Because unemployment in South Africa is at levels considered unthinkable in other parts of the world, it has been seen as something of a conundrum that the informal and micro-enterprise sectors remain as small as they are, that they are so dominated by retail activity and have so little apparent dynamism or scope for growth and employment creation. Surely economic initiative ‘from below’ in townships, informal settlements and rural areas should be making a greater contribution to creating employment and livelihoods?

Explanations for this state of affairs typically focus on the historical exclusion of black people from many forms of business activity; the consequent lack of a culture of entrepreneurship; the lack of access to credit and capital and skills; and red tape and regulatory barriers to entering the market.

None of these issues is irrelevant, but they overlook a bigger issue: the role of structural inequality in limiting economic opportunities in poor and/or remote areas in ways that limit the entry points and pathways into sustainable economic activity. For poor people this raises the bar for market entry far higher than in many other developing countries. Two key forms of structural inequality are the focus here: spatial inequality, and the structure of the economy.

While the roots of the many forms of inequality lie in the apartheid period and before it, the problem is that, despite the many changes since 1994, crucial underlying determinants of inequality persist. As long as they remain real, they will limit the scope for poor people to escape poverty via self-employment.

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Written by Kate Philip, Researcher, TIPS, Advisor to the Presidency on Short-term Strategies for Employment Creation

This article was first published on the Econ3x3 website – Accessible policy-relevant research and expert commentaries on unemployment and employment, income distribution and inclusive growth in South Africa.