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Informal Food Economy Vital for Producers and Consumers
By: Ann Steensland, Deputy Director, Global Harvest Initiative
This blog is based on an article in the 2016 Global Agricultural Productivity Report® (GAP Report®), page 53.By 2050, two-thirds of the world’s population will live in cities. This has generated renewed calls for the private sector, particularly the finance industry, to invest in and support small and medium-scale enterprises (SMEs) in the food value chain. 
In the near term, medium-scale producers and consortiums of small-scale producers who have the capacity to expand their operations are more likely to benefit from this new wave of investment. Independent small-scale farmers will continue to rely on the informal food economy, selling their products in local markets or to traders who supply larger buyers.
The informal food economy plays a significant role in the economic life of rural communities, particularly for women. A livelihoods study in the Free State Province of South Africa found that 72 percent of people in the communities studied derived at least part of their income from selling into informal food markets; 55 percent of these people were women.  The study observed that the formal economy in rural areas often favors men with fewer opportunities for women, making the informal food economy essential to women’s livelihoods.
The informal food economy also contributes to the food security and nutrition of low-income people in cities and peri-urban areas. In South Africa’s urban centers, low-income people tend to purchase their monthly supply of staple foods, such as mealie meal, from formal retail outlets, but perishable products and ready-to-eat foods are purchased on an as-needed basis at local food markets or from street vendors.South Africa’s informal food economy contributes significantly to the overall agricultural economy. The informal market, in aggregate, is the country’s second largest potato buyer. Fresh Producer Markets, the country’s largest formal potato buyer, purchases more than half of its supply from informal traders. 
The informal livestock sector is also an integral part of South Africa’s food system. It is estimated that 21 percent of all beef consumed is processed informally and a full 45 percent – nearly half – of all livestock consumed is distributed through informal markets. 
Integrating small and medium-scale producers into formal value chains will continue to receive attention and investment, but the informal food economy is a vibrant and growing part of the agri-food system throughout Africa. Yet, there is relatively little data on the informal sector when compared to the amount of data gathered on the production or consumption of agricultural and food products.
More research is needed so that policymakers can effectively address concerns about the safety and nutritional content of informal food value chains, as well as the sustainability and safety of how these foods are produced and the working conditions and well-being of those involved in the informal food economy.
 Thomas Reardon, Growing Foods for Growing Cities: Transforming Food Systems in an Urbanizing World, Chicago Council for Global Affairs, (April 2016).
[2, 3] Etai Even-Zahav and Candice Kelly, “Systemic Review of the Literature on ‘Informal Economy’ and ‘Food Security’,” Institute for Poverty, Land and Agrarian Studies, Working Paper No. 35 (July 5, 2016), 14.
[4, 5] Even-Zahav and Kelly, 16.