In the beginning of The Kaffir Boy, there is a sign at the crosswalk. What is the function of this sign? Why does the author take up space in the text to show that sign?

The sign that the question asks about is a sign that indicates to travelers that a particular road passes through "proclaimed Bantu locations."   Furthermore, the sign states that a person that does travel through those locations needs a permit to do so or he/she is risking prosecution for violating a particular law that was established in 1945.  
The narrator of the story explains in the next paragraph that the huge sign is meant to dissuade white people from entering the "black world."  The result of the sign and the law is that the majority of white people that live in South Africa have almost zero experience with the awful conditions that the blacks in South Africa are living in.  
The author chooses to take up page space with this sign and explanation in order to quickly acclimate readers to the harsh racial realities that exist in South Africa.  The distance that exists between whites and blacks in South Africa doesn't exist only because of cultural differences.  It exists because the government is enforcing a system that physically designates certain areas for blacks and other areas for whites.  The people of the country don't mix because the government is enforcing that separation.  By beginning the chapter with the sign, readers are being told that powerful people want to keep the racial segregation in place.