Grow SMMEs to avoid losing another decade
• Experts must understand the unique demands of the segment and deliver more bespoke solutions
Improved outcomes for the local economy will only be achieved if advisers do far more than just tick boxes. They must identify opportunities for efficiencies and growth, all to meet strategic goals and add value.
They must also ensure businesses are given a roadmap to success that includes navigating bumps in the road such as regulations and load-shedding.
A more strategic approach will ensure that the immense economic dividend of SMMEs is harnessed so that SA secures its future. The consequences of not improving the SMME sector today will, sadly, lead to another decade of lost opportunities.
The SMME sector remains the engine room of growth and jobs for SA, yet not enough is being done to grow and support this “sweet spot” for the economy.
A spate of delisting from the JSE recently reflects how tough it is to survive, yet this — together with high unemployment and fewer job opportunities — is opening the door for more flexible, innovative businesses to thrive, whether out of necessity or choice.
According to the World Bank, SMEs represent about 90% of businesses and more than 50% of employment worldwide, and formal SMEs contribute up to 40% of emerging economies’ national income (GDP). These numbers are significantly higher when informal SMEs are included. They are by far the biggest creator of jobs, and so
ACCORDING TO THE WORLD BANK, SMES REPRESENT ABOUT 90% OF BUSINESSES AND MORE THAN 50% OF EMPLOYMENT WORLDWIDE
this is clearly where the solution lies to SA’s ongoing unemployment crisis.
However, the International Finance Corporation (IFC) has noted that while SMMEs employ about half of SA’s workforce and contribute to about 34% of GDP, their voice is often excluded from the national conversation.
A joint report by the IFC and the World Bank, in partnership with SA’s National Treasury, aptly titled the “Unseen Sector”, found that micro, small and medium enterprise (MSME) sector growth stagnated over the past decade and that only 14% of small businesses in SA are formalised. That means many micro and small enterprises are creating opportunities for self-employment.
The recent Mastercard SME Confidence Index finds that three out of four SMEs surveyed in SA are concerned about the rising cost of doing business. While more than half of SA SMEs are optimistic about the future, 80% of SMEs in the country project similar or increased revenue.
So where is it all going wrong? The answer is nuanced, based on numerous factors ranging from sociopolitical to lack of skills, support and access. These are all the areas in which more work is needed to ensure this sector grows significantly faster than it is now.
The report highlighted that informal businesses struggle more to access finance than their formal counterparts and that female ownership lags behind male small business ownership in the country and is declining.
The Mastercard survey highlights the top three areas for support required by SMEs in Africa: training and upskilling staff (91%), digitalising businesses (88%) and access to a broader range of financial services (88%).
Experts in financial services must step up the support levels they provide SMMEs. The problem is many major players focus on large businesses, corporate deals and high net worth clients.
Still, the key is to truly believe in these businesses’ potential and why they must not be allowed to fail. This means that, as experts, we must harness data, understand the unique demands of the sector and deliver more bespoke solutions.