Around 440 000 small businesses have closed in the last five years, according to the Adcorp Employment Index released today.
The group February 2012 employment index highlights with alarm the closure of 440 000 small businesses over the past five years, Loane Sharp, labour economist at Adcorp, said in a statement.
In addition, the number of new business start ups was at an all time low.
The gravity of the situation is emphasised by the fact that 68% of all South African workers are employed by small business employing fewer than 50 people, Sharp said.
Given that the typical small business employs 12 people (aside from the owner-manager), a revival of this sector could potentially create 5.3 million jobs.
In 2001, around 250 000 people were involved in starting their own businesses. In 2011, only 58 000 people were trying to do so, a decline of 76%, Sharp said.
Applying the average ratio of 12 workers per small business, the reduction in entrepreneurial activity over the past five years has reduced the economy job creation potential by around 2.3 million jobs.
Sharp said if the recession were the only factor to blame, then this trend should reverse as the economy recovered. However, regulatory issues were not helping.
The World Economic Forum Global Competitiveness Report for 2011 cited labour problems , weak public education, restrictive labour laws, and a poor work ethic, as among the most problematic factors for doing business in South Africa, Sharp said.
Small businesses offer the only real prospect of large-scale job creation in South Africa, yet conditions for small businesses have deteriorated markedly. The number of people trying to start their own businesses is a critical indicator to watch in the coming months.
Source: City Press (amended)
Applying the average ratio of 12 workers per small business, the reduction in entrepreneurial activity over the past five years has reduced the economy job creation potential by around 2.3 million jobs.
Sharp said if the recession were the only factor to blame, then this trend should reverse as the economy recovered. However, regulatory issues were not helping.
The World Economic Forum Global Competitiveness Report for 2011 cited labour problems , weak public education, restrictive labour laws, and a poor work ethic, as among the most problematic factors for doing business in South Africa, Sharp said.
Small businesses offer the only real prospect of large-scale job creation in South Africa, yet conditions for small businesses have deteriorated markedly. The number of people trying to start their own businesses is a critical indicator to watch in the coming months.
Source: City Press (amended)
