Whitman School of Management at Syracuse University
Abstracts > Abstract Details JDE

Abstract Details

Prospects of Entrepreneurship to the Challenge of Job Creation in South Africa
Vol. Volume 17, Number 4 December/2012

DARMA MAHADEA
Entrepreneurship is critical to job creation and economic growth. Unemployment in South Africa is presently at about 25 per cent. The formal sector is unable to provide adequate employment opportunities for labour although the country registered positive economic growth rates over the past 17 years since the demise of apartheid. Some people manage to obtain employment in the informal sector. However, this sector too has been shedding labour recently. Although the government has responded with many initiatives to deal with employment creation, unemployment rates, especially among the youth, remain a formidable challenge. Entrepreneurship, through the creation of new ventures and expansion of business firms, can make a difference to absorb more people in the labour market. But this depends on the level of entrepreneurial capacity in the South African economy. This paper examines the problem of low employment economic growth performance over the post-apartheid period. By drawing on the Harrod-Domar model as a heuristic guide, and using regression analysis, the paper highlights the probable links between changes in economic growth and changes in employment. The results indicate that the growth elasticity of employment is very low over the 1994-2010 period, and investment in relation to the country’s desired growth in GDP is also found to be low. The paper identifies some constraints to employment creation against the entrepreneurial environmental conditions in South Africa and then examines how entrepreneurship can make a difference to employment creation.

Keywords: Job creation, economic growth, entrepreneurship, unemployment, environment, and labor absorption