Challenges Facing Small Businesses Frances Baard SMME Week.
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Transcript of Challenges Facing Small Businesses Frances Baard SMME Week.
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/year- 4% of turnover if the smme turn R 5 million per year)
– Top red tape headaches:• 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.