The National Development Plan (NDP) notes that small business in
the services sector is negatively affected by a shortage of skills.
This shortage is mostly true for business services such as
accounting and sales capabilities. The Department of Trade and
Industry (2008) acknowledges that a shortage of skills and limited
entrepreneurship capacity act as constraints to employment growth. .
RED TAPE
SHORTAGE OF SKILLS
Government policies are instrumental in enhancing entrepreneurial
activities, as they set the platform upon which new businesses can
be started and sustained. Delays and long processes in the time
required to obtain permits and licenses is one of the major challenge
and cost faced by SMEs in South Africa
The high level of crime is a pervasive problem in South Africa. In this
regard, both formal and informal SMMEs are equally affected. Increased
spending on security has a ripple effect on the overall cost of doing
CRIME
business.
CRIME
The inability for SMMEs to access markets has been noted as one of the major factors
threatening their longevity. Access to markets is one of the fundamental requirements
(by credit providers) to accessing funding and mentorship at early stages.
Risks faced by SMEs
Lack of access to finance and poor profitability are at the top of the list of reasons why small businesses close shop.
Formal and Informal Sector Overview
The SMME industry is characterized by the formal and informal sector. Formal sector being all SMMEs that are
registered for VAT and other statutory obligations, while informal sector consisting all businesses that are not
registered at all. Statistics shows the following number of SMMEs in both sectors (Quarter 2, 2015):
Formal sector – 809,829
Informal sector – 1,441,992
Total – 2,251,821
Over the last seven years, the number of SMMEs in South Africa increased by only 3%, from 2.18 million in 2008Q1 to
2.25 million in 2015Q2. This growth is significantly less than the 14% expansion in GDP over the same period.
Among the provinces, Limpopo had the highest growth rate in its number of SMMEs (34%), followed by Gauteng
(14%). The Northern Cape lost the largest portion (31%), followed by the Free State (16%).
Of the 2.2 million SMMEs in South Africa, most (944.5 thousand) operate in the domestic trade
(wholesale and retail) and accommodation sector of the economy, followed by the community, social
and personal services sector. However, the turnover of SMMEs in the various sectors differs largely. On
the high side, SMMEs in the mining sector had an average turnover of R16 million (annualised) in the
first quarter of 2015, compared to only R360 000 in the community and social services sector.
The information was taken from the research commissioned by SEDA (Research Note 1:2016, Dated: January 2016).
For more information visit www.seda.gov.za.
SMEInvestor Magazine Analysis
The SME industry is the major role player in our economy and should be the attention it deserves from all stakeholders and
players. Challenges and risks facing the industry should be tackled head-on and a long term realistic plan of action to
empower SMEs should be developed.
Every person must Play His Part for the country to achieve its goal.