Employment growth constraints of informal enterprises in Diepsloot, Johannesburg

Abstract

Orientation: Informal enterprises in South Africa’s townships play an important role in employment creation and social protection. While some informal enterprises in inner cities grow, those in townships experience stagnant growth.

Research purpose: The aim was to identify and analyse the internal and external growth constraints, regarding employment growth, of informal enterprises in Diepsloot, Soweto.

Motivation for the study: Knowledge of internal and external growth constraints can inform policymakers on aspects that needs attention in assisting informal enterprises to realise their growth potential.

Research design, approach and method: A quantitative research approach was followed. Primary data were collected from 300 informal enterprises using a convenience sampling technique and structured questionnaire. Descriptive statistics, a matrix analysis and logistic regression models were used to analyse the data

Main findings: The statistically significant growth constraints faced by informal enterprises in Diepsloot are external constraints over which the owner or manager has no control. Local authorities have an important role to play in the growth of informal enterprises.

Practical/managerial implications: Managers need skills and training to manage the external growth constraints. Local authorities should also provide proper infrastructure, public services and increased security. An alternative source of funding, with the ease of access of micro-lender financing but at the rates of commercial bank lending, should be investigated.

Contribution/value-add: This study focuses on the growth constraints of informal enterprises in a township offering a wide range of goods and services. The increase in the number of employees is used as the measure for the enterprises’ growth.