One of the most unfavourable states that a country can find itself in is having a high unemployment rate. It has adverse effects on an economy on many levels. Firstly a high unemployment rate means that the productivity of a country is materially reduced and so there is an imbalance between the consumption and production that the nation has. Also, the gross domestic product is significantly less than it could potentially be. The economy is unable to function at its true potential because a large number of its population is not actively contributing to the building up of the economy.
It can also have some negative socio-economic consequences; an increase in crime being the worse possible consequence of unemployment. So then it is a great issue. A country cannot be great by simply boasting a small number of highly successful individuals; the majority of the population must have a general sense of financial stability, which often comes in the form of a job. This is why a low unemployment rate is one mark of a successful economy.
When you compare the unemployment rate of South Africa, which we now know to be the 9th highest in the world, at 27.7%, and that of Qatar, which is the lowest at 0.1%, you get a picture of how far back we are lagging when it comes to employment. When you consider the level of development of our nation, you get to see that this figure is much too high. The obvious answer to unemployment is job creation, because the unemployment rate is calculated by taking into account the individuals who are eligible for work but do not have employment. But where will this job creation come from?
In South Africa, we find ourselves always looking to the government to create jobs for us. We come to the government like the little orphan boy Oliver, with a bowl in hand, asking for some more. However any government’s ability to -of its own- produce an increase in job creation is extremely limited. The government owned organisations do not have the ability to produce enough job vacancies to even begin to make a dent to our unemployment rate.
So who can we look to next? The large privately owned companies perhaps? It is true that a large number of jobs are provided by large corporations, but the unemployment rate is still where it is. It can only be reduced by the creation of a significant number of new jobs; which is something large companies are unable to do. They are more likely looking to decrease their workforce in order to maximise their profits and remain competitive in their industries; also, there is a rise in the use of automated systems by large companies which result in further job losses. So then where are these much needed jobs going to come from?
Job creation can only come from new employment opportunities arising, and small businesses are the greatest creators of new employment. We have to therefore look to small business and entrepreneurship. In 2011 South Africa had an estimated 5,579,767 small business owners. These businesses accounted for almost 12 million jobs in the country. Yes, you read right; however, the more interesting thing to note there is that in the years leading up to 2011 small businesses had a only a 21% success rate in the country. This means that the 12 million jobs came from only the successful 21%. Now, imagine how many more jobs there would have been if there was a greater number of successful small businesses in the country. Entrepreneur and small business success is truly the remedy for unemployment in the country.
Studies show that about 90% of the new jobs that will be created in South Africa in the next decade or so will come from small businesses. How then can we accelerate this process? How can we make sure that more small businesses in our country succeed? If only half of the small businesses created were able to achieve sustained success, then an estimated 10 million jobs could be created. As a result I believe that time, money and energy needs to be invested into the development of our entrepreneurship ecosystem and infrastructure. This will in turn result in an increase in the number of successful and established small businesses, which will then lead to a large number of jobs being created. This is the best available avenue of decreasing our extremely high unemployment rate.
Soon I will post an article detailing what an entrepreneurship ecosystem entails and how we, as SA entrepreneurs can play the most important part in its development. As entrepreneurs and small business owners, we are in the position to significantly improve the state of our economy!