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.

__________

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

Digest is a free email newsletter delivered to our inbox weekday mornings explaining financial newsworthy topics and events.

Award winning entrepreneur, COO of the Hirsch’s, the Appliance and Electronics giant retailers, Margaret Hirsch was the Guest Speaker recently at the Entrepreneurs Organisation (Durban branch) members networking event that was held in the new SMEG showroom in Umhlanga Rocks.

Margaret spoke about her journey with Hirsch’s, after founding the company thirty eight years ago with her husband Allan, with just R900 that they had saved. She said that she has found that the most rewarding part of her job has been helping to launch entrepreneurs within Hirsch’s, and finding young talent in low income areas – and helping them to flourish in business. 

In her vote of thanks, owner of PRO Appointments, and founder of the Robin Hood Foundation, Cindy Norcott, who was the first woman to join the Entrepreneurs Organisation’s Durban Chapter, said that Margaret was a great example to fellow entrepreneurs with the projects that she had got involved with over the years, and the people she has mentored.

The Entrepreneurs Organisation’s Durban Branch is the fastest growing EO chapter in the world.

For information on how to join, contact Chapter Manager, Sandi Thorpe. This email address is being protected from spambots. You need JavaScript enabled to view it.