INFORMAL businesses will never be the springboard for successful and productive business development and growth, so South Africa needs to focus more attention on formal business development, research by the Bureau of Market Research (BMR) at the University of South Africa has found.
Research director at the BMR Prof André Ligthelm recently conducted a study on the state of formal business development in South Africa based on data compiled by Statistics South Africa.
Prof Ligthelm said, though, that it was important to note informal businesses still played an important role in the lives of the poor and would continue to feature in the South African economy for the foreseeable future, as they were often the only means of survival for the poor.
The report suggested the government should elevate business development and growth to one of its priority programmes to urgently address South Africa’s "below-average" entrepreneurial and business performance.
"Current government policy tends to inhibit business growth and development," Prof Ligthelm said.
"In similar vein, South Africa should substitute the notion of job creation with enterprise creation as jobs cannot be sustained independently of business development."
The report showed that in 2010, a total of 462,330 formal businesses were registered for value-added tax (VAT) in South Africa, and almost seven in every 10 of these were either active in the real estate and business services sector (44.3%) or in the trade sector (25.1%).
Almost 35% of total business turnover in 2011 was generated by businesses in the trade sector and just over 28% were in the manufacturing sector.
The report revealed that between 2006 and 2011, the contribution of large businesses to total turnover remained at approximately three-quarters of total business turnover.
The contribution of small businesses declined from 16.4% in 2006 to 14.4% in 2011, according to the report.
"This reality confirms the fact that government policy should become more large business-friendly to stimulate additional fixed investment and the creation of quality jobs," Prof Ligthelm said.
"Government should realise that the creation of a safe, secure and conducive climate for business development is the only sustainable means of addressing unemployment and poverty."