South Africa promises to jack up SME movement

SME talk of the past few days is suggesting that South Africa is set to move a gear up in its intensions of jumpstarting the Small to Medium Enterprise sector. This comes with a hope that the intense SME development talk is not mere stage performance set for the 37th International Small Business Congress which kicked off in Sandton yesterday.

Speaking at the congress, the minister of trade and industry, Rob Davies said government was in the throes of implementing various interventions to ensure that small enterprises and big businesses have a symbiotic relationship that will boost the development and growth.

The minister seemed to be kicking off the suggested slew of SME development initiatives set to be rolled out in the near future by unveiling plans by his department to launch an SME Incubation Support Programme next months.

Davies said the incubation was aimed at developing enterprises that will absorb and upgrade the vast unskilled labour force, develop new technologies and strengthen the country’s economy. He added that the programme would encourage private sector partnerships with government to foster collaboration between small and big businesses.

“Small businesses have benefited significantly from working closely with big business in most countries, particularly in Brazil. The government of South Africa also recognises and acknowledges the role that big business can play in boosting the development and growth of our small enterprises. It is against this background that we have initiated measures that will ensure that there is a symbiotic partnership between our small enterprise and big businesses,” said Davies.

On Friday Absa launched its SME Index which promises to be a critical source of information about the health of South Africa’s SME sector.

Absa Group’s Chief Executive for Retail and Business Banking Bobby Malabie said with the data collected to measure the number of people that have been employed by companies versus the unemployment figures in the country over the last two decades, it’s quite evident that unemployment remains one of South Africa’s key challenges into the foreseeable future.

“This is especially rife in the youth category where unemployment is as high as 50% and its clearly unsustainable taking into consideration that we have 15 million people on social welfare, but only 7 million are taxpayers,” said Malabie.

The Absa SME Index showed that while only about 270 000 out of the more than 1,9 million businesses employ five or more employees other than the owner, only 10% of those businesses employ more than 50 employees and that is less than 4% of all employees.

The latest employer figures show a decline by 5 000 employers in the second quarter compared to the first quarter where it stood at 700 000 employers.

The number of self employed also declined to 1 243 000 in the second quarter of 2012 from 1 281 000 in the beginning of 2008. Self employed numbers are however slightly up on a year ago when the number was 1 231 000.

 

Malabie said while it may be easy to say we need more businesses to employ more people, unfortunately there has been a consolidation of businesses (mergers, and partnerships) while others have been forced to close down due to high operating costs and other economic pressures.

He said “The Absa SME Index will provide valuable information that allows SMEs to make better and informed decisions with access to solid and reliable information that will help them to grow their businesses. It will also allow policy makers to make relevant decisions”.

Economist Mike Schussler who worked on the Absa SME Index noted that the index has dropped to its lowest level in 18 months at the back of global economic uncertainties.

“This probably also has to do with sluggish growth outside of the mining sector in the second quarter while most firms are in other sectors such as retail, manufacturing and construction.”

Malabie said “It is through entrepreneurship that this country will create the much needed 5 million jobs by 2020 – in every growing economy around the world, SMEs are the engine room of job creation. This SME Index is a further demonstration to our commitment of becoming part of the solution towards job creation.”

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