A critical mechanism behind the unusually deep inequality in South Africa is the very small number, by international standards, of small businesses in the country. On the one hand, far fewer people earn livelihoods from their own businesses than in other upper middle-income countries. That fact largely explains South Africa’s extraordinarily high level of joblessness. On the other hand, income from productive assets and financial savings is even more unequal than wages and salaries.
It follows that an industrial policy aimed at inclusive industrialisation needs to step up the number of small businesses. This Working Paper analyses the current state of small business, and the systemic obstacles to its expansion, in order to identify strategies to achieve that aim.