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S T A T S SA

Survey of Employers & the Self-Employed (SESE) Presentation to the Portfolio Committee 3 September 2014 Pali Lehohla Statistician-General. S T A T S SA. THE SOUTH AFRICA I KNOW, THE HOME I UNDERSTAND. Presentation outline.

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S T A T S SA

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  1. Survey of Employers & the Self-Employed (SESE) Presentation to the Portfolio Committee 3 September 2014 PaliLehohla Statistician-General STATSSA THE SOUTH AFRICA I KNOW, THE HOME I UNDERSTAND

  2. Presentation outline • Defining the informal sector and non-VAT registered businesses within the sector. • Comparing outcomes in the informal sector with the formal sector. • How the Survey of Employers and the Self-Employed (SESE) was undertaken. • Access to services/amenities and socio-demographic profile of non-VAT business operators. • Location and reasons for start-up. • Industries in which non-VAT businesses operate. • Employees and labour costs. • Turnover, Net profits and Debts. • Financial inclusion and assistance needed. • Highlights THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  3. The Survey of Employers & the Self-Employed (SESE) is mainly about the informal sector • SESE is based on a household survey consisting of two stages. • First stage identified persons who were running businesses in 2001 and 2005 using the LFS and in 2009 and 2013 using the QLFS. • Second stage was a follow up - persons identified in the first stage were interviewed. • Only those who ran non-VAT registered businesses were asked detailed questions about their business operations. • Most non-VAT registered businesses from (SESE) are in the informal sector THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  4. Definition of the informal sector is based on registration and the number of employees in the business. Defining the informal sector Total employed Employed excluding Agriculture & Private households Employers, Own-account workers, Persons unpaid in household businesses Employees Not registered for VAT or Income tax Income tax not deducted by employer Fewer than 5 employees in the business Informal sector

  5. SESE coverage Most non-VAT businesses are in the informal sector (1,4 mil of 1,5mil in 2013) but a small number (143 thousand) pay income tax and are in the formal sector. Non-VAT formal (paying income tax) Formal sector Non-VAT Informal THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  6. The importance of non-VAT registered businesses Non-VAT registered businesses in South Africa play an important role in job creation and income generation among various groups. These units typically operate at a low level of organisation and on a small scale. Non-VAT businesses in the informal sector are often not connected to companies in the formal sector, operating in different markets with different customers. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  7. Comparing the formal and informal sectors : Based on the QLFS results THE SOUTH AFRICA I KNOW, THE HOME I UNDERSTAND

  8. Output and jobs STATS SA Year-on-year changes in formal sector employment has been the main driver of real GDP in the post-recession period. But the informal sector is an important source of jobs for many groups THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  9. Contribution of the informal sector to output and jobs in South Africa STATS SA While the informal sector accounts for between 5-6% of GDP, it contributes 15,8% to total employment (including agriculture) in 2014. THE SOUTH AFRICA I KNOW, THE HOME I UNDERSTAND

  10. Province: Formal and informal sector share of total employment STATS SA Formal sector Informal sector The informal sector provides jobs for one in every four employed persons in LP and one in every five persons in MP, EC & KZN THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  11. Results of the SESE

  12. Persons running non-VAT registered businesses: Socio-demographic profile; Access to services and amenities THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  13. Non-VAT registered businesses Age profile STATS SA Compared with 2001, in 2013 larger proportions of people aged 35-44yrs and 45-54yrs were running non-VAT registered businesses THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  14. Non-VAT registered businesses Gender STATS SA In 2013, more than half (55,4%) of those who had non-VAT businesses were men - up from 39,3% in 2001 THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  15. Non-VAT registered businesses Population group, 2013 STATS SA Almost nine out of every ten people running non-VAT registered businesses are African THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  16. Non-VAT registered businesses Education profile, 2013 STATS SA In every province more than 50% of persons running non-VAT businesses had less than matric. Highest proportions with less than matric were in: MP (82,7%) EC (79,7%) KZN (78,1%) Note: The sample size in Western Cape, Northern Cape, Free State and North West is too small for reliable estimates. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  17. Non-VAT registered businesses Selected features in 2013 STATS SA Source of water (%) Electricity (%) 69,9% do not have piped water 28,3% have no electricity 33,2% only have a pit latrine Toilet facilities (%)

