South Africa's workforce crisis: rethinking skills development for entrepreneurship

South Africa’s unemployment crisis continues to place pressure on the economy, communities and the public sector. While skills development programmes have traditionally focused on preparing people for formal jobs, the reality is that the formal labour market cannot absorb everyone. In the short to medium term, millions of South Africans will not find formal employment, regardless of their qualifications. For many people, entrepreneurship and participation in the informal economy are not choices but necessities. Small businesses, street traders and micro-enterprises provide a critical source of income for households across the country. The key question is no longer whether skills development should support entrepreneurship, but whether it can do so in a way that helps businesses survive, grow, and create jobs.

Rethinking the purpose of skills development

Skills development has long been designed around formal employment. This approach made sense in an economy where job creation kept pace with population growth. Today, it is no longer enough on its own. Too many people are locked out of the formal labour market, even when they have training or experience.

As a result, economic activity is increasingly taking place outside traditional employment. The informal economy already supports millions of South Africans, yet it is often treated as temporary or secondary. In reality, it is a permanent and important part of the economy. Skills development needs to reflect this by supporting both employment and self-employment pathways. This does not mean that entrepreneurship is a solution for everyone. Running a business involves risk and uncertainty, and not everyone is suited to it. These traits cannot be taught in the same way as technical skills. Acknowledging this is important. The role of training is not to turn everyone into an entrepreneur, but to support those who are already running businesses or who clearly want to do so.

Why many micro-enterprises struggle

Many small businesses in the informal economy operate in survival mode. The problem is usually not a lack of effort or customers. More often, it is a lack of basic business skills that prevents stability and growth.

Financial management is one of the biggest challenges. Many entrepreneurs focus on sales but underestimate their true costs. Expenses such as transport, fuel, utilities and stock losses are often overlooked. Without proper pricing and cash flow management, a business may appear profitable but still struggle to survive from month to month.

Other common gaps include compliance, basic planning, operations, project management and customer management. In a micro-enterprise, the owner must handle everything, often without any formal business training. This makes it difficult to make informed decisions or plan for growth.

The value of practical, structured training

Practical, well-structured training can make a real difference to small businesses. When training is focused on real-life business situations rather than theory, entrepreneurs can apply what they learn immediately. Improved financial skills help business owners price correctly, manage cash flow and plan for difficult periods. A better understanding of compliance helps them reduce risk and make informed decisions. Training in operations and customer management can improve efficiency and service quality.

Training cannot create entrepreneurs where there is no interest or drive. What it can do is strengthen the businesses that already exist. Better skills lead to better decisions, improved resilience and greater productivity. Over time, this increases the chances that small businesses will stabilise, grow and start creating jobs.

Building stronger businesses for wider impact

As skills improve, informal businesses are better positioned to grow and, where appropriate, formalise. Stronger businesses are more likely to access funding, join value chains and contribute to the tax base. They are also more likely to employ others, even on a small scale.

Access to training remains a challenge, but government programmes and private sector initiatives can help close this gap. In an economy where formal jobs are scarce, it is essential to support both job seekers and job creators. Strengthening the skills of entrepreneurs who are already active on the ground offers a practical and realistic path to sustainable businesses, broader economic participation and job creation.

As skills improve, informal businesses are better positioned to grow and, where appropriate, formalise. Stronger businesses are more likely to access funding, join value chains and contribute to the tax base. They are also more likely to employ others, even on a small scale.

Access to training remains a challenge, but government programmes and private sector initiatives can help close this gap. In an economy where formal jobs are scarce, it is essential to support both job seekers and job creators. Strengthening the skills of entrepreneurs who are already active on the ground offers a practical and realistic path to sustainable businesses, broader economic participation and job creation.

* Daniel Orelowitz is MD at Training Force

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