Unemployment behind 70% of informal businesses – Stats SA

Updated on 14 August 2014

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Unemployment behind 70% of informal businesses - Stats SA

According to Stats SA, almost 70% of people who start an informal business do so because they are unemployed and have no alternative source of income, and they are self-funded. Among those who operated informal businesses and did not use their own money to start, most borrowed the money from friends and relatives.

This is one of the findings of the Survey of Employers and Self-Employed (SESE) released by Statistics South Africa (Stats SA) on Thursday.

A survivalist in nature

The SESE, which is conducted every 4 years, collects information about non-VAT registered businesses, most of which are in the informal sector.

Informal businesses are predominantly run by black Africans, persons aged 35 – 44 years, and those with lower levels of education

In 2013 1,5 million people were running an informal business, an increase from the 1,1 million recorded in 2009.

Informal businesses are predominantly run by black Africans, persons aged 35 – 44 years, and those with lower levels of education. But the second most frequently stated reason was that people had the skills for the business they were operating (7,1%), following unemployment and lack of alternative sources of income.

More than one out of four persons (28,3%) running informal businesses had no electricity at their business; 10,1% had a flush toilet off-site, 33,2% only had a pit latrine while as many as 8,0% had no toilet facilities available for their business.

This suggests that any are survivalist in nature.

Turnover levels and profit margins are relatively small for most informal businesses. In 2013 more than 50% had a turnover of R1500 or less in the month before the survey, and less than 10% of businesses made net profits of more than R6000.

Read Also: The Importance of Entrepreneurship in South Africa

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