Going under the radar

2012-03-13 00:00

THE drop-out rate among small businesses in South Africa has sky-rocketed over the past five years, with many of the owners electing to operate in the informal sector.

According to employment services company Adcorp, 440 000 small businesses have closed their doors over the past five years.

A labour market analyst with Adcorp, Loane Sharp, told The Witness yesterday that the lack of new startup businesses was of major concern.

“Equally disturbing is the number of startups. A few years ago there were about 250 000 people in the process of establishing startups at any given point in time.

“This number is now around 50 000.”

Sharp said the data were collated using a number of sources, including Statistics SA, the Business Trust and Adcorp’s internal databases.

While structural issues like the tax burden on small businesses and labour regulation have impacted the sector, the recession of 2009 was also a blow to small businesses.

“The structural issues will dominate the cyclical issues like the recession,” Sharp said.

“The prospects for small businesses remain very modest. The government has not come up with a concrete proposal for the stimulation of this sector.”

Sharp said many “small business dropouts” had entered the informal sector.

“More and more businesses that are dropping out are entering the informal sector where they do not fall under the labour law radar.”

The informal sector employs about 6,2 million people, he added.

Sharp was releasing the Adcorp Employment Index for February 2012, which found that employment grew by 24 000 last month, compared with growth of 80 000 in January 2012.

While the demand for skilled labour continued to strengthen, most of the job creation in February 2012 came from the informal sector.

“There is an incredibly high demand for skilled, professional people,” Sharp said, but this was from large businesses.

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