Entrepreneurship is the saving grace of the local economy, according to a leading economist.
New figures released this week show that, although the number of employed people increased in line with population growth, the number of self-employed people grew at four times this rate, at 28%, in the last five years.
The statistics are contained in the fifth South African Employment Report, prepared by economist Mike Schussler for the United Association of South Africa (Uasa).
The report provides some solace for economic policymakers. It says that the total number of people in work has grown 13,3% over the last five years, while about 240 000 new formal sector jobs have been created over the past year — a 2,9% increase. And self-employment is a growing trend.
According to Schussler, the average formal sector entrepreneur employs 14 people, while the average informal entrepreneur employs less than half a person other than themselves. Since 2002, the number of formal entrepreneurs has grown 17,7%, but the firm size has declined slightly.
Informally self-employed numbers increased 34,4% over the same period, while the firm size for the informal sector also declined. The informal sector is still struggling to create jobs other than for the self-employed, but shows a 33% growth rate in workers.
Speaking at the launch of the report on Wednesday, Schussler also revealed that the number of company registrations had mushroomed. There are now 1,9-million registered entities, which includes both companies and close corporations.
At the end of 1999, just 800 000 companies and close corporations were registered. Although not all of the new companies are active, the growth in registrations is further evidence of a trend towards entrepreneurship.
‘There are a lot more smaller firms, and they are driving the economy a lot more. We need to make things easier for them,†he said, citing arduous administrative requirements and cumbersome official procedures.
Both informal sector entrepreneurs — who are mostly struggling to survive — and the unemployed could be better served by the Sector Education and Training Authorities. (Setas).
The trend towards small business is coupled with an increasingly urgent skills shortage. The highest number of unemployed people are those with grade 11 as their highest level of education. Just over 36% of people in this group were unemployed, against 25,2% of the total workforce.
Only 3,7% of university graduates are out of work, and the total number of people with more than matric without work is at 7,8%.
Schussler said this highlighted the need for specialist skills in the workforce. Employment is readily available in elementary occupations, but technical and professional fields have shown almost no growth.
Both informal sector entrepreneurs – who are mostly struggling to survive – and the unemployed could be better served by the Sector Education and Training Authorities (Setas). Schussler said the Setas already had R3,8-billion available to them, of which they planned to spend R3,7-billion. This year, they will receive another R6-billion.
But the money would be put to better use if basic skills courses and specialist training were offered, along with shorter courses that entrepreneurs could more easily attend.
About 16,8% of people overall are self-employed, with 16,3% of males and 17,4% of females. Around one in four white males work for themselves or create employment for others.
Most black self-employed people – 86,8% of this group – create incomes in the informal sector. For other population groups, 29% work in the informal sector and 71% in the formal sector. Seventy percent of self-employed people are in the informal sector, Although 30% of self-employed work in the formal sector, many of their businesses are still very small. Formal sector workers make up 93,4% of all workers, while the informal sector only contributes 7,6%.
Schussler said he expected the number of entrepreneurs to continue to grow, but that the bigger challenge will be to formalise the informal sector over time, as this is where the biggest growth can be achieved.