Micro, small and medium enterprises (MSMEs) in South Africa account for over 2 million companies, represent over 98% of formal businesses, and have experienced two-digit growth in the last years.
However, they contribute to creating less than a third of all formal jobs, leaving job creation highly concentrated in a small number of large employers and in the government. In addition, most entrepreneurs enter the ecosystem driven by necessity and the high rates of unemployment. As a result, the majority stay in the informal sector, keeping low growth aspirations and showing a high rate of failure and a low contribution to the creation of formal jobs.
The latter is of particular importance as youth unemployment levels continue to remain very high due to the slowing down of the country’s economic growth, especially when compounded with broader economic fall-out from the COVID-19 pandemic.
South African youth entrepreneurs face similar challenges as their counterparts in the entire continent as they are hindered by a lack of access to sufficient capital, markets, poor marketing and branding skills, suitable infrastructure (including working space and ICT), as well as business management and educational skills.
The aftermath of the pandemic continues to have a devastating impact on MSMEs, youth and women-owned businesses.
These weaknesses have been identified in the UNCTAD Diagnostic Assessment conducted in 2021 and by the stakeholders during the diverse workshops organized to better understand the barriers to MSMEs and entrepreneurship (Partner Dialogue I and Partners Dialogue II).
This report is based on these activities and identifies three areas of interest, namely.
- Optimizing the regulatory environment
- Improving access to finance and
- Entrepreneurship education and skills building
The report was prepared in close cooperation with the Department of Small Business Development and offers a brief analysis of South Africa’s entrepreneurial ecosystem using the UNCTAD Entrepreneurship Policy Framework.