ECSECCs latest report on informal business shows significant decline in formal employment and increase in informal employment. The report shows that for every 100 people employed in the Eastern Cape’s formal sector in 1995, there were 14 fewer people in 2013. However, for every 100 people employed in the Eastern Cape’s informal sector in 1995, there were 64 additional people in 2013. This implies an employment shift from the formal economy to the informal economy; an inflow into the informal sector in the form of self-employment through the creation of micro-enterprises. This reality cannot be ignored. Given the trend towards increase in informal sector employment, this report emphasises the role that the 148 672 entrepreneurs running informal businesses may play in employment creation.
The ECSECC report analyses StatSA's Survey of Employers and Self-Employed (SESE) for 2013. The report seeks to examine the role that micro businesses play in the informal sector in the Eastern Cape. The report is based on the results of the "Survey of Employers and Self-Employed" (SESE). The survey was conducted country-wide by Statistics South Africa in 2013. The focus of the survey was on employers and self-employed people (or own account workers) who are engaged in businesses which are not registered for VAT or income tax, most of which were in the informal sector (in this report, they are referred to as informal businesses). According to SESE, in 2013, the Eastern Cape had 148 672 people running informal businesses.
The report presents a baseline profile and the status-quo of the 148 672 informal businesses. It seeks to address critical questions that puzzle SMMEs practitioners in the province. These questions are as follows:
What is the contribution of informal businesses to total employment in the province?
In which economic sectors do micro-businesses in the informal sector operate?
What is the education and skills level of people engaged in informal business?
To what extent do informal businesses contribute to the subsistence economy?
What are the main reasons why people decide to start an informal business?
Where do entrepreneurs in the informal sector get money from to start their businesses?
What is the turnover of micro-businesses and how do entrepreneurs use the profit generated by informal business?
What is the status of women entrepreneurs running informal businesses?
What challenges do entrepreneurs running informal business encounter and what type of assistance do they need?
Some of the findings of the report include:
The 148 672 entrepreneurs who were involved in informal businesses represent 11.4% of total employment in the province. In other words, the Eastern Cape’s informal businesses contribute 11.4% to total employment. This contribution of 11.4% is very substantial. It by far surpasses that generated by Agriculture (6.0%), Mining (0.2%), Electricity (0.6%), Construction (6.4%) and Transport (3.0%).
Informal businesses are also scattered unevenly across the Eastern Cape district municipalities, ranging from 32.8% in Amathole to 2.6% in Cacadu. The majority (61.3%) of informal businesses are found in the Amathole and O R Tambo districts, which is an indication that informal businesses in the Eastern Cape are not necessarily an urban phenomenon.
Almost three quarters (74%) of the profit generated in the business is spent on household items. This is an indication that informal businesses are mostly operating for subsistence purposes. The other quarter of the profit is either saved or re-invested in the business.