Entrepreneurs are national assets that need to be cultivated, motivated and remunerated to the greatest possible extent. They have the potential to create jobs and address South Africa’s unemployment crisis.

Research suggests that entrepreneurial ventures generate new wealth. While existing businesses may remain confined to the scope of existing markets and may hit the glass ceiling in terms of income and employment opportunities. New and improved products, services or technology from entrepreneurs enable new markets to be developed and new wealth to be created.

Additionally, increased employment and higher earnings contribute to better national income in the form of higher tax revenue and higher government spending. This revenue can be used by the government to invest in other, struggling sectors and human capital.

The interesting interaction of entrepreneurship and economic development holds important inferences for policy makers and business owners. If we understand the benefits and drawbacks, a balanced approach to nurturing entrepreneurship can result in a positive impact on our economy and society.

While it is right to consider entrepreneurship as a development tool, it is also crucial to identify the kind of entrepreneurship that contributes meaningfully towards economic development. It also sets out a robust platform for economic development through triggering innovation, job creation, productivity, and economic and social growth. Moreover, various studies have shown an inherent relationship existing between entrepreneurship and forces that shape economic prosperity. 

In addition, regulation plays a crucial role in nurturing entrepreneurship and requires a fine balancing act on the part of government. Unregulated entrepreneurship may lead to unwanted social outcomes including unfair market practices, pervasive corruption, and criminal activity. However, one in every six South Africans who work, work in the informal sector. 

Obstacles and constraints cause hardship and failure for many of them, pointing to the need for well-designed policies to enable and support the sector, rather than suppress it. Recognizing the informal sector as an integral part of the economy is a crucial first step towards assisting and growing it.

Regrettably, for many decades the sector has been forgotten and marginalised by economic analysis and policy. Many policy makers appear to lump it with formal SMMEs (small, medium and micro-sized enterprises). However, such an approach risks missing key elements of the world of informal enterprises — their potential, the constraints they face, their vulnerability, and the policy support they need to be viable.

While SA’s informal sector is small compared with other developing countries, its informal enterprises provide livelihoods, work and income for more than 2.5-million workers and business owners.

The poverty-reducing effect of informal sector employment is remarkable.

It is estimated that the loss of 100 informal sector jobs has about the same poverty-increasing effect as losing 60 to 80 jobs in the formal sector. As such, policy makers should not be cavalier about losing or destroying informal sector jobs.

An enabled, well-supported, more dynamic informal sector can be a potent instrument in broad-based economic empowerment, job creation and more inclusive growth. As such, an informal sector that generates more viable livelihoods and better-quality employment must be an important objective. This is not to suggest that the informal sector will “solve” the problem of unemployment. But the informal sector must be an integral part of the response to the problems of unemployment, poverty and inequality.

Contrary to popular stereotypes, most of the employing enterprises in the informal sector are in construction, retail trade and services, but also in manufacturing and communication. The informal construction industry holds much promise and has a high propensity to employ.

With South Africa’s rate of unemployment continuously rising, it is imperative that a supportive environment for entrepreneurship – in both the informal and formal sector – is created, as it could easily fast-track economic growth and tackle SA’s unemployment crisis