B.E. Assessment

Priming the Soil: Small Business in South Africa (2011)

    The SME Growth Index is the first and largest study of its kind to be undertaken in South Africa. It differs from previous studies in breadth, scope and intent. It is based on the experiences and perspectives of a Panel of 500 small businesses, across South Africa’s three major metropolitan areas. It delves into the wide spectrum of factors germane to the operation of a business. It also focuses on drivers behind SME survival and growth. While much of the government’s attention has been on supporting the establishment of new small businesses, the Index emphasises the enormous and sometimes unacknowledged contribution made by established enterprises with the potential to expand, generate wealth and take on additional employees.

    In 2011, in the first of a series of annual surveys, the research underpinning the Index gathered over 65 000 data points – the most comprehensive picture yet assembled of the sector. The SME Growth Index Panel consists of a representative panel of 500 firms, each with ten to 49 employees Importantly, the Index is longitudinal. It will run for an initial period of at least three years. The Index also investigates the growth experiences and aspirations of fi rms at different points along the age continuum. The Index focuses on three economic sectors - business services, manufacturing and tourism. These sectors have high volumes of SME activity, have been prioritised by government as critical economic growth areas, and offer the potential for SME growth.

    Summary of results
    •Two thirds of business owners on the Panel are white, while 19 percent are black. Over two thirds of the business owners are men. Business owners on the Panel are mainly in the mid to later years of their careers and have post-school qualifications.

    •The median turnover of firms in the Panel was R6 million in 2010, while the mean number of permanent employees across the sample is 21. Expectations for 2012 are positive –42 percent hope to employ more staff, and only 7 percent expect to shed staff. Tourism firms are more likely to be young and manufacturing firms are for the most part mature.

    •Panellists identify the current economic climate as the primary barrier to employment growth and job creation.

    •19% say that labour regulations are the biggest barrier to growing their staff numbers. Critical issues include the inflexibility of labour laws, inflated staff costs, difficulties with the unions and strikes. Further regulatory obstacles noted by Panellists are BBBEE and SARS inefficiencies.

    •Panelists identified the critical actions that government needs to take in order to support small business growth and employment generation (these will be analysed in detail in forthcoming SBP Alerts). These include reducing the cost and complexity of regulatory compliance; improving administrative efficiency within government in order to reduce red tape; creating a level playing field, ensuring that regulations are fairly and consistently enforced.