Challenges Facing Small Businesses
Frances Baard SMME Week
Overview
• NDP
• Challenges
• Conclusion
NDP
• Sets out ambitious goals for smme’s:
– Target – 90% of employment opportunities to be created by
this sector by 2030.
– Envisions the SA economy growing by at least 5,4% growth
per year over the next 15 years – to treble in size ( smme
sector is pivotal to drive this growth)
• These targets depend on a business environment that
supports the growth and sustainability of existing smme’s; a
culture of entrepreneurship and enables new sme’s to prosper
Challenges
• Growth cycle of smme’s : survivalist businesses to potential high growth
entrepreneurial firms
– Require a richer more detailed analysis of the smme lifecycle to
enable policy to be targeted more effectively.
• Comparatively underperforming –
– Estimated that SA smme’s account for 60% of empployment
compared to global average of 77%.
• Exceptionally high failure rate:
– Min Rob Davies noted that 70% of smme’s fail in their first year.
• World Bank: Viability of micro-enterprises is linked to the motivation for
starting the business:
– Successful businesses start by choice, as entrepreneurial ventures.
– Survivalists – motivated by a lack of other employment options –
seldom successful.
– Most of SA’s smme’s fall into the latter category.
– Since - Decline in smme’s employing less than 50 workers
Challenges
• NDP places smme’s at the head of the employment
charge.
• Regulatory burden:
– Smme’s spend a disproportionate amount of time dealing with
regulatory compliance ( approximately 8 working days a
month dealing with red tape – a cost of about R 216 000/year4% of turnover if the smme turn R 5 million per year)
– Top red tape headaches:
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Dealing with SARS
Labour issues
Dealing with their municinaplities
Compliance with BEE
– Responses differed across industries: tourism – concerned
with municipal issues; manufacturers – labour issues (11 days
per case to resolve a dispute)
Conclusion
• Policy makers need to understand the complexity and diversity of
the sector.
– Needs linked to incentives.
• Address the red tape and burdensome regulations.
– Use regulatory impact assessments as a mechanism to reduce
red tape.
• Interventions to reduce skills shortages
• Incentives to encourage investment in smme’s.