A data series on small and micro businesses launched by Statistics SA sheds new light on the sector, seen by the government as critical to employment creation in South Africa.
The Survey of Employers and the Self Employed (Sese) shows that about 1.7 million businesses in South Africa are not registered for value-added tax (VAT), less than earlier ballpark estimates of between 2 million and 2.5 million. Of the total, only 178 200 claimed to have a licence to operate. And more than three-quarters of the respondents said they kept no record of transactions.
Businesses with an annual turnover of R300 000 are obliged to register for VAT. Those with turnover between R20 000 and R300 000 have the option of registering; those with turnover less than R20 000 are not required to register. The activities of businesses that fall outside the VAT net are not reflected in the quarterly employment survey of 24 000 businesses.
Department of trade and industry deputy director-general Lionel October said this month that the government was assessing "new strategic thrusts" in relation to small and micro business. The official policy focus comes at a time when the official unemployment rate is about 25.6 percent.
"The employment multiplier of small businesses tends to be greater than that of larger businesses," said Standard Bank chief economist Goolam Ballim. "It is also a pillar of black economic empowerment." So information on its largely undocumented activity is critical for the formulation of policies to promote it.
While the twice-yearly labour force survey of 32 000 households partly addresses this need, its focus is to determine "the level and pattern of employment" in the economy. The new survey provides a detailed picture of the activities of informal businesses. Conducted in September last year, it will be repeated every five years. It is based on the responses of a sample of 3 328 people.
The Sese estimate of total businesses in the sector falls well short of that of small business funder Business Partners. Managing director Jo Schwenke put the number at 600 000 formal sector small businesses and up to 2.5 million informal. But the latter estimate was based on "extrapolation from observations and intelligent guesstimates", he said.
The Sese findings show that slightly more than half the businesses surveyed were in the wholesale and retail trade, followed by 12 percent in manufacturing. Two of every three people started businesses because they were unemployed. It showed that more than 90 percent of non-VAT-registered businesses were owned by "black Africans".
Stats SA said this confirmed the link between unemployment and informal sector activity, since the unemployment rate is much higher among black Africans than other population groups - 31.5 percent, compared with 22.4 percent of coloured people, 15.8 percent of Indians/Asians and 5.1 percent of white people. Another finding was that slightly more than half of all business owners in this sector were black African women.
While much is expected from the businesses in the way of employment creation, Sese showed that only 15.7 percent had one or more employees, either paid or unpaid. The numbers generally "are in line with our research", Schwenke said.
from Business Report here