is vast.
I would welcome a clear outline of Alcock’s methodology. Without it, his numbers remain anecdotal projections, not facts.
4 Government figures on poverty and inequality: wrong as they exclude the informal sector and government grants and subsidies?
The article states that South Africa’s poverty and inequality rates are far lower than official figures. Pennington’s reasoning being that the informal sector, as well as government grants, subsidies and benefits, should be included in the calculations of poverty and inequality. They already are!4 Stats SA includes government grants when calculating both poverty and the Gini coefficient. As for education and other subsidies, anyone who has spent time in underresourced communities knows the reality: long periods without subject-specific teachers, gaps in teacher competency, crumbling infrastructure and limited access to basic resources. While these services matter, to count these as “consumption value” in a household budget is misleading.
Stats SA also includes the informal sector in its figures being 19.5% of total employment in the fourth quarter of 2024 and, as stated previously, 6% of GDP of R7.3-trillion. This means that Stats SA has included an informal sector of about R440-billion in their poverty, unemployment and inequality figures already. Even if this were viewed as underestimated, the starting point should be the identification of gaps in current Stats SA calculations and a proposal of how to effectively close those gaps, rather than making sweeping statements which have no undergirding.
Inequality is not invisible, just unequally seen
Living between two starkly contrasting communities, I am constantly confronted by the deep inequality that defines our nation – a divide largely hidden from most South Africans by the spatial legacy of apartheid. When I shared the claims in Pennington’s article with a wise community leader, she burst out laughing and asked: “Where do they get these numbers from?” We both agreed: if we had to estimate unemployment in her community, it would be close to 85%. While many of the unemployed are “hustling” in some form, very few earn anything near the minimum wage.
My strong response to Pennington’s article is not to dismiss hope, but to ground it. I believe deeply in the potential that lies dormant in our communities. At the ReStory Foundation we’ve witnessed genuine shifts in dignity and agency through our work with orphans, vulnerable children, unemployed youth, caregivers and the broader community. But the path is long. Years of trauma and societal messaging that the materially poor are “less than” have dimmed the flame of self-belief. Ironically, even well-meaning social grants can sometimes reinforce that message.
The informal sector must be part of the solution, but we cannot build transformation on myth. We must first understand, then respond to, the real economy of the materially poor.
Let’s be honest with hope
Pennington ends with: “So do the sums!” I agree. Let’s take this seriously: interrogating the data before we disseminate it. Let’s distinguish aspiration from evidence.
Misinformation, however well intended, can be harmful. It risks softening our national resolve. It allows those in power – or those who benefit from existing inequality – to pretend the crisis is over. It is disrespectful to the materially poor and creates an illusion that makes true redress even harder to pursue.
Yes, we need hope. But hope must be built on truth, not illusion.
Let’s not use feel-good fiction to distract from the real work of rebuilding South Africa – from the margins in. DM
Mandy Pearson holds a master’s degree in the economics of developing countries from the University of Cambridge. She has worked in corporate strategy and banking across Europe and South Africa and has spent more than 20 years working in some of South Africa’s most disadvantaged communities. She is the founder and CEO of the ReStory Foundation, an NPO committed to restoring dignity and agency to the most marginalised.