Blacks are going into business at a record rate
Entrepreneurial zeal shown by sharp rise in company registrations
● A data set obtained by Open Up reveals that black South Africans are registering small and medium-sized businesses at an unsurpassed pace, illustrating an entrepreneurial zeal that needs support.
This excludes coloured, Indian and Chinese people who are also classified as black.
Support for small and medium-sized businesses is at the heart of ANC economic policy, and the data reveals the pent-up demand as well as a seismic shift in who is registering companies.
Data for 2016 shows that 60% of company registrations with one or two directors were owned by black Africans. White-owned company registrations are at 20%, and the remaining 20% of registrations have mixed directorships, which include black people.
The data blows holes in the rhetoric that says black people are not participating in the economy and marks the first time that a racial qualifier has been added to the raw numbers.
The director demographics are not a perfect proxy for small and medium-sized business ownership but do offer an important trend-line for policymakers to build on.
While the debate on white monopoly capital and its dominance is likely to take up ANC conference air, the trend towards an emerging small and medium-sized business-owning class is more interesting, say analysts, as the numbers are much higher than most people think.
Where opportunities lie
The sectors in which companies are being registered provide an interesting snapshot of where opportunities may lie for owners of small and medium-sized businesses, or where they perceive these to be.
African directors appear focused on construction, security, transport and property.
White-owned small businesses are largely in the same sectors with a large number — 31% — registering in plumbing, with high numbers of property companies, too.
Companies with one or two directors constitute 90% of all companies registered, again showing that the South African economic debate is too focused on big corporations. It is simply not where the action is.
The Companies and Intellectual Property Commission has changed how it registers companies to make it easier. This is one factor explaining the jump in registrations.
Gauteng the epicentre
The numbers of African-owned small and medium-sized business registrations have risen substantially between 2014 and 2017.
Johannesburg and Gauteng in general are the epicentres of black can-do — they account for the majority of black Africanowned companies. In the Western Cape, an early assessment of company registrations reflects a dominance of white directors, with a much smaller number of new businesses registered by blacks.
Land transactions, used as a proxy for progress on land reform, also reveal that land owned by black people in the Western Cape, Northern Cape and the Free State is still in single percentages.
Significant progress has been notched up in KwaZulu-Natal, Limpopo and the Eastern Cape (see Page 4).
That is the good news. The data also contains bad news.
Deregistration numbers are high, and dormant or shelf companies are significant. African-owned companies have a significantly higher deregistration rate than whiteowned companies at 68% versus 45%, measured for 2013 and 2014.
This is a 68% deregistration rate of threeto-four-year-old companies. It may be much higher for older companies.
Also, deregistration might occur much later than when the company actually stopped trading.