Impact of unemployment and income on entrepreneurship in post-apartheid South Africa: 1994–2015

Abstract

Background: South Africa has made significant progress since the dawn of democracy in 1994. It registered positive economic growth rates and its real gross domestic product (GDP) per capita increased from R42 849 in 1994 to over R56 000 in 2015. However, employment growth lagged behind GDP growth, resulting in rising unemployment. Aim and setting: Entrepreneurship brings together labour and capital in generating income, output and employment. According to South Africa’s National Development Plan, employment growth would come mainly from small-firm entrepreneurship and economic growth. Accordingly, this article investigates the impact unemployment and per capita income have on early stage total entrepreneurship activity (TEA) in South Africa, using data covering the 1994–2015 period. Methods: The methodology used is the dynamic least squares regression. The article tests the assertion that economic growth, proxied by real per capita GDP income, promotes entrepreneurship and that high unemployment forces necessity entrepreneurship. Results: The regression results indicate that per capita real GDP, which increases with economic growth, has a highly significant, positive impact on entrepreneurial activity, while unemployment has a weaker effect. A 1% rise in real per capita GDP results in a 0.16% rise in TEA entrepreneurship, and a 1% rise in unemployment is associated with a 0.25% rise in TEA. Conclusion: There seems to be a strong pull factor, from income growth to entrepreneurship and a reasonable push from unemployment to entrepreneurship, as individuals without employment are forced to self-employment as a necessity, survival mechanism. Overall, a long-run co-integrating relationship seems plausible between unemployment, income and entrepreneurship in South Africa.

Modelling key predictors that stimulate the entrepreneurial performance of small and medium-sized enterprises (SMEs) and poverty reduction: Perspectives from SME managers in an emerging economy

“…This aligns with the view of various scholars (Desiree & Kengne 2016;Mafini, Pooe & Loury-Okoumba 2016;Mafundu & Mafini 2019;Oyelana & Adu 2015) who maintain that SMEs are key drivers of economic growth and job creation as they introduce innovations to tap new markets, boost competition and efficiency across the economy, and reduce poverty and inequality. Mahadea and Kaseeram (2018) also share the same sentiments by asserting that SMEs can reduce the high level of unemployment and contribute to the GDP of the local economy in South Africa. Therefore, SMEs are essential in improving a society's living standards and a country's stability (Cant, Wiid & Meyer 2016).…”

Small and medium enterprises led-growth in two Adriatic countries: Granger causality approach

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Economic Development and South Africa: 25 Years Analysis (1994 to 2019)

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“…(Mahadea, 2001; Mago, 2013; Mago and Toro, 2013; Manaliyo and Muzindutsi, 2013; Mago and Chitokwindo, 2014; Mukorera and Mahadea, 2014; Manaliyo, 2016; Marais, 2016; Mahadea and Kaseeram, 2018; Matebesi and Marais, 2018)…”