South Africa’s economic policy has historically been influenced by big businesses, often overshadowing the potential of smaller enterprises. This is particularly concerning given the country’s staggering youth unemployment rate of 60%. While big business-led initiatives, such as the government’s youth employment scheme, aim to combat this crisis, their impact remains minimal. There’s a clear need for a paradigm shift. Small businesses and social entrepreneurs could be the game changers South Africa needs.
1. The Disparity in Job Creation
Despite the dominance of large corporations, it’s small and medium-sized enterprises (SMEs) that contribute significantly to employment. The Small Business Institute in South Africa notes that SMEs are responsible for nearly 28% of jobs in the non-agricultural sector (SBP Alert, 2018). More broadly, the World Bank highlights the vital role SMEs play in global economic development and job creation (World Bank, 2019).
2. Nurturing Innovation and Resilience
Large corporations frequently prioritize sustaining innovation. While this ensures consistency, it often lacks transformative impact. SMEs, on the other hand, are more agile and can introduce groundbreaking products and services, providing avenues for economic diversification (Christensen, 1997).
3. Breaking the Internship Cycle
A concerning trend among young South Africans is the cyclical transition from one internship to another without progressing to stable employment. SMEs, given their adaptability, can offer more diverse and long-term opportunities, addressing this ongoing issue.
4. Localized Benefits
The community-oriented nature of SMEs ensures that wealth generation is localized, fostering equitable growth and development across regions (Mason, Carter, & Tagg, 2011).
5. Leveraging Social Entrepreneurship
Social entrepreneurs can address various societal challenges, merging economic strategies with impactful solutions (Austin, Stevenson, & Wei-Skillern, 2006).
Recommendations:
1. Enhanced Funding: The government, in collaboration with big businesses, should provide accessible and low-interest loans for SMEs, focusing on those with a demonstrable strategy for youth employment.
2. Capacity Building: Establish mentorship and training programs that connect seasoned business professionals with emerging SMEs and social entrepreneurs.
3. Review and Revise Policies: Redesign the SETA framework to prioritize SMEs, ensuring internships have a clearer path to stable employment.
4. Promote Collaborations: Encourage partnerships between big businesses and SMEs, enabling resource sharing, skills transfer, and mutual growth.
5. Incentivize Youth Employment: Offer tax incentives or grants to SMEs that demonstrate a strong record of hiring and training young individuals.
For a nation with such a high youth unemployment rate, relying solely on big business-led initiatives is insufficient. Small businesses and social entrepreneurs, with the right support from both the government and large corporations, can significantly address this pressing issue. It’s time for a more inclusive, strategic approach to economic development in South Africa.
References
– SBP Alert. (2018). Quantec Research: Counting the cost of red tape for business in South Africa. Small Business Institute.
– World Bank. (2019). Small and Medium Enterprises (SMEs) Finance https://www.worldbank.org
– Christensen, C. (1997). The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Review Press.
– Mason, C., Carter, S., & Tagg, S. (2011). Invisible businesses: The characteristics of home-based businesses in the United Kingdom. Regional Studies, 45(5), 625-639.
– Austin, J., Stevenson, H., & Wei-Skillern, J. (2006). Social and commercial entrepreneurship: Same, different, or both?. Entrepreneurship Theory and Practice, 30(1), 1-22.