Economy needs SMMEs

South Africa’s unemployment rate in the first quarter of 2017 increased to 27.7% from 26.5%, the highest since 2003. With no choice but to make ends meet, many families have had to strategise on how best to put bread on the table. CHARLENE SOMDUTH took to the streets and spoke to entrepreneurs, who are selling everything from poultry to children’s underwear on the roadsides to survive.

SMALL business and co-operatives are the lifeblood of economic growth and development, says the spokesperson for the Department of Small Business Development, Cornelius Monama.

Despite the increasingly difficult economic conditions, the contribution of Small, Medium and Micro-sized Enterprises (SMMEs) to the economy had continued to increase, he said.

Speaking to POST, Monama said the development portfolio, comprising the department, the Small Enterprise Development Agency (Seda) and Small Enterprise Finance Agency (Sefa), including its social partners, is determined to strengthen the small business sector.

This, he added, was to enable SMMEs to occupy their rightful place in the mainstream economy.

It was also aimed at demonstrating that small business was “the big business” of the future.

Also, that through joint partnerships, more could be achieved.

“The contribution of SMMEs to the South African economy is far below its potential. According to the quarterly financial statistics report, the private sector earned a total of R2.3 trillion in turnover in the last quarter of 2016,” said Monama.

Large businesses, dominant in the manufacturing and trade industries, contributed 60% to this total followed by small and medium businesses at 40%, he said.

“We need to do better and match the global average, which shows small businesses share higher levels of participation in various economies.

Monama explained that the contribution by SMMEs continued to increase in terms of four tax categories.

“This is namely, Pay-AsYou-Earn (PAYE), which increased from 57% to 59% and the contribution by SMMEs to the skills development levy increased from 51% to 54%. Corporate Income Tax (CIT) from 65% to 67% and Value Added Tax (VAT) from 57 to 58%. The contribution of small businesses to the Unemployment Insurance Fund (UIF) also increased from 62% to 64%.”

The enterprise development manager at the Durban Chamber of Commerce, Nanana Sabela, said SMMEs are considered an important contributor to the economy as drivers for reducing unemployment, especially since the formal sector continued to shed jobs.

“Some researchers have estimated that in South Africa, small and medium-sized enterprises make up 91% of formalised businesses, provide employment to about 60% of the labour force and the total economic output accounts for roughly 34% of the GDP (gross domestic product).”

She explained that in a South African context, the promotion of entrepreneurship and small businesses remained a priority for the country.