Online retail study shows signs of growth in South Africa in 2010

Online retail study in South Africa shows strong growth between 2009 and 2010. This trend is reinforced when a longer perspective is taken.

World Wide Worx has released its latest report on online retail in South Africa in 2010. The press release provides some interesting data. This post covers the following:

  • a snapshot of online retail sales in 2005 and 2010
  • a comparison between physical retail and online retail in 2010
  • chart on the growth rate between physical and online retail between 2009 and 2010

{Ed Note: This post experiments with a way to display charts and data. It may not work in every web browser, and for this reason I have included a PDF version of the document below.}

[download id=”9″]

Online retail grows just under 300%  between 2005 and 2010

The press release got me thinking what does the longer term trend look like. In an article , the value of online spending was R 514 million in 2005, and the estimate is presented by the same research company. The chart below shows formidable growth over three years – using nominal values – of just under 300%. It is estimated that online retail sales in 2010 were R 2,028 billion.

South Africa Online Sales
Online sales grew by almost 300% between 2004 and 2010.

… Online however remains a small percentage of retail spending in 2010

 
Online still accounts for less that 0,5% of all retail sales in South Africa. This is representative of a growing industry, with internet access still a major issue slowing down the growth of online sales. Importantly, as World Wide Worx point out, it is not just access to the Internet, but rather that more experienced Internet users are leading the growth trends.

Online sales have grown more rapidly than physical retail sales

 

South Africa - Online versus Physical Retail
Online sales are less than 1% of total retail sales (2010).

The chart shows that online retail sales have grown by 30%, while physical retail sales have grown much more modestly at 7% between 2009 and 2010.

Immigration policy in South Africa requires coalition building

South Africa must create a coalition between government, business and labour to address immigration policy.

On the radio programme The Money Show with Bruce Whitfield, Richard Pike of Adcorp had estimated that there was a vacancy rate of 829 800 high skilled jobs in South Africa that could not be filled, in part because the immigration laws made it difficult to recruit internationally. The report on which the estimate is based can be read here [PDF: Link]
In my mind, somewhere on Empire Road, I did a quick calculation.
 
There is a truism that every skilled job creates somewhere between 2 and 3 jobs. So in effect if the data at Adcorp is correct, we are potentially losing out somewhere between 1,6 million and 2,4 million jobs.
There is a truism that every skilled job creates somewhere between 2 and 3 jobs. So in effect if the data at Adcorp is correct, we are potentially losing out somewhere between 1,6 million and 2,4 million jobs. Importantly, the call is too fill jobs that currently exist in companies, not a clarion call for igniting entrepreneurial activity. Simply stated, existing companies do not have the skills they need to run their businesses. Adcorp, has far as I can tell not made their methodology for calculating employment rates or the estimates for immigration open to public scrutiny, and as such the claim does not yet pass the tests needed for evidence based public policy. However, even if Adcorp is half correct, then this is an area that requires significant attention. It is safe to assume that Adcorp is correct, even if there methodology still needs scrutiny:

  • The Department of Labour has estimated in 2008 that there are 502 000 skilled vacancies in the South African economy.
  • There are several studies that reach similar conclusions, and are instructively reviewed by Reza Daniels [PDF Link], of the University of Cape Town. Each of these studies reviewed indicate a lack of skilled workers in the South African economy.

The pro-business think-tank, Centre for Development and Enterprise summarises the argument for reviewing immigration policy as follows:

Immigants can spur growth by filling the skilled jobs which firms need in order to expand; providing the entrepreneurial skills needed to start new businesses; and adding the education, training, engineering,medical, and other skills needed to improve service delivery.

 
CDE then continues to outline a set of proposals to achieve these objectives, which require careful evaluation.
But, this is only half the story. There is another set of compelling arguments around immigration.
First, South Africa has a high rate of graduate unemployment. The Quarterly Labour Force Survey indicates that an estimated quarter million unemployment graduates. (This is the first Chart of the Week that we will produced on Zapreneur). The argument goes that these graduates have under utilised skills that competent and creative companies could utilise to fulfil their own objectives, and in this case contribute to the national goal. Significantly, there are section of organised business that have focussed solely on immigration policy, but have not focussed extensively on the wider issues related to the skills shortage in South Africa.
Second, there is a concern that foreigners would replace South African jobs. Importantly, if there is demonstrable evidence of a link between skilled foreign workers, and the creation of local employment, these concerns need to be addressed. A good example would be the Malaysian attempts to attract skilled workers and entrepreneurs into their economy which matches their national interests with the needs of potential immigrants.
Third, there are genuine concerns that the Department of Home Affairs would not have the capacity to fulfil their role in a new (I should note that I recently applied to replace my stolen Identity Document, and received a skilled, competent and friendly service from the Department of Home Affairs.)
Importantly, the New Growth Path indicates that:
 

the overall supply of highly skilled labour should be increased by continued efforts to streamline the immigration system in ways conducive to the inflow of skills, linked to a skills-transfer programme and an on-going commitment to upgrade domestic education on a broad basis.

