Relatively little credible data is available about small, micro and medium enterprises (SMMEs) in South Africa, and the available stats look dismal. A 2018 study by the Small Business Institute (SBI) showed that the number of micro firms in SA increased from 169 986 in 2011 to 176 333 in 2016, whereas the number of small firms increased from 63 864 to 68 494 and medium firms from 15 257 to 17 397.
SMMEs, in effect, are not growing fast enough to meet the National Development Plan (NDP) targets, which envisioned that the segment would contribute up to 80% of GDP growth and generate 90% of an estimated 11m new jobs by 2030.
“The segment would have to grow at a rate of at least 20% a year to achieve the NDP goals,” says John Dludlu, CEO of the SBI.
The odds of success are also low. According to the Global Entrepreneurship Monitor, SA has one of the highest business start-up failure rates in the world. The Enterprise Observatory of SA estimates that 31 companies with a taxable income under R10m shut their doors each week and former minister of trade and industry, Rob Davies, claimed that over 70% of businesses failed in less than two years.
Whereas SMMEs account for 98% of the formal economy across all sectors in SA, the segment only accounts for 28% of formal jobs. Medium firms, according to the SBI study, account for 12%, whereas small firms account for 11% and micro firms for 5%.
A thousand large employers, including the government, state-owned companies and civil services, in contrast, contribute 56% of these jobs.
The number of employees in micro firms increased by 4% from 658 333 in 2011 to 685 264 in 2016, whereas those in small firms increased by 8% from 1 434 918 to 1 549 411. Those in medium-sized firms increased by 14% from 1 426 006 to 1 628 429, and employees at large firms increased by 15% from 8 453 986 to 9 702 416.
This story is from the 5 March 2020 edition of Finweek English.
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This story is from the 5 March 2020 edition of Finweek English.
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