Impact of unemployment and income on entrepreneurship in post-apartheid South Africa: 1994–2015
Background: South Africa has made significant progress since the dawn of democracy in 1994. It registered positive economic growth rates and its real gross domestic product (GDP) per capita increased from R42 849 in 1994 to over R56 000 in 2015. However, employment growth lagged behind GDP growth, r...
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| Format: | Article |
| Language: | English |
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AOSIS
2018-03-01
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| Series: | The Southern African Journal of Entrepreneurship and Small Business Management |
| Subjects: | |
| Online Access: | https://sajesbm.co.za/index.php/sajesbm/article/view/115 |
| _version_ | 1811232454104580096 |
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| author | Darma Mahadea Irrshad Kaseeram |
| author_facet | Darma Mahadea Irrshad Kaseeram |
| author_sort | Darma Mahadea |
| collection | DOAJ |
| description | Background: South Africa has made significant progress since the dawn of democracy in 1994. It registered positive economic growth rates and its real gross domestic product (GDP) per capita increased from R42 849 in 1994 to over R56 000 in 2015. However, employment growth lagged behind GDP growth, resulting in rising unemployment.
Aim and setting: Entrepreneurship brings together labour and capital in generating income, output and employment. According to South Africa’s National Development Plan, employment growth would come mainly from small-firm entrepreneurship and economic growth. Accordingly, this article investigates the impact unemployment and per capita income have on early stage total entrepreneurship activity (TEA) in South Africa, using data covering the 1994–2015 period.
Methods: The methodology used is the dynamic least squares regression. The article tests the assertion that economic growth, proxied by real per capita GDP income, promotes entrepreneurship and that high unemployment forces necessity entrepreneurship.
Results: The regression results indicate that per capita real GDP, which increases with economic growth, has a highly significant, positive impact on entrepreneurial activity, while unemployment has a weaker effect. A 1% rise in real per capita GDP results in a 0.16% rise in TEA entrepreneurship, and a 1% rise in unemployment is associated with a 0.25% rise in TEA.
Conclusion: There seems to be a strong pull factor, from income growth to entrepreneurship and a reasonable push from unemployment to entrepreneurship, as individuals without employment are forced to self-employment as a necessity, survival mechanism. Overall, a long-run co-integrating relationship seems plausible between unemployment, income and entrepreneurship in South Africa. |
| first_indexed | 2024-04-12T11:03:05Z |
| format | Article |
| id | doaj.art-0c8f20e290434f32a1fb0f5dbdda15cf |
| institution | Directory Open Access Journal |
| issn | 2522-7343 2071-3185 |
| language | English |
| last_indexed | 2024-04-12T11:03:05Z |
| publishDate | 2018-03-01 |
| publisher | AOSIS |
| record_format | Article |
| series | The Southern African Journal of Entrepreneurship and Small Business Management |
| spelling | doaj.art-0c8f20e290434f32a1fb0f5dbdda15cf2022-12-22T03:35:53ZengAOSISThe Southern African Journal of Entrepreneurship and Small Business Management2522-73432071-31852018-03-01101e1e910.4102/sajesbm.v10i1.11552Impact of unemployment and income on entrepreneurship in post-apartheid South Africa: 1994–2015Darma Mahadea0Irrshad Kaseeram1School of Accounting, Economics and Finance and Economics, University of KwaZulu-NatalDepartment of Economics, University of ZululandBackground: South Africa has made significant progress since the dawn of democracy in 1994. It registered positive economic growth rates and its real gross domestic product (GDP) per capita increased from R42 849 in 1994 to over R56 000 in 2015. However, employment growth lagged behind GDP growth, resulting in rising unemployment. Aim and setting: Entrepreneurship brings together labour and capital in generating income, output and employment. According to South Africa’s National Development Plan, employment growth would come mainly from small-firm entrepreneurship and economic growth. Accordingly, this article investigates the impact unemployment and per capita income have on early stage total entrepreneurship activity (TEA) in South Africa, using data covering the 1994–2015 period. Methods: The methodology used is the dynamic least squares regression. The article tests the assertion that economic growth, proxied by real per capita GDP income, promotes entrepreneurship and that high unemployment forces necessity entrepreneurship. Results: The regression results indicate that per capita real GDP, which increases with economic growth, has a highly significant, positive impact on entrepreneurial activity, while unemployment has a weaker effect. A 1% rise in real per capita GDP results in a 0.16% rise in TEA entrepreneurship, and a 1% rise in unemployment is associated with a 0.25% rise in TEA. Conclusion: There seems to be a strong pull factor, from income growth to entrepreneurship and a reasonable push from unemployment to entrepreneurship, as individuals without employment are forced to self-employment as a necessity, survival mechanism. Overall, a long-run co-integrating relationship seems plausible between unemployment, income and entrepreneurship in South Africa.https://sajesbm.co.za/index.php/sajesbm/article/view/115Incomeunemploymenteconomic growthentrepreneurship |
| spellingShingle | Darma Mahadea Irrshad Kaseeram Impact of unemployment and income on entrepreneurship in post-apartheid South Africa: 1994–2015 The Southern African Journal of Entrepreneurship and Small Business Management Income unemployment economic growth entrepreneurship |
| title | Impact of unemployment and income on entrepreneurship in post-apartheid South Africa: 1994–2015 |
| title_full | Impact of unemployment and income on entrepreneurship in post-apartheid South Africa: 1994–2015 |
| title_fullStr | Impact of unemployment and income on entrepreneurship in post-apartheid South Africa: 1994–2015 |
| title_full_unstemmed | Impact of unemployment and income on entrepreneurship in post-apartheid South Africa: 1994–2015 |
| title_short | Impact of unemployment and income on entrepreneurship in post-apartheid South Africa: 1994–2015 |
| title_sort | impact of unemployment and income on entrepreneurship in post apartheid south africa 1994 2015 |
| topic | Income unemployment economic growth entrepreneurship |
| url | https://sajesbm.co.za/index.php/sajesbm/article/view/115 |
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