R10 billion spent on entrepreneurs since 2017, but little to show for it

The City of Johannesburg invested billions in business incubators, policy changes and partnerships with the private sector to boost entrepreneurship as a solution to unemployment, but these efforts have been considered “inadequate” on a global scale.

The Roodepoort Civic Centre has a hidden entrance behind the glitz and glamour of the Roodepoort Theatre. It is here, just inside a small, gated door, where hopeful entrepreneurs can find the unassuming sign that reads, “Isiqalo Opportunity Centre.” 

A short trip to the fourth floor of the building and down a long corridor reveals a medium sized room, clean and tidy but especially quiet. The only sound the tapping of keys as two women work at administrative desks and one client, a man, uses one of the dozen available computers which neatly line the bottom left corner of the space to browse Facebook. According to the freely available brochure, this is the City of Johannesburg’s “concrete solution” to unemployment, stunted economic growth and informal trading.

Johannesburg has a rising unemployment rate of 26,5% according to the Cooperative Governance and Traditional Affairs profile on Johannesburg and a provincial youth unemployment rate of 63,9% according to a 2023 media release from the Gauteng office of the premier. The latest Global Entrepreneurial Monitoring Report (GEM), a 25 yearlong project which maps entrepreneurial ecosystems globally through direct interviews with entrepreneurs in over 50 countries, states that it is a lack of employment which drives 90% of entrepreneurs in South Africa to start their own business. 

Johannesburg is home to around a third of South Africa’s small, medium and micro enterprises (SMME’s) according to a 2022 study on Investigating SMMEs strategic planning techniques in Johannesburg central business district post-COVID-19 lockdown, and this number is growing. The City of Joburg’s definition of an SMME includes not only formal entrepreneurs but also informal traders, this is according to the Small Enterprise Development Agency’s research note on the South African SMME sector.

A market for women entrepreneurs was held in Johannesburg on May 7, 2023 at
Constitution Hill. Photo: File

The Department of Economic Development (DED) is responsible for entrepreneurship in formal and informal sectors, which they refer to “the backbone of any economy” on their website. The department’s mandate promises to, “Support the city towards achieving a 5% economic growth rate and to bringing down unemployment by 2021.” This includes promoting SMMEs, informal traders and streamlining regulation.

However, the department is yet to achieve the economic growth target in the City of Johannesburg, only seeing 0,79% growth in 2018, while the unemployment rate continues to grow, as jobs cannot be created fast enough for a growing population. In addition, the support laid out by the city for entrepreneurs and informal traders is regarded as inadequate by the GEM, who lists South Africa as the worst of over 50 participating countries in entrepreneurial framework conditions. 

This means that South Africa, and Johannesburg in particular, has no adequate framework conditions. These conditions include financing, policy, taxes and bureaucracy, city programmes, school-level entrepreneurship education and training. In addition, despite the department spending R10 billion in the last seven years towards these aims, they have consistently underspent their budget allocated by the city treasury, according to their annual and quarterly reports.

In the “Young Entrepreneurship Policy and Strategy Framework,” the vision is to make Johannesburg “the leading city in entrepreneurial development in the developing world by 2025” through removing barriers of poverty and unemployment. The policy was drawn up in 2009.

According to Leah Knott, Johannesburg Ward councillor and MMC for Economic Development between 2016- and 019, the Johannesburg policy on entrepreneurship has not been amended since. Knott said that this document is outdated, “we should be renewing policy every five years. But it takes 18 months to two years to be approved by council and this can’t happen when the Johannesburg government changes every five minutes.” Referring to the frequent changing of hands in the city’s coalition government, Knott added that, “when government changes, policies in the process go back to the beginning.”

In an effort to support entrepreneurs in Johannesburg, the DED launched ten opportunity centres throughout the city. Knott, who held the role of MMC during the rollout of the centres, said: “The majority of small businesses fail in their first three years, and so the centres give a leg up to entrepreneurs and give them the necessary tools to succeed, like how not to eat profits before seeing a return.”  The opportunity centres serve as entry points to local communities to access guidance and cut the red tape of bureaucracy when starting a business or growing an informal business into a sustainable, formal business.

This project began with the transformation and expansion of what used to be “business centres” according to Knott, who managed small advisory desks in regions E and A, Diepsloot and Alaxendra. The opportunity centres were created in collaboration with various Johannesburg-based communities, who said they did not visit the centres previously because they could not access them due to their placement. The department has since opened 10 opportunity centres in Diepsloot, Montclare, Florida Park, Soweto, the Johannesburg CBD, Alexandra, Braamfontein, the Joburg Market, Elderado Park and a mobile centre which travels to remote areas. The latest annual report from the department said that the rollout is only partly complete, with a goal to open 14 centres.

The DED’s website states that “the purpose of the opportunity centres is to create an environment where entrepreneurs and small businesses can thrive”. Knott said that the centres provide help and advice on finances as well as tax returns, accounting and registration with the CIPC. Workers at these centres are not required to have any entrepreneurial experience themselves, according to the department’s job description.

They do not provide funding to clients, but they do assist with access to funding, mostly through the Gauteng Enterprise Propeller. According to assistant key accounts manager, Nomonde Zulu, access to funding can be secured by applying on the propellers website or by visiting one of their offices.

Including training, events and workshops, the centres have supported 14,294 entrepreneurs in the last financial year. This means that less than five entrepreneurs visit a centre per day. The department acknowledged this low number in their latest report and said it would be able to make more of an impact and reach more clients if they were granted a locomotive allowance. This request has been put forward in the past two financial years and denied due to no budget being available. The department is set to resubmit the request in the next financial year. 

