Differentiated Governance, Distributive Justice: Ethical Pathways for South Africa’s Informal-Illicit Nexus

Abstract

South Africa’s economy is marked by dualism, comprising a globally integrated formal sector and a substantial informal economy that provides livelihoods for millions excluded from formal employment. In contexts of persistent unemployment, informal work becomes a necessity for survival rather than a choice. However, state policy often incorrectly conflates this economic necessity with illicit markets. This conflation functions as state-engineered sovereignty, exercised through selective enforcement, regulatory ambiguity and epistemic practices that marginalise informal livelihoods while facilitating organised criminal economies. Using a critical political economy lens, this paper examines two cases: the COVID-19 alcohol and tobacco bans (2020) and Cape Town’s extortion economies (2023-2024). Drawing on policy analysis, case studies and quantitative data on market disruption, tax losses and price volatility, it demonstrates that sudden prohibitions and broad enforcement measures destabilise legitimate informal activities, expand illicit markets and undermine state legitimacy. The study concludes that it is crucial to differentiate, both analytically and normatively, between survivalist informality and illegal organised trade to rebuild a decolonised social contract grounded in distributive justice and risk-proportionate governance. Such a framework recognises subaltern livelihoods as elements of economic citizenship, treating dignity as a prerequisite for inclusion rather than a consequence of incorporation.