Resilience and risk in the informal economy: a study in the regulation of risk

Abstract

Environmental hazards (and change) pose a challenge to development - particularly for the world’s poor. A key issue shaping development within poor communities is the ability of entrepreneurs in these communities to effectively manage risks as they provide a significant number of the goods in poor communities to sustain themselves and provide work for others (Meagher 2006,2005; Devenish and Skinner 2004). Climate change and variability are key environmental hazards threatening the economies of the poor. In response to risk, the poor have developed innovative and sophisticated coping strategies. Examples of these include savings, burial and building societies. Often these strategies are unnoticed, uncoordinated, and unaided by national governments, development agencies, or international agencies. (Christoplos et al. 2009). This paper explores one particular area of community resilience; the ability of entrepreneurs in poor communities to anticipate and manage environmental hazards. Although international climate change negotiations, multilateral and bilateral agencies, donors, and international governance and financial institutions such as the World Bank are paying increasing attention to risk management mechanisms (mitigation and adaptation) most research has focused on national planning and top-down approaches (Mukheibir 2008). However, remarkably little attention has been paid to the ways in which poor communities cope with environmental hazards, such as climate variability and extremes (Reid et al. 2009: 13) and how they govern themselves for improved resilience. Furthermore, the governance and risk management literatures have largely focused on individual actions to cope with environmental hazards. This paper looks at the role of the collective action and cohesive governance in poor communities for managing environmental hazards. The paper draws on the social capital literature to explore the ways in which poor people help one another in the event of a hazard and sees these relationships as a form of ‘informal insurance’. The case study method is used to explore these issues in the Langa township, Cape Town (South Africa) where significant climatic and socio-economic changes that have recently occurred and continue to happen, including growing in-migration, increasing service delivery protest and land use contestation. The city of Cape Town is also seen as being very progressive in its climate change adaptation and mitigation policies (Holgate 2007). However, little investigation has gone into understanding the effectiveness and use of such policies at the community scale. Whether the city’s climate change policies can either support or hamper community level responses to change is therefore is great interest for this analysis. To understand this, the paper will outline the ways in which enterpreneurs in the research sites perceive risks to their business and respond both within and outside the frameworls of the municipal and city government laws and regulations.