Kizito Okechukwu | January 25, 2024
The National Planning Commission (NPC) recently released its ten-year review of the National Development Plan (NDP). The NDP review revealed that the vision for South Africa outlined in the NDP has not been realised over the past decade. The review revealed that the NDP has been marginalised, leading to fragmented planning and ineffective implementation. The NDP places the responsibility of creating 90% of new jobs in the workforce in South Africa on the SMME sector, between 2010 and 2030. The small business sector, which had an estimated 2.5 million small businesses in 2019, was most severely affected by the Covid-19 pandemic lockdown.
22 On Sloane recently published a white paper which seeks to foster a comprehensive understanding of the present employment landscape within the South African SMME sector. This was achieved through the compilation, analysis, and the trend analysis of data from various publications and data sources.
The NDP has set an ambitious target of reducing unemployment to 6% by 2030, with interim goals of 20% by 2015 and 14% by 2020. The unemployment rate in 2015 stood at 24.3%, surpassing the 20% target by 4.3 percentage points. Notably, this discrepancy escalated significantly over the five years leading up to 2020, where the unemployment rate was 18.3 percentage points higher than the 14% target. Another cause for concern is that, based on the current trajectory, the 2030 unemployment rate could potentially increase to 38%. At the current unemployment rate, a negative growth rate of -11.58% would be needed to reach the 2030 NDP target of 6%.
The fact that unemployment levels have increased significantly from the initial figures on which the NDP had based its projections over the past decade remains a cause for concern. There are multiple reasons for this increase, including the socio-economic and health impact of the COVID-19 pandemic, skills deficits in emerging and critical sectors, unsuitable policies, rising crime, growing social fragmentation and lower than-expected investment.
We are currently in the 2019-2024 Medium Term Strategic Framework (MTSF) and it is envisaged that the 2024-2030 MTSF would be the last seven-year NDP implementation framework.
Over the past 15 years, the employment ratio has seen a negative growth rate of -1.27%. To reach the NDP target, there would need to be an 8.53% growth rate over the next seven years. The current projection based on the past 15 years is 35.3%. Total employment will also need to see the growth rate increase from 0.92% to 5.91% over the next 7 years, to reach the NDP employment target of 24 million in 2030. The current projection, based on the past 15 years is 17.55 million. These projections (Employment Ratio and Total Employment) provide an estimate of the employment level in 2030 under the assumption of a continued trend, without major economic disruptions, as observed in the historical data.
In the white paper, 22 On Sloane introduced a ‘COVID-19 Exclusion Baseline’, which is a hypothetical scenario designed to estimate the trends as if the COVID-19 pandemic had not occurred. For 2020 and 2021, data points were replaced with the average values from a 5-year period (2017, 2018, 2019, 2022, 2023). This was with the aim of creating a normalised baseline for comparison against the actual pandemic-impacted data. With the exclusion of COVID-19, the projections improve to 27.83 million for the labour force and 18.44 million for employment, with a decline of 1.16 million in the total number of unemployed individuals. While these figures paint a more positive picture, they are still significantly behind in reaching the NDP targets.
The NDP envisions that in 2030 the SMME sector will contribute 60% – 80% to GDP growth and employ 90% of the workforce. Of the overall 24 million employment target (NDP target for total SA employment by 2030), SMMEs would need to employ 21.6 million people in the workforce by 2030. The current projection of 9.72 million jobs in the SMME sector by 2030 means that, without major economic disruptions and at the current growth rate, SMMEs could only potentially create 1.72 million new jobs.
The Department of Small Business Development emphasised in May 2023 that as of 2023, approximately 2.5 million Small, Micro, and Medium Enterprises (SMMEs) in South Africa employ just under 8 million people and thus to meet the NDP target, there would be a strong need to significantly increase the number of SMMEs and cooperatives in South Africa. This situation calls for a substantial increase in support for SMMEs, along with the development of integrated strategies within the SMME and cooperative sector, as outlined in the National Integrated Small Enterprise Development Strategic Framework (NISED).
To align with the NDP goal of having SMMEs generating 90% of new jobs by 2030, the need for adjustments to facilitate growth needs to be acknowledged. Providing robust support for SMMEs over the next seven years requires thorough research to inform policies that effectively address existing gaps. Currently, attention is required to fill evidence gaps, including obtaining information on SMMEs in rural areas, obtaining more accurate estimates of SMME employment and understanding SMME growth rates. Regularly updated evidence, encompassing the impacts of current interventions, is essential for better monitoring and evaluating programmes.
The role of SMMEs in job creation, particularly for vulnerable populations, is pivotal. Governments, private sector and donor organisations in both developed and developing nations recognise this, leading to substantial investments in SMME development, as underscored by the International Labour Organisation in 2010.
If South Africa is to achieve its NDP targets, it means that both private and public sector need to work together to create 3.21 million new SMMEs over the next seven years and, given the current estimate of 3.71 employees per SMME, this could potentially help create 11.9 million new jobs by 2030 thereby achieving the NDP targets.
To have access to the full white paper, visit: https://www.22onsloane.co/resources/
Kizito Okechukwu is the Executive Head of 22 On Sloane, Africa’s largest startup campus; and co-Chair of the Global Entrepreneurship Network (GEN) Africa.
22 On Sloane is the largest startup campus in Africa. The campus offers disruptive startups and innovative SMEs a complete turnkey solution to scale, from the initial idea all the way to commercialisation, funding opportunities and access to markets. Its aim is to nurture the entrepreneurial mindset, ensure their sustainability, and explore development of new industries and contribute towards job creation in Africa.
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