Township economics: how the market structure of the informal economy impacts the recirculation of secondhand tires in South Africa

Abstract

In the context of South Africa’s extraordinarily high unemployment rates, urban residents are increasingly fashioning livelihoods from the reclamation and recirculation of waste. Drawing on a survey of 458 unregistered tire dealerships operating in South African townships, this article examines the structure and operations of this segment of the informal economy. Our analysis addresses several underexplored aspects of informality, with a focus on market dynamics and interfirm competition within township economies. The article contributes to the literature on informal economies and recycling value chains by providing firm-level insights into the competitive pressures faced by unregistered tire dealerships, highlighting how market structures influence business outcomes. The study seeks to make three contributions to the literature on economic informality: it centers the microeconomics of the firm; adds to the understanding of evolving township economies; and examines the basis of interfirm competition and the geographies of informality. The research also highlights the dual nature of these microenterprises, which generate jobs and incomes but remain small-scale and survivalist, limiting their potential for growth and their broader economic impacts.