Almost 70% of people who start an informal business do so because they are unemployed and have no alternative source of income.
This is one of the findings of the Survey of Employers and Self-Employed (SESE) released by Statistics South Africa (Stats SA) on Thursday (14 August).
The report found that turnover levels and profit margins are relatively modest for most informal businesses.
In 2013, as many as 52.3% had a turnover of R1,500 or below in the month prior to the survey, and only 14.6% had sales above R6,000.
Net profits for 64.9% of businesses were also low, at R1,500 or lower in the month prior to the survey, and only 9.2 % of businesses made net profits above R6,000.
The SESE, which is conducted every 4 years, collects information about non-VAT registered businesses, most of which are in the informal sector.
It found that in 2013 there were 1.5 million people running an informal business, an increase from the 1.1 million recorded in 2009. This is still less than the 2.3 million recorded in 2001, “and demonstrates the negative effect the global recession had on this sector”, Stats SA said.
Informal businesses are predominantly run by black Africans, persons aged 35 – 44 years, and those with lower levels of education, it found.
As many as 79,1% of persons running informal businesses did not have a bank account, while over 90% had no credit facilities, no asset finance or mortgage loans for their business operations.
The main reason why people decided to start an informal business was due to unemployment and having no alternative source of income. This was reported by 60.6% of persons who ran informal businesses in 2001 and by 69.2% of persons in 2013.
The vast majority of people who started informal businesses used their own money to do so, at over 70%, the report found.
The SESE 2013 survey is based on a household survey, consisting of two stages. The first
stage involved identifying individuals who are running businesses based on the Quarterly Labour Force Survey (QLFS) conducted in the third quarter (July – September) of 2013.
The second stage involved a follow-up, when the owners of these businesses were interviewed, to determine the nature of their businesses.