 
The debate on immigration policy is thus an important area to debate especially as it relates to economic inclusion in South Africa. The debate would be assisted by:

  • Strategies to include unemployed graduates and improve the skills profile of South Africans,
  • A more deliberate strategy on how to deal with attracting skilled migrants into South Africa

It is an area that requires careful attention due to its importance. More to the point, an agreement on the appropriate policy for skilled migrants is possible, requiring building a coalition across business and labour. It requires reframing the debate in a way that speaks to the wider imperatives of economic growth and economic inclusion. The foundations of creating this coalition is the already existing evidence. Immigration policy must be part of the wider policy package to improve skills in the economy. Moving the debate forward requires making the linkages between increasing recruitment of skilled foreigners, and the potential impact on employment in South Africa. It requires turning the truism that jobs will be created as a result of reviews to our immigration policies be developed into a more coherent set of arguments that support public policy proposals.
[Ed Note – This post has focussed on skilled migrants, but recognises that there are wider issues related to asylum seekers and undocumented migrants]

The White Tiger and the Rooster Coop

Book review of The White Tiger by Aravind Adiga.

Aravind Adiga in The White Tiger raises important questions and completes an important feat – rendering the complex concepts of poverty traps and the rah-rah around entrepreneurship accessible in a devastating tale.

The-White-Tiger

The White Tiger by Aravind Adiga, Atlantic Books, Published March 2009, 336 pages, ISBN: 978 1 84354 722 8

The entrepreneurial story is often about young men – women rarely feature as protagonists – undertaking the journey from rags to riches.  Through hard work, attending the University of Hard Knocks the protagonists find a route to social mobility and respect. This universal storyline has been criticised so consistently that to equate entrepreneurial success with hard work, dedication and perseverance – without referencing to contextual factors – is to be guilty of the Haratio Alger Myth. The author Haratio Alger, was an extremely popular American author writing in the 19th century, who told stories of industrious young men overcoming their poverty, with hard work, initiative and perseverance, and through that becoming not only wealthy, but virtuous people. There is an importance in not reproducing this myth, for as much as we admire the successful and ethical entrepreneur, it provides little understanding of the reasons for her success.


Can the opposite however be true? In criticising those perpetuating the  Haratio Alger Myth we may overemphasis the contextual factors that have led to entrepreneurial success. Yet, there is a deeper conclusion that we may reach – entrepreneurial success may transform the lives of the person, but it is not powerful and disruptive enough to change the underlying economic system, meaning that the majority of people stay trapped in conditions of exclusion and exploitation. A demanding question that South Africa must face, and the reason The White Tiger – set in India – has relevance to us in South Africa.
Continue reading “The White Tiger and the Rooster Coop”

National Planning Commission Goes Facebook, excludes most South Africans

South Africans given first opportunity to input on the development of the National Plan, but only for internet users.

South Africans given first opportunity to input on the development of the National Plan, but only for internet users.
On Zapreneur, I have argued that the national planning process must be made more open for the National Planning Commission to meet its goals. While it is presumptuous to indicate that the article had an influence, The Presidency announced that it will be having NPC Jam Session running for five days starting on the 28 March 2011.
Continue reading “National Planning Commission Goes Facebook, excludes most South Africans”

Three things the National Planning Commission should be doing

Proposes a way to make the National Planning Commission work more open and transparent.

The National Plan – it holds almost a mythical status in our discourse about our future, and has a multiplicity of meaning. These meanings are layered with deep ideological, class, race, gender and many other chasms that are the South African reality. The idea that closes this chasm is that with a national plan, we will find common ground to face the deep and structural reasons that make us a country with staggeringly high rates of unemployment and inequality. We are placing our future hopes on a national plan, that the National Planning Commission (NPC)has been tasked to develop. In placing such a huge burden on the commission, the quietness of the NPC to outline a process towards meeting this goal is disappointing.
It is also understandable in that the NPC is doing something that we have not done before. The task is after all formidable one to both:

  • unite society behind a programme,
  • and at the same time  develop a deliberate strategy to overcome the structural nature of unemployment, inequality and low economic growth.

With such an important task, the NPC has however failed to mobilise it’s most important resource – the people of South Africa. The process currently fails to galvanise the energy of citizens to begin developing inputs and to organise and mobilise behind their perspectives. The process of developing the “vision statement” must be consultative at the outset, and not a product of process involving just the commissioners and experts. Importantly, I do not think that the NPC would disagree with the core principle of participation. What is at issue is whether public involvement happens sooner or later. I argue it should happen immediately.

