Capitec CEO Gerrie Fourie is calling on SA to rethink its unemployment metric, contending that when the vast informal sector is taken into account, the headline figure of 32.9% could be closer to 10%.
“What is interesting is when you look at the unemployment rate, we talk about 32%. But Stats SA doesn’t count self-employed people. I really think that is an area we must correct. The unemployment rate is probably actually 10%. Just go look at the number of people in the township informal market, who are selling all sorts of stuff, who have a turnover of R1,000 a day,” Fourie said.
“To grow SA, we need to understand what is happening there [in the emerging market]. If we really had a 32% unemployment rate, we would have had unrest. If you go to the townships, most people have back-rooms to rent out, everyone is doing something. If we are talking job creation, let’s go out and encourage these entrepreneurs.”
Fourie’s comments tap into the national conversation about the role of the informal economy, potentially reframing discussions around economic policy, while also inviting scepticism that such redefinition risks glossing over deep structural issues that should serve as a catalyst for meaningful policy reform.
Fourie, who presides over the lender with 24-million clients, said Stats SA ignores the country’s large “emerging market”, describing entrepreneurs in this space as “discouraged” job seekers. He said this segment, which Capitec has identified as a growth unicorn, is looking to replicate its retail success in business banking.
Fourie gave the example of Mexico to drive home his point that SA has to rethink how it views what constitutes unemployment. He said that Mexico, where Capitec has exposure through its investment in Avafin, has low unemployment because it has embraced the informal economy.
“The formal economy in Mexico [people who earn a salary] is 45% while the informal is 55%. They pretty know who those [informal] businesses are, and what they are doing ... we have to change the narrative in SA. We have a completely wrong narrative,” he said.
The lender believes the size of SA’s small, medium and micro enterprises is made up of 3-million formal businesses and a further 3-million “emerging” businesses.
Pushback
Fourie’s comments are likely to face pushback, with SA regarded as one of the most unequal societies in the world. According to the latest data from Stats SA, the country’s unemployment rate increased to 32.9%.
SA can make a dent in unemployment if it frees the informal sector from overbearing regulations, including restrictive zoning in urban centres, a working paper from UCT in conjunction with Harvard University has suggested.
The paper said the country’s high unemployment could be partly explained by informal sector activity that is abnormally low relative to its peers.
The formal economy in Mexico [people who earn a salary] is 45% while the informal is 55%.
— Gerrie Fourie
Capitec CEO
“Despite the puzzle, explaining SA’s uniqueness of high unemployment and low informality has received less attention in the public debate. This is unfortunate because, qualitatively, if SA’s informal sector were as large as its income per capita would predict, its unemployment rate would also be much lower,” the paper reads.
It found that SA and Mexico in 2018 had similar levels of GDP per capita, but the big difference is that SA has high unemployment and low informality, while Mexico has relatively low unemployment and high levels of informality. SA is regarded as the most unequal society in the world, with unemployment, particularly among the youth, at astonishing levels. SA’s economy also has one of the highest Gini coefficients, a measure of income, wealth or consumption inequality.
Capitec is backing its belief that there is a vibrant informal market in SA, with investments in growing its business banking proposition. The head of Capitec Business, Karl Kumbier, said there is huge potential to enable emerging businesses to make a more pronounced impact on the economy.
Capitec Business has a 1% market share in business banking, with a loan book of R22bn. The business is, however, growing rapidly, having added 45,000 new clients in the past three months.
Insights
The bank said its confidence in the sector is also based on its more than 2-trillion data points from its retail sector, which has given it insights into where people spend their money and sources of income. The lender said it will grow its market share in the competitive segment by market-leading prices and transparency on fees — the same model that saw it retail clients surge to 24-million.
Nedbank in April flagged Capitec’s foray into small and medium-sized (SME) lending as presenting the toughest competition among its rivals. “SME banking has emerged as the next battleground, driven by enhanced digital capabilities at incumbent banks and the entry of non-traditional competitors,” it said. “Key investor concerns include the potential impact of Capitec replicating its retail market successes in the SME market.”
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