| By Gavin Chait,
on 02 December 2006
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A lot is made of occasional government and private development initiatives: how they will change communities, improve livelihoods and so on. It is useful to have a sense of proportion; some idea of how much any project influences development, and how much weight to give any one project. In South Africa there are - officially - 9 million people employed in the formal sector. Government declares that 30% of working-age South Africans are unemployed. Working this out (and being generous with the numbers) means that about 3.5 million people are unemployed. From other government statistics the average formal sector business employs 15 people. This is a good number theoretically. A business employing six people is likely to be entirely family-run. Family members will put up with lower pay and the business is unlikely to be growth-orientated, focusing instead on the day-to-day needs of the family. Larger businesses require staff and are more orientated to delivery, fighting off competition, and that sort of thing. However, these numbers imply that our economy needs to grow an additional 235 000 businesses to absorb all these work seekers. With the extent of legislation and bureaucracy it can take up to two years to legally start a business. Since only the most talented and creative start businesses, they must choose between the few available jobs, migrating to other (less didactic) countries, or going through the nightmare of starting a business. There is no way that government can keep up with this alone. Even a project as extensive as the 1 000 x 1 000 can only start 1 000 microscopic businesses (that certainly don’t employ 15 people each). One way of measuring business size is to estimate the number of jobs that a given cost of setting up a business creates. The figure for South Africa is that R 50 000 buys one permanent job. When the City of Cape Town’s entire budget for economic development is only R 10 million it means only 200 jobs can be created. If it is so clear that Government, on its own, cannot solve the problem, then it is just as clear that Government needs to work with the private sector to create opportunities. Clearly, though - with unemployment figures remaining static over the past 10 years - this is not happening.
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