What the NPC should be doing?

What then should the NPC be doing? The NPC should be immediately doing three things.

  1. Involve people immediately. This would require setting up systems for citizens to contribute to the NPC in a meaningful way, and in the organisational forms of their choosing. This deepens democracy and advances our intrinsic values of a “people’s democracy”. At an instrumental level, it creates a legitimate and open process. As we know from our history, people participating in the process become the strongest advocates of ideas that they have helped shaped.
  2. The NPC must listen. For some the NPC are like sages that will deliver answers. This is not the role of the NPC. Instead, it must search for the answers in society. Fortunately, there is an abundance of ideas in our society. Yet, the question remains whether we are providing a platform for the idea creators to share their solutions and contribute to the national plan. Importantly, this process requires openness and transparency to catalyse innovative thinking and effective implementation. This brings the advantage of multiplying ideas, and after that weeding out the bad ideas, and seeding the good ones. Importantly, this process creates the prospects for shaking the proverbial hegemony of ideas in our society, by unleashing the talents of South Africans outside of the current organisations that dominate our discourse.
  3. The NPC must release early and release often, to use a term from software development. I doubt that anyone has a view that the national plan is an event where  the President  simply announces it. Instead, everyone agrees it is a process. The real question is around what that process should be. I would argue that the NPC should be presenting a set of options on an important issue, and asking for advice, criticism and calling for alternatives. To do this, it must release documents often and early, so that it involves people, builds trust and field-tests ideas and their programmatic elements.

Too some a democratic process for the National Plan is a non-starter, given the deep divides in our society. However, the process itself could provide for a deepening of democracy, an assessment of ideas, and a bridge across our traditional divides. Obviously, government must take decisions at the end of the day, and ensure implementation. The way it develops policy however is important to building support around a vision for our country. More to the point, through assessing all the options it helps in choosing policy options that will challenge the underlying power relations that underpin inequality and unemployment.Ultimately, are we as a society comfortable with handing over our futures, without participating in it? The overwhelming answer is that not only are we uncomfortable with such a state of affairs, as a society we would welcome and cherish the opportunity to shape our collective future.

Enter the entrepreneur? Budget 2011 Proposals for Many Small Businesses not Just White Tigers

Review of major tax and expenditure proposals impacting on small business.

 

zapreneur
Zapreneur declares it has an interest in this subject. Photo - Moe and Milsey's Construction Company

We like them. The small business that succeeds against the odds. Minister Gordhan even saluted a couple of success stories on the budget. In the build up to the budget, I choose to read The White Tiger by Indian author Aravind Adiga . The White Tiger provides a devastating description of the poverty traps, and that rare success stories translate to private gain without a wider social impact. The central premise of the book is that successful entrepreneurs are as rare as white tigers. In fact, in South Africa the data provided by the Global Entrepreneurship Monitor indicates that job creating, opportunity based businesses are a rarity in South Africa. The book though not set in South Africa provides a useful refrain from the rah-rah usually associated with entrepreneurship. What then does the budget propose for the small business entrepreneur?
Continue reading “Enter the entrepreneur? Budget 2011 Proposals for Many Small Businesses not Just White Tigers”

Youth Subsidy and building consensus

Debates the proposals on a youth subsidy for South Africa.

Youth subsidy
KwaZulu-Natal Midlands: Ceramic painters Zama Nqubuku (foreground) and Wiseman Ndlovu at work in the Ardmore Ceramics studio. Photo: Hannelie Coetzee

Minister Pravin Gordhan reintroduction of the proposals around the youth subsidy is a brave political decision, given the overwhelming and justifiable criticism of the proposal. In tabling the new proposal Minister Gordhan has listened to the criticism and opted to tweak the proposal. The first proposal provided a wage subsidy or hiring voucher to lower cost of labour and compensate employers for the perceived risk of hiring inexperienced workers. In tweaking the proposal, government has shifted from this position, so that it is now to be administered as a tax credit. This is significant step as it potentially means that entry-level wages will remain the same.
Continue reading “Youth Subsidy and building consensus”

What will happen to the R 9 billion job creation fund?

Budget preview focussing on two distinct options to allocate the R 9 billion job creation fund.

2011 Budget Options

This article previews the budget looking at three options for spending the R 9 billion for job creation activities announced in the State of the Nation Address.
President Jacob Zuma left the details of the R 9 billion for job creation activities vague in his State of the Nation Address, simply saying:

We are pleased to announce the establishment of a jobs fund of 9 billion rand over the next three years to finance new job-creation initiatives.

