Small business and supply chains

‘You can’t bite the hand that feeds you’: Contracts between SME suppliers and the large supermarkets

Marlese von Broembsen, University of Cape Town on 9 May 2017
Reads 1,315

This article examines the implications of the contracts between the four main South African supermarkets and their SME suppliers. Supermarkets’ procurement practices, in particular their practice of charging suppliers a substantial ‘rebate commission’ as well as requiring suppliers to comply with private, rather than public, production and health standards, have a significant impact on the ability of new SME suppliers to enter the market and to create jobs. This has important policy implications.

Factors contributing to the demise of informal enterprises: evidence from a Cape township

Andrew Hartnack, Sustainable Livelihoods Foundation on 16 January 2017
Reads 2,322

The reasons for the closure of fairly well-established informal enterprises are varied. Between 2010 and 2015, in the Cape Flats township of Delft South, a key factor was the failure to respond adequately to the more entrepreneurial business model of foreign traders and the strict enforcement of unfavourable liquor trading policies. Still, household misfortunes and broader socio-cultural dynamics also played crucial roles. A richer understanding of why enterprises shut down should inform policy to foster the sustainability of informal enterprises.

Cooperatives: has the dream become a nightmare?

Johannes Wessels, Enterprise Observatory of SA on 23 June 2016
Reads 3,115

Over the past 15 years Government has promoted cooperatives at national and provincial levels with the aim of enabling small producers to tap into mainstream economic activities. Tens of thousands of cooperatives were formed in processes with officials’ performance appraisals based on the number of new cooperatives being formed. A 2014 study in the Free State indicates a very low survival rate of cooperatives and little evidence of job creation. This accords with earlier findings of an EU-funded study at the national level.

Why are foreign-run spaza shops more successful? The rapidly changing spaza sector in South Africa

Rory Liedeman, Sustainable Livelihoods Foundation on 13 November 2013
Reads 45,221

This article examines the contrasting business models in the spaza shop sector, and compares foreign-run businesses with South African businesses. We argue that foreign shop keepers are more successful than South Africans because of the strength of their social networks, which provide them with access to labour and capital and enable collective purchasing and market domination. The article argues for a two-pronged policy that would formalise larger shops whilst permitting and encouraging informal micro and survivalist businesses.

Unlocking the growth and employment potential of business in the margins

Eddie Rakabe, Financial and Fiscal Commission on 13 August 2013
Reads 6,365

Marginalised businesses provide livelihood and income opportunities for a large section of the population. However, these businesses are not able to capture growth opportunities because of several constraints; they continue to operate on the periphery of the mainstream economy. Yet they could become a major source of employment growth. Efforts to unlock this potential must concentrate on exploiting value chains and making government policy more responsive to the unique needs and challenges of marginalised businesses.

How structural inequality limits employment and self-employment in poor areas (or: Why South Africa’s informal sector is so small)

Kate Philip, Advisor to the Presidency on Short-term Strategies for Employment Creation on 16 November 2012
Reads 10,891

Given South Africa’s high levels of unemployment, the relatively small size of the micro-enterprise sector is a conundrum. This article argues that structural inequality is the reason for this – in particular, inequality in the structure of the economy, the legacies of spatial inequality and the continued inequalities in human development. Their combined effect is to limit the scope for poor people to escape poverty via self-employment. This explains the limited extent and small range of informal employment.