SA’s 1 million missing entrepeneurs

OHANNESBURG – This story is statistically
complicated by the fact that the way self-employed
or own account workers are counted has changed
over the past ten years. But if you dig around a
bit, you will find that a million self-employed
people have disappeared.
The story starts in 2002 when Statistics South
Africa published a survey analysing Non-VAT
registered Businesses for 2001. This survey showed
that there were 2.3 m unregistered businesses with
an estimated turnover of less than R300 000.
Around 1.9 m of these businesses had no
employees. The other 300 000 businesses were
employing at least one individual, even if the
person was not paid. (The two numbers do not
add up to 2.3 m.)
The Labour Force Survey of 2001 estimated that
another 260 000 self-employed individuals were
registered for VAT. The survey showed there were
close to 2.2 m people who were self-employed,
either registered for VAT or not.
Fast forward to 2010 to the recently released
Labour Market Dynamics survey published by
Statistics South Africa, while the jargon changed to
“own account workers” to describe the self-
employed, the statistics show that there are now
only 1.2 m own account workers.
This means roughly 1m self-employed
entrepreneurs have disappeared between 2001
and 2010. This suggests a 45% reduction of self-
employed entrepreneurs, a rather large number
which alone could reduce the national
unemployment rate by a quarter.
Remember that the self-employed are the basis
from which the next set of new entrepreneurs
should develop. These entrepreneurs will become
employers and this is the key to address South
Africa’s mammoth unemployment problem.
The recession and tough economic climate of the
past few years may have attributed to the apparent
vanishing of the self-employed.
But the recession is not the only reason as by 2005
–well before the recession – the number of self-
employed had reduced to approximately 1.6 m.
This indicates that disappearance of the self-
employed are not only a recent development but a
longer term trend.
Perhaps the fact that in 2001 about 50% of our
self-employed were African women who were
dependent on their entrepreneurship skills to
survive now have access to welfare cheques may
be another contributing factor.
But this alone cannot explain the disappearance of
these entrepreneurs. Today African women still
represent around 40% of the self-employed and
many would have continued with their ventures as
it would increase household income.
Perhaps it is the official red tape and attitudes of
others such as local governments who chased the
self-employed off the streets while creating “new
markets” far away where there are no customers.
Perhaps it is that South Africans no longer want to
run their own businesses, but rather wait for
government. No simple reason can actually explain
what happened to the missing million.
Internationally could it be an even bigger
number?
Another factor that is puzzling is that a typical
emerging market country has about 40% of
workers who are categorised as vulnerable,
according to the ILO. Vulnerable workers would be
so-called own-account workers and unregistered
workers (informal employees and self-employed in
plain South African English).
The self-employed make up only about 9% of
South Africa’s employment and our total informal
market represent approximately 17%. In other
emerging markets approximately 40% of jobs are
“informal” – more than double the 17% in South
Africa.
The ILO also reports that self-employment category
in many emerging markets is usually more than
20% of the total workforce. For example Thailand
has 37.6% of its workforce as self-employed while
Turkey is at 21.6 %, Brazil at 24.6 % and Korea at
22%. In South Africa it is 9%.
South Africa should in all likelihood have at least
3m self-employed from which our next generation
of employers can grow from. This number is only
10% of our total adult population but around 20%
of the labour force.
So the mystery deepens as we look for the
“missing” self-employed. Using emerging markets
as a benchmark, the missing could quite easily
number 1.8 m self-employed people, assuming
20% of the local workforce is indeed self-
employed, and not the official 9%.
South Africa currently have approximately 700 000
employers. We would need to see around 300 000
“self-employed” becoming employers to push this
number to 1m – the number of employers we
would need to bring our employer numbers closer
to the international average of 3.5 % of total adults.
In South Africa, the average employer employs just
over 15.7 employees. If another 300 000
employers can migrate from the self-employed
category, this could add 4.7 m jobs to the
economy.
If the international norm is extrapolated to South
Africa, we could see another 1.8 m self-employed
individuals. This just shows how important the
missing self-employed is.
These two numbers (4.7 m and 1.8 m) combined
would add 6.5 m jobs or employed adults to our
country’s labour statistics. It would improve
everyone’s welfare and it would add say another
15% to 20% GDP.
Interestingly, the number of unemployed and
discouraged work seekers also number around
6.5 m.
The mystery of the missing million remains a
reality; it will not be resolved by opinion pieces and
fancy statistical manipulation. But it would suggest
that it is a topic that should receive priority
treatment and be investigated immediately. At least
a part of the solution must be getting the missing
million or perhaps 1.8 m back into the economy.
South Africa will not see the unemployment rate
decrease if the unemployed merely wait for decent
jobs. We need people to try and start their own
businesses – however small at first. Remember the
typical net income for the self-employed is around
R2 000 per month. That missing million would add
at least R24bn to our GDP and reduce
unemployment by a quarter to under 20%
Solving the mystery of the disappearing self-
employed may just solve our job crisis.
*Mike Schüssler is an economist and entrepreneur.

[Source:] www.moneyweb.co.za/mw/view/mw/en/page295025?oid=554935&sn=2009+Detail&pid=287226
[Date:] 2011-10-28

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