The announcement on the details of this are eagerly anticipated when Minister Pravin  Gordhan delivers the 2011/12 Budget Speech. There are three major readings about what the details of the proposal will mean. The major options are:

  1. Application based fund
  2. Subsidy to support youth employment
  3. Support small business

Continue reading “What will happen to the R 9 billion job creation fund?”

Taxes to support entrepreneurship

Preview of Budget 2011 and possible changes to taxation to support SMMEs and enterprise development.

Proposals on a major reform for small business taxes have been around for years. In this preview, we explore some of the options that potentially features in Budget 2011.

Photo: Rodger Bosch- Workers processing peppers on the production line of a food processing company near Port Elizabeth. Read more: http://www.mediaclubsouthafrica.com

Proposal to utilise taxes to support small business and entrepreneurship are a strong possibility to feature in Budget 2011.
Minister Pravin Gordhan, in his 2010 Budget Speech indicated that small business taxation would be an area of focus in government. Work in this area has been undertaken, and government might be ready to offer significant tax incentives to small business and start-ups.The logic is important to understand – more employers = more jobs.  The result is that economic participation and inclusion is supported.

Continue reading “Taxes to support entrepreneurship”

Zuma's Inadequate and Incomplete Jobs Package

Argues that Jacob Zuma jobs proposals are a useful starting point, but remain inadequate and incomplete given the high levels of unemployment in South Africa.

The expanded definition of unemployment is  35,8% according to Quarterly Labour Force Survey (4th Quarter, 2010). It helps to say that a little more slowly, due to the gravity of the statistic. 3,5 out of every 10 economically active people are unemployed. Dig a little deeper, and the number of people is 7,3 million. President Jacob Zuma and South Africa’s citizens recognise it as national crises.  In this context, everyone wildly cheers as President Jacob Zuma expresses our hopes of higher unemployment in declaring 2011, the year of the job. This sense of crises however may leave us praising anything that supports job creation. Instead, as argued in this article, the Jobs Package is a useful start, but ultimately inadequate and incomplete.

Will more factories be created? Cape Town, Western Cape province: Factory floor of Hip Hop, a successful fashion label in the city centre. Photo: Rodger Bosch MediaClubSouthAfrica.com Read more: http://www.mediaclubsouthafrica.com/index.php?option=com_content&view=article&id=647&Itemid=75#ixzz1DdqFuAiB

Before explaining what is meant by inadequate and incomplete, it helps to reflect on possible criticism to this article. Those asking us to line up behind the Jobs Package, will remind us that:

  • You have to start somewhere
  • The state’s ambition must be matched with it’s capacity
  • President Zuma is placing small business on the agenda

Each of these arguments are valid, and provide a mixture of common sense and place emphasise on “getting behind the programme”. There is however an uncomfortable truth, when measured against the scale of the problem the Jobs Package is miniscule for three related reasons.
Acknowledgement: Photo courtesy of Media Club South Africa.

  1. Biased to the formal sector. Based on research by the Department of Trade and Industry [PDF Link],  one can extrapolate that the majority of business owners are black, but overwhelmingly in the informal sector.  The dominance of black business in the informal sector is potentially the strategic entry point to broadening black participation in the economy. The Presidential Jobs Programme however does not address this reality. After all, to access the majority of the programmes a company needs to be registered. The only reference to informal business are proposals related to the merging of Khula, the SA Micro-Finance Apex Fund and the IDC’s small business funding into a single unit.
  2. Links between economic and social policy are weak, especially for the young and unemployed. President Jacob Zuma argues that “insert quote on developmental state”. Evaluations of social grants show increases in the job search activity and attendance at schools. The links that currently exist would however be amplified if there was a social security system that provided support to the never employed.
  3. Incremental programmes will result in incremental results. The programmes outlined by the President are important in themselves as experiments in public policy interventions. However, the programmes do not support rapid changes to the structure of the economy. They are too small to have the desired long-term impact. As a society, we must be finding ways of running experiments at scale more quickly.

The silver lining is that President Jacob Zuma has emphasised the small business sector. This policy stance is a significant political commitment. It could be the start of what the ex-Brazilian Planning Minister Roberto Mangeibera Unger has called in an interview the “decentralised alliance between government and the little guy”.
Taken together, what we are calling the Jobs Package is inadequate and incomplete. We could dodge the question by calling it a useful start, but we will not do that. In the current conjuncture, government can do more, and we can do more as citizens. Zapreneur will hopefully be one platform amongst a multitude of platforms that helps us to see the way. Zapreneur succeeds not because it will provide the best analysis of South Africa, but because we contribute to changing South Africa.
Join us as we move from criticism to creating public policy alternatives.