Africa’s most industrialised country has a large formal sector, which offers many jobs across the board. But the real opportunity in South Africa is for young entrepreneurs to build new businesses, a trend that is supported by policies to uplift young people such as Black Economic Empowerment and the Youth Enterprise Development Strategy.
The informal economy accounts for 18% of GDP and it is where the numbers are for growth. The challenge is to capture workers in it into the formal economy, where they can take part in initiatives put in place to build their capacity and sustainability.
The country’s National Development Plan posits that 90% of new jobs will come from smaller local enterprises by 2030. However, this ambition needs strategic interventions to realise this goal. To get there, South Africa must address the low levels of entrepreneurial activity, which the Youth Enterprise Development Strategy puts at just 6%.
However, there has been an increase in the number of small and medium enterprises in the economy, which are formally registered and qualify to take part in other government empowerment initiatives such as the Enterprise and Supplier Development measures and the Black Business Supplier Development Programme, both aimed at promoting economic transformation.
The intersection of big and small business is a sweet spot for transformation in South Africa, with large companies bringing smaller players into their supply chains, boosting skills development and wealth creation.
Large companies, with interests in mining, retail, property, ICT, financial services, manufacturing and other sectors, have long dominated South Africa’s economic sector with successful companies expanding into the rest of Africa and globally.
Big brands include retailer Shoprite, financial services players such as Standard Bank, Old Mutual, Sanlam and Rand Merchant Bank, miners Anglo American and Anglogold Ashanti, pharmaceutical giant Aspen Pharmacare as well as mobile phone operators MTN and Vodacom.
South Africa’s engagement with the continent is likely to increase through opportunities afforded it by initiatives such as the African Continental Free Trade Area, which plays to its particular strength of being the biggest exporter of manufactured goods in sub-Saharan Africa.
The township economies of South Africa are also a significant growth opportunity as the migration to the cities continues, with many newcomers locating themselves in areas formerly designated as blacks-only suburbs in years gone by.
To date, most of the development in these areas has been ad hoc and dominated by informal businesses, but much more could be done in a multi-stakeholder effort to boost these high-density areas.
There is much more to be done for South Africa to realise its full potential. But for a country that has overcome so much as a young democracy, it continues to punch above its weight, inspire new ways and remain resilient against all odds.