The informal economy in South Africa and other parts of the continent is a safe haven for many who are unable to find jobs in the formal sector of the economy. In the case of South Africa, it is not only the nationals of the country who are striving to survive and generate income from this sector but also foreign nationals.

Since 1994, the country has experienced a huge influx of immigrants from other parts of the continent some escaping from dire living conditions in their home countries and looking for better life opportunities while many others were forced to migrate from their own countries as a result of political unrest and lack of stability and security. Among these latter example is the Somali community who are the subject matter of this study. Many of these mainly African immigrants including Somalis got themselves involved in the informal sector of South Africa. This has increased competition in this sector and caused clashes between South Africans and immigrants who are also involved in the informal sector. Despite facing high levels of crime where many Somalis were killed and their property looted, they are still determined to stay in the South African townships.

Using a cross-sectional panel data analysis, this study proves that, amongst other variables, nationality is significant in profit determination of the informal businesses in South African townships. Further, using a logitand Panel Least Squares Models the study proves that Somalian owned informal businesses have the probability to contribute towards South African tax base, employment creation and gross value added (GVA) product in the Nelson Mandela Bay, South Africa.It is recommended that root causes of xenophobia be addressed rather than just the symptoms