Last week, (before he was replaced by Nhlanhla Nene), Ex-Finance Minister Malusi Gigaba gave the budget speech and announced some initiatives that seek to support Small, Medium and Micro Enterprises (SMMEs*) in SA.

In a sign of support for SMMEs, numerous measures have and will continue to be implemented. This includes a R2.1 billion allocation for SMMEs in the early start-up phase. An additional R1.4 billion from the CEO initiative will support high potential SMMEs, and public procurement regulations will be revised to improve dealings with government. A black business growth fund worth R100 billion will be made available to sponsor large deals - yet another exciting tool on the horizon for SMMEs. 

SMMEs are key for job creation and the development of an economy. In SA, they make-up 91% of formalised business in terms of company numbers and employ 60% of our labour force. In an OECD study, it was found that the bulk of jobs are created by companies with fewer than 250 employees - and the majority of those have less than 200 employees each. The chart below illustrates their findings across countries and shows that South Africa underutilises the SMMEs potential contribution. In terms of contribution to GDP, South Africa also falls short of other countries. This next chart illustrates how much SMMEs contribute to their respective countries' GDP. 

Well, there are many, but access to financing is usually high on this list of obstacles for SMMEs. Considering the risks, banks are less willing to provide loans to unproven businesses, and if they do lend, they typically charge high-interest rates. The rural location of many informal SMMEs further intensifies this problem. Lack of access to infrastructure, utilities, transport and land all pile on more challenges. Whilst the journey is being made easier, a lot of work lays ahead. Growth in South African SMME numbers has been slow - research shows that the number of SMMEs only grew from 2.1 million to 2.2 million between 2008 and 2015. This doesn't bode well for the National Development Plan, which hoped that  90% of new jobs would be created by this sector by 2020.

Well, there are many, but access to financing is usually high on this list of obstacles for SMMEs. Considering the risks, banks are less willing to provide loans to unproven businesses, and if they do lend, they typically charge high-interest rates. The rural location of many informal SMMEs further intensifies this problem. Lack of access to infrastructure, utilities, transport and land all pile on more challenges. Whilst the journey is being made easier, a lot of work lays ahead.

The initiatives identified by treasury indicate a clear emphasis on the importance of SMMEs to the growth of the SA economy. The focus on increasing the sources of funding available bodes well for one of the major challenges. It’s important for government to focus on additional policies that meet most of the issues facing small businesses. Perhaps an important aspect relates to being able to develop and improve entrepreneurial skills and knowledge. We are interested to see how this develops.

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This article first appeared in Digest |@digestRSA | www.digest.web.za |

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