Empowering the unemployed to start their own small businesses, or to partner with others in entrepreneurial ventures, can be a powerful tool for economic revival. (Photo by: Peter Titmuss/Education Images/Universal Images Group via Getty Images)
Recently released employment data by Statistics South Africa show that the country’s unemployment rate has soared to a record 33.5%, with 8.4 million people actively seeking but unable to find employment. Youth unemployment is even more alarming, exceeding 60%.
These figures paint a grim picture of the economic problems facing South Africa, especially for recent matriculants and graduates who are looking for their first job. Additionally, unskilled and semi-skilled workers, who are being or will be retrenched as a result of poor economic conditions, will find it increasingly difficult to re-enter the job market.
With few large-scale projects on the horizon that could create millions of jobs, a possible solution may lie in fostering small business development. But, for such an initiative to be successful, the requisite support structures must be in place. Without this, many small businesses may fail, leaving the unemployment crisis unresolved.
Empowering the unemployed to start their own small businesses, or to partner with others in entrepreneurial ventures, can be a powerful tool for economic revival. This approach leverages the skills and experiences of those who are without work, transforming them into job creators rather than job seekers. Key among the problems they face are access to capital, resources and networks essential for launching, running and sustaining successful enterprises. Other challenges that will test small businesses include high lending rates, a weakened consumer market and, until recently, frequent load-shedding.
To foster a thriving small business sector, the government and large corporations must collaborate to create an enabling environment for smaller companies. This effort must go beyond the current “tick-box” exercises where small businesses are supported through “mandatory” enterprise supplier development (ESD) programmes. While some positives have emerged from these initiatives in terms of employment creation and enterprise growth, many small businesses struggle once they are no longer part of these programmes and lose their sponsors as clients.
Therefore, a networked approach to supporting small businesses should be prioritised from a sustainability standpoint. ESD programmes and initiatives should not only benefit the sponsor but also create networks of businesses requiring similar services, thereby fostering a more resilient ecosystem. For example, rather than a small business relying solely on one large corporate client, it could be connected with a network of companies that require similar services. This would reduce the risk of failure once the initial support programme ends. Additionally, government and private sector initiatives could facilitate partnerships between small businesses, enabling them to pool resources, share knowledge, and collaborate on projects that might be too large or complex for an individual entrepreneur to handle alone.
Technology is a powerful enabler for small businesses, offering tools and platforms that can reduce costs, increase efficiency and open up new markets. But small businesses often don’t have access to the necessary technology to be competitive with larger counterparts. For the unemployed, who may not have significant capital to invest in traditional business infrastructure, technology provides a low-cost entry point into entrepreneurship. Digital platforms, for instance, can allow artisans to sell their products online, reaching customers far beyond their local communities. Similarly, cloud-based tools can enable small service providers to manage their operations more efficiently, without the need for expensive software or hardware.
To support small enterprises in becoming technologically adept, the government and private sector could offer sustained mentorship and training programmes focused on digital literacy and e-commerce. These programmes would help new and existing entrepreneurs to leverage technology effectively. Moreover, partnerships with technology companies could provide affordable access to the necessary tools and platforms, further lowering the barriers to entry and the cost of doing business for small business owners.
A viable solution to the unemployment crisis involves developing a comprehensive ecosystem that supports entrepreneurs at every stage of their journey. This includes not only access to finance and technology but also regulatory support, market access and ongoing mentorship and training. To achieve this, a national small business development strategy, coordinated across all levels of government, will be essential. This strategy should focus on reducing the regulatory burden on small businesses, providing more tax incentives, and creating and growing markets for their goods and services.
Additionally, the government could consider becoming the primary customer for some of these enterprises’ offerings. This approach would support baseline growth and enable these companies to evolve into medium-sized and more customer-diverse organisations over time. At the provincial level, tailored support programmes should also be implemented to address specific entrepreneurial needs. For example, in provinces with strong agricultural sectors, support programmes could focus on helping small-scale farmers adopt sustainable practices and access new, more lucrative markets through initiatives such as harvest pooling and communal product processing. In urban areas, initiatives could focus on supporting young entrepreneurs to start technology-driven businesses that can thrive in the digital economy by addressing highly sought-after community-based needs and wants.
As the employment environment evolves, job recovery initiatives may become more cumbersome. The advent of artificial intelligence and technological advancements is expected to create redundancies, further escalating the unemployment rate. Therefore, an incremental and long-term approach is required to create sustainable employment for the country. This approach should promote small business development that embraces and integrates technology, is part of an ecosystem that provides scale and market access, enables easy access to affordable financing and other critical resources (such as training and mentorship), and empowers businesses to grow and progress rather than just survive.
James Maposa is the managing director of Birguid.