  18. Non-VAT registered businesses Selected features in 2013 75,7% of persons running non-VAT businesses do not keep accounts Financial records (%) Reasons for not keeping records THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  19. Non-VAT registered businesses Duration of the business operation STATS SA In 2013, a larger percentage of businesses were in operation for 10 years or longer (19,6%) compared with in 2001 (11,0%) THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  20. Persons running non-VAT registered businesses: Percent of the working-age population THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  21. Non-VAT registered businesses Percent of the working-age population (WAP) running such businesses STATS SA In 2013, % of WAP running non-VAT registered businesses highest among: Men (4,9%) Black Africans (4,9%) 45-54 yrs olds (8,0%) THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  22. Non-VAT registered businesses Percent of the working-age population (WAP) running such businesses Among the working age population in every province the proportion who ran non-VAT registered businesses declined over the period 2001-2013. The % of the WAP running non-VAT businesses is highest in LP; MP; GP: KZN & EC THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  23. Persons running non-VAT registered businesses: Location and main reason for start-up of business THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  24. Non-VAT registered businesses Location STATS SA In 2013, most non-VAT businesses were located in the owner’s dwelling : 25,3% in a separate space 21,3% in the family space THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  25. Non-VAT registered businesses Businesses with no fixed location by province STATS SA Except in GP, the percentage of non-VAT businesses with no fixed location increased over the period 2001-2013. The largest increases were in: EC by 17,0 percentage points MP by 13,6 percentage points Note: The sample size in Western Cape, Northern Cape, Free State and North West is too small for reliable estimates. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  26. Non-VAT registered businesses Reasons for starting the business, 2013 STATS SA The main reason given for starting a non-VAT business was unemployment (69,2%) THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  27. Provincial distribution of those who started businesses because of unemployment Non-VAT registered businesses STATS SA Reflecting the impact of the global crisis, a larger proportion of people started non-VAT registered businesses because of unemployment. Largest increases in FS, KZN, LP, MP Note: The sample size in Western Cape, Northern Cape, Free State and North West is too small for reliable estimates. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  28. Non-VAT registered businesses Licencing arrangements STATS SA Most non-VAT businesses did not have licences/permits to operate. Among those who did (64 000 or 12,5% in 2013) one in three had a licence/permit from the Municipal/Provincial authority. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  29. Persons running non-VAT registered businesses: Industry THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  30. Non-VAT registered businesses Industry STATS SA The vast majority of non-VAT businesses are in the Trade industry. But the proportion in this industry declined by 15,2 percentage points 2001 to 2013 The second largest industry for non-VAT businesses in 2013 was Services (13,1%) THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  31. Non-VAT registered businesses Industry by gender, 2013 STATS SA In 2013, more than half of the 1,5 mill persons running non-VAT registered businesses were men (55,4%). Businesses in the construction (98,8%) and transport (88,2%) industries were mostly run by men. Women featured more prominently in Agriculture (63,6%) and Services (58,1%). THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  32. Persons running non-VAT registered businesses: Source of finance; Use of raw materials and supplies THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  33. Non-VAT registered businesses Finance needed STATS SA Most people running non-VAT businesses needed money to start their business THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  34. Non-VAT registered businesses Source of finance STATS SA Most people running non-VAT businesses used their own money to start their business. Among those who used their own money wage employment was the main source of finance. Among those who borrowed money - the vast majority got loans from friends or relatives. Commercial banks are playing an increasing role in financing the operations of small businesses. Source of own money Source of borrowed money

