FERTILISE TO GROW JOBS

Call to empower SMES

“SOUTH Africa has a huge potential to meet its employment targets by utilising the potential of the small to medium-sized enterprise (SME) sector in creating employment. ”

So says Faith Ngwenya, technical director at the South African Institute of Professional Accountants (SAIPA), in a paper presented at The Clute Institute’s International Academic Conference held in Bangkok in March this year.

However, she concludes, educating and empowering the sector demands much more than just pumping millions of rands into incentives and other schemes.

Ngwenya makes the point that 61% of those who are employed work for an SME, while SMEs provide between 52% and 57% of the country’s gross domestic product.

These are particularly impressive statistics when one considers that of the 5,98 million SMEs registered with the Companies and Intellectual Property Commission, 67% are one-person businesses and don’t create any employment at all.

“If 33% of the existing SMEs make such a huge contribution to our economy, imagine what the effect would be if we could grow the sector even by a relatively small percentage each year,” Ngwenya notes.

Government has recognised that SMEs offer the best opportunity to turn back the tide of unemployment, and is making large sums of money available to exploit this: R9bn for the Jobs Fund, R10bn for the Industrial Development Corporation and R20bn in tax breaks and allowances for the manufacturing sector.

All this is in addition to the funding provided by the Small Enterprise Development Agency (SEDA), Khