Employment growth constraints of informal enterprises in Diepsloot, Johannesburg

Christina M Ledingoane,Jacoba M.M Viljoen

doi:10.4102/ac.v20i1.827

Abstract

Orientation: Informal enterprises in South Africa’s townships play an important role in employment creation and social protection. While some informal enterprises in inner cities grow, those in townships experience stagnant growth. Research purpose: The aim was to identify and analyse the internal and external growth constraints, regarding employment growth, of informal enterprises in Diepsloot, Soweto. Motivation for the study: Knowledge of internal and external growth constraints can inform policymakers on aspects that needs attention in assisting informal enterprises to realise their growth potential. Research design, approach and method: A quantitative research approach was followed. Primary data were collected from 300 informal enterprises using a convenience sampling technique and structured questionnaire. Descriptive statistics, a matrix analysis and logistic regression models were used to analyse the data Main findings: The statistically significant growth constraints faced by informal enterprises in Diepsloot are external constraints over which the owner or manager has no control. Local authorities have an important role to play in the growth of informal enterprises. Practical/managerial implications: Managers need skills and training to manage the external growth constraints. Local authorities should also provide proper infrastructure, public services and increased security. An alternative source of funding, with the ease of access of micro-lender financing but at the rates of commercial bank lending, should be investigated. Contribution/value-add: This study focuses on the growth constraints of informal enterprises in a township offering a wide range of goods and services. The increase in the number of employees is used as the measure for the enterprises’ growth.

Highlights

The term ‘informal’ refers to employers and workers who make a living or supplement their earnings outside the formal economy (Edusah 2013:178)
Many South Africans who cannot find employment in the formal economy turn to the informal economy
Enterprises who perceived a lack of agency funding, commercial bank funding, land ownership, proper roads and street lights, and sewerage facilities as growth constraints are more likely not to grow with odds ratios of 052859, 0.3707268, 0.4009038, 0.761923 and 0.2718777

Summary

Introduction

The term ‘informal’ refers to employers and workers who make a living or supplement their earnings outside the formal economy (Edusah 2013:178). Informal non-agricultural activities play an important role in economic development and job creation in many African countries (Edusah 2013:177). Many South Africans who cannot find employment in the formal economy turn to the informal economy. Compared to other middle-income countries, South Africa’s informal economy is much smaller (Lloyd & Leibbrandt 2018:152). Between January 2008 and June 2016, only 16% of those employed were employed in the informal economy (Lloyd & Leibbrandt 2018:152). In 2014, 1.4 million were owners and 1.1 million were employees (Rogan & Skinner 2018:151)

Methods

Results

Discussion

Conclusion