SA small enterprises fall short of expectations

Airports Company SA (Acsa) has suspended the evaluation of 78 retail store tender bids after a recent high court judgment found that the state-owned airports operator had acted inconsistently with the Constitution in another tender.

Earlier in July, the high court in Johannesburg found that Acsa’s attempt to exclude car rental company Imperial from its premises on empowerment grounds was unconstitutional.

The judgment handed down by Judge Phillip Coppin forced Acsa to scrap the request for bids it issued last September for 10-year car hire concessions at nine airports‚ comprising a total of 71 kiosks.

Coppin found that the company had failed to apply section SA is a complete outlier internationally when it comes to employment creation by small and medium-sized enterprises.

Initial findings of a new study by the Small Business Institute (SBI) and the Small Business Project (SBP) found SA has only 250 000 formal SMEs, fewer than previous estimates of between 2-million and 6-million.

While formal SMEs – defined as businesses employing fewer than 200 employees – account for 98.5% of the economy, they only employ 28% of the formal workforce. This is significantly lower than employment rates internationally.

In the Organisation for Economic Co-operation and Development countries, over 95% of businesses are SMEs, employing between 60% and 70% of the working population and contributing up to 60% to GDP, said Chris Darroll, chief executive of the SBP.

Alarmingly, the contribution of South African SMEs to jobs is falling, with large firms adding more jobs and growing employment at a faster rate than small businesses, according to the research. SA’s 1 000 largest employers, including the government, provide 56% of the country’s jobs. The aim in the National Development Plan is for SMEs to contribute 90% of job growth by 2030.

“The critical point to ask is whether this is pointing to policy and regulatory failure in this country. Why are we so completely out of step with the rest of the world?” Darroll said.

In an attempt to answer this question, the SBI and SBP have embarked on the first comprehensive baseline study on the size, nature, challenges and potential of SMEs in SA.

Preliminary findings show a lack of consistency in the government’s definitions of SMEs in 70 laws, regulations and key strategies reviewed.