  35. Non-VAT registered businesses Use of raw materials and supplies by industry STATS SA In 2013, the Manufacturing industry used the most raw materials. The Trade industry used the most supplies. Use of raw materials Use of supplies THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  36. Persons running non-VAT registered businesses: Employees and labour costs Note: Labour costs are not adjusted for inflation over the period 2001 to 2013 THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  37. Non-VAT registered businesses Employers, own-account workers and employees Own-account workers accounted for the vast majority of people who ran non-VAT registered businesses in both 2001 and 2013. In 2013, the 370 thousand employers employed 1,0 mil employees which is equivalent to an average of 2,7 employees per employer – up from 2,1 employees in 2001. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  38. Non-VAT registered businesses Proportion of paid and unpaid employees STATS SA In 2013, there were 1,0 mill employees in non-VAT businesses : 800 thousand (79,4%) were paid 207 thousand (20,6%) were unpaid. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  39. Non-VAT registered businesses Monthly labour costs STATS SA Larger proportions of people running non-VAT businesses had higher labour costs in 2013 – ranging from 15,8% with costs of R1 501-R3 000 to 10,4% with costs of more than R6 000 in the month prior to the survey. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  40. Persons running non-VAT registered businesses: Turnover and net profits; Business debt Note: Turnover; Net profits & Business debt are not adjusted for inflation over the period 2001 to 2013 THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  41. Non-VAT registered businesses Turnover levels of non-VAT businesses are low - 52,2% had sales below R1 501 per month Profit margins are also low – 64,9% made net profits below R1 501 per month STATS SA Turnover & Net profit Turnover Net profit

  42. Non-VAT registered businesses Turnover in the past month, 2013 STATS SA Almost half (46,6%) of people with non-VAT businesses in Agriculture had turnover of R750 or less in the month prior to the survey. In contrast, one in every three (35,2%) of those in Transport had turnover of more than R6 000. And larger proportions of men compared with women had turnover above R1 500 in the month prior to the survey. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  43. Non-VAT registered businesses Turnover in the past month of R0-R1 500 by province STATS SA In 2013, in MP, LP, EC & KZN more than one in every two non-VAT businesses had a turnover of R1 500 or lower in the month prior to the survey. Note: The sample size in Western Cape, Northern Cape, Free State and North West is too small for reliable estimates. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  44. Non-VAT registered businesses Net profit in the past month, 2013 STATS SA 64,9% of non-VAT businesses made net profits below R1 501 in the month prior to the survey. In Finance, 18,2% of people with businesses had net profits above R6 000. In Transport 17,4% had net profits at that level Larger proportions of men compared to women made net profits above R1 500 THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  45. Non-VAT registered businesses Business debts by industry STATS SA Less than 5,0% of non-VAT businesses had debts. The Trade industry accounted for the largest share of business debts each year. This share has declined from 61,9% in 2001 to 36,2% in 2013. In 2013, Transport (26,7%) had the second largest share of debts by a large margin.

  46. Persons running non-VAT registered businesses: Financial inclusion; Type of assistance needed THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  47. Non-VAT registered businesses Financial inclusion, 2013 STATS SA Source of loans for operations (%) Banking institution (%) • 79,0% do not have a bank account • 96,8% had loans from friends/family for day-to-day operations • More than 95,0% had no credit facility, or asset finance or a mortgage loan for their business • Among the few who had bank accounts only 33,6% used the internet to make payments Access to finance (%) Mechanism for payments (%)

  48. Non-VAT registered businesses Type of assistance needed The largest changes in the proportions 2001-2013 occurred among those who needed assistance with: Marketing (13,1 percentage points) Easing of Govt regulations (11,8 percentage points) Better access to loans (11,2 percentage points) THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  49. Non-VAT registered businesses Marketing assistance needed by province STATS SA In every province except LP, there was an increase in the proportion of persons who wanted assistance with marketing their business. Note: The sample size in Western Cape, Northern Cape, Free State and North West is too small for reliable estimates. THESOUTH AFRICAIKNOW,THE HOMEIUNDERSTAND

  50. Highlights • The number of persons running non-VAT registered businesses declined from 2,3 million in 2001 to 1,1 million in 2009 and increased to 1,5 million in 2013. Over 95% of owners had only one business. •  Non-VAT businesses are predominantly run by black Africans, men, and the less well educated. In 2013, the proportions of the working-age population involved in small businesses were highest in Limpopo (6,3%), Mpumalanga (6,1%), Gauteng (5,0%) and KwaZulu-Natal (4,7%). • 28,3% of non-VAT businesses had no electricity; 10,1% had a flush toilet off site, 33,2% only had a pit latrine while as many as 8,0% had no toilet facilities available. This suggests that many are survivalist in nature. • Most businesses were in the Trade industry – ranging from 1,6 million in 2001 (69,6%) to 821 000 (54,4%) in 2013. • The main reason why people started businesses was due to unemployment. This was reported by 60,6% of persons who ran non-VAT registered businesses in 2001 and by 69,2% of persons in 2013.

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