Contrary to the statement provided, the financial performance of the department, which is listed in the same quarterly report, states that the department was granted an advertising budget of R1,084,000 for the last financial year but spent only R257,000 of it.

The complicated issue of informal trading 

Twenty one percent of the Johannesburg workforce is in what the DED refers to as a “thriving, vibrant informal sector”. MMC of the department in 2021 Lawrence Khoza said in his speech for the opening of the Joburg Market Opportunity Centre that the centres provide informal traders with, “non-financial assistance on how to formalise their businesses.” The policy on informal trading in Johannesburg boasts that the city supports informal traders in a way that is more progressive than others, “it looks good on paper,” said Doctor Mamokete Modiba, a senior researcher at the Gauteng City Region Observatory. 

“But there is a translation issue when it comes to practice,” she continued. The city has goals such as the “sharing of public space” and “the regulation of competition” as well as “enabling access to entrepreneurial activities.” In this regard, the opportunity centres exist to take members of the informal economy into the formal economy and provide advice on business growth so they might expand to create jobs and benefit the macro-economy. “On one hand this is effective because it gives resources and training to people with a specific focus on disadvantaged groups and disadvantaged areas,” said Modiba. 

“On the other hand, informal trade is not regarded as a real business by the City of Joburg, it is regarded as something they want to make into something else.” Modiba continued to say that not all informal traders have the ambition to become successful businesses. Some are simply survivalists who want to make enough money to keep bread on the table, and they need a different kind of support from the city. 

Sakhile Pehana is an informal fruit trader, who sells his fruit to passing cars at this
Linden intersection

Modiba suggested adequate services and infrastructure as an intervention strategy for the informal sector, “some traders have no shelter and then when it rains, they lose money because they can’t do their job. Others waste time looking for ablution facilities.” Louis Botha, a Parkview based entrepreneur, said that his main problem with running a business in Johannesburg is electricity. In running his mobile coffee business, Perfect Cup, he said, “I think our main challenge is power. With the loadshedding, at markets in particular, we constantly have to keep an eye on the Eskom schedules.”

The DED had budgeted R3,9 million towards the goal of allocating appropriate areas for informal traders in Joburg, but by the end of the 2022/2023 financial year, no areas were allocated and only R212,000 was spent towards informal trading.

In addition, the city emphasizes training for informal traders to improve their skillset through opportunity centres, however, Modiba states, this training can be inappropriate, “some people in the informal sector do not have an education, others are engineers, for example, who cannot find employment elsewhere. You cannot train someone on writing skills if they already have a degree in engineering.” 

The question of why the DED did not utilize the advertising budget allocated to them and the reasons behind the underspending as well as the failure of the informal trading project were brought to the department, but Wits Vuvuzela received no reply by the time of publishing. 

Entrepreneurs in Gauteng Race, sex and education

Other Johannesburg initiatives: Public-private partnerships

The Johannesburg opportunity centres perform an advisory role, however, a 2022 study by Bantu Majaja and Jabulile Msimango-Galawe on mapping the needs and challenges of SME’s in Johannesburg found through interviews with 1,099 entrepreneurs that the main challenges facing entrepreneurs in Johannesburg is the city’s spatial divide, access to suppliers and access to equipment. These are beyond the resources and capabilities of the opportunity centres, however, national and provincial government attempt to bridge these gaps by partnering with private sector companies and NGO’s in Joburg. 

Moses Mogotlane, manager of the Transnet Matlafatšo centre told Wits Vuvuzela that this centre, based at the University of the Witwatersrand, was started with access to equipment in mind.

This centre consists of two halves, the ideation space and the innovation space. The ideation space follows the same model as the opportunity centres of non-financial support. The innovation space, on the other hand, gives entrepreneurs access to equipment such as 3D printers, computers, software and woodwork machines. “All of this equipment has been made as simple as possible,” according to Mogotlane, who said that, “if you can use a computer, you can use the technology here.” 

The centre was built in partnership with the South African government owned enterprise, Transnet, who sponsored the operations until 2020. It became a popular innovative space for local entrepreneurs, “anytime you visited the centre, there were always people in the space, creating or thinking of ideas”, Said Mogotlane. 

In 2020, however, the contract between Transnet and the University of the Witwatersrand expired and was not renewed by Transnet. Since then, the centre has become absorbed into the Wits Innovation Centre and serves only the Wits community. The number of visitors to the centre has since been on the decline and in the month of September 2023, only 72 people visited the centre at all. 

In addition to this gap in support with regards to equipment, research by the Gauteng City Region Observatory found that historical inequalities continue to persist in the world of entrepreneurship in Johannesburg. In 2021, the percentage of entrepreneurs who are white increased from 10% in 2015 to 20% while the percentage of entrepreneurs who are African increased only from 7% to 15%. This is a trend which applies to gender and education as well.

In response to this, youth employment accelerator Harambee has turned their focus specifically onto young, African women in Johannesburg with lower levels of education in the hopes of bridging this historical divide. “We refer to it as make your own money” says Xolile Sepuru, programme manager at Harambee. 

According to Seperu, this programme consists of social media interaction to stimulate entrepreneurship, looking at a platform-based approach for young entrepreneurs as well as policy, incentives and licensing, “the goal is to remove the barriers to young people starting businesses,” said Seperu. The organization is supported through the Gauteng government. “I think the City of Joburg is doing a lot. They’re doing well in trying to bridge the gap and help entrepreneurs. What we need is for more private organizations to step in” he continued. 

FEATURED IMAGE: The Khoebo Opportunity Centre, based in Braamfontein, is temporarily located at the department of economic development’s building due to disrepair at their previous location. Photo: Kimberley Kersten

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