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Tips, advice, and information for South African business owners

05 Dec

SA Government Failing SMEs

In my business, as I’m sure it is in yours, macro-economic indicators don’t matter too much. Far more important are statistics like revenue, margins and customer retention. But now and then it’s useful to take the helicopter up a few thousand feet and survey the landscape we’re playing in. For example, the health of a country’s small business sector is a useful predictor of economic resilience. Improving entrepreneurial success is also a key driver of economic growth.

How disappointing it is, then, to read how poorly SA is performing in the small business sector. According to research by the Small Business Institute (SBI) published in Business Day, “SA is a ‘complete outlier’ internationally when it comes to employment creation by small and medium-sized enterprises.”

Although SMEs make up 98.5% of SA’s companies, they employ only 28% of the workforce. In countries comparable to SA, while 95% of businesses are SMEs, they employ 60% to 70% of the working population. In other words, unlike other countries, the employment landscape in SA is dominated by big business. The failure of just a few big players has a big effect on the economy.

The future is worrying too: big companies in SA are growing employment at a faster rate than SMEs. The report says: “SA’s 1,000 largest employers, including the government, provide 56% of the country’s jobs.”

Further research hopes to clarify the causal factors, like the hypothesis that SA’s poor SME statistics point to policy and regulatory failure. In my humble opinion, of course it does!

Aside from the onerous compliance burden, there’s a lack of consistency in the rules themselves. In the 70 laws and regulations reviewed in the research so far, many have incompatible definitions of “SME”.

No matter how much the politicians pat themselves on their backs, we are succeeding as small business owners despite government.

If you’re an entrepreneur, keep up the great work!

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