1. Survey of Employers & the Self-Employed (SESE)
Presentation to the Portfolio Committee
3 September 2014
Pali Lehohla Statistician-General
STATS SA
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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
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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
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4. Employed excluding Agriculture
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 Non-VAT formal (paying income tax) Non-VAT Formal sector
Registration details
2013
No VAT but Income tax
1 517
No VAT no Income tax
1 374
Income tax only
143
% Income tax only
9,4
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
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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.
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7. Comparing the formal and informal sectors :
Based on the QLFS results
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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
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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.
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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
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11. Results of the SESE

12. Persons running non-VAT registered businesses:
Socio-demographic profile;
Access to services and amenities
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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
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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
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15. Non-VAT registered businesses
Population group, 2013
STATS SA
Almost nine out of every ten people running non-VAT registered businesses are African
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16. Highest proportions with less than matric were in:
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.
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17. Non-VAT registered businesses
Selected features in 2013
STATS SA
Source of water (%)
69,9% do not have piped water
28,3% have no electricity
33,2% only have a pit latrine
Electricity (%)
Toilet facilities (%)

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%)
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20. Persons running non-VAT registered businesses:
Percent of the working-age population
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21. In 2013, % of WAP running non-VAT registered businesses highest among:
Percent of the working-age population (WAP) running such businesses
STATS SA
2001
2013
Thousand
2 258
1 517
% WAP
8,3
4,3
In 2013, % of WAP running non-VAT registered businesses highest among:
Men (4,9%)
Black Africans (4,9%)
45-54 yrs olds (8,0%)
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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
The % of the WAP running non-VAT businesses is highest in LP; MP; GP: KZN & EC
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23. Persons running non-VAT registered businesses:
Location and main reason for start-up of business
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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
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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
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.
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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%)
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27. Largest increases in FS, KZN, LP, MP
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.
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28. Non-VAT registered businesses
Licencing arrangements
STATS SA
Most non-VAT businesses did not have licences/permits to operate. Among those who did ( or 12,5% in 2013) one in three had a licence/permit from the Municipal/Provincial authority.
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29. Persons running non-VAT registered businesses: Industry
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30. The vast majority of non-VAT businesses are in the Trade industry.
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%)
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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%).
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32. Persons running non-VAT registered businesses: Source of finance;
Use of raw materials and supplies
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33. Non-VAT registered businesses
Finance needed
STATS SA
Most people running non-VAT businesses needed money to start their business
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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 own money
2001
2013
Previous / present wage employment
44,0
53,8
Other business
3,2
2,8
Sale of livestock/crops
2,9 2
Sale of other assets
5,1
2,6
Inheritance
5,2
3,1
Pension from work
3,5
4,1
Retirement/severance pay
4,4
A policy that matured
0,6
0,1
Money paid out from a stokvel
6,1
5,8
Other
24,1
21,3
Total
100,0
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
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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
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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.
2001
2013
Thousand
Employers
309
370
Own-account
1 948
1 147
Total
2 258
1 517
Employees
661
1 007
Ave number of employees per employer
2,1
2,7
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38. In 2013, there were 1,0 mill employees in non-VAT businesses :
Non-VAT registered businesses
Proportion of paid and unpaid employees
STATS SA
2013
Thousand
Employers & own-account
1 517
Paid employees
800
Unpaid employees
207
In 2013, there were 1,0 mill employees in non-VAT businesses :
800 thousand (79,4%) were paid
207 thousand (20,6%) were unpaid.
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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.
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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
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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.
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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.
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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 R In Transport 17,4% had net profits at that level
Larger proportions of men compared to women made net profits above R1 500
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45. Non-VAT registered businesses
Business debts by industry
STATS SA
2001
2013
Had debts
109 71
Total
2 258
1 517
% with debts
4,8
4,7
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
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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 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)
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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.
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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 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.

51. Highlights contd.,
In every province, except Gauteng and Northern Cape, and reflecting the effects of the global recession – over the period 2001 to 2013, there was an increase in the proportion of people who stated unemployment as the main reason for being involved in non-VAT registered businesses.
The vast majority of people who started businesses used their own money to do so (over 70,0%). However, in 2013 there was an increase in the proportion who were able to get loans from commercial banks.
Assistance with marketing was the type of assistance most needed by business operators - the proportion needing this type of assistance rose from 27,4% in 2001 to 40,5% in In addition, as many as 21,5% wanted an easing of Government regulations – up from 9,6% in 2001.
Turnover levels and profit margins are relatively small for most non-VAT business operators.
As many as 79,1% of persons running non-VAT businesses did not have a bank account. And over 90% had no credit facilities, no asset finance or mortgage loans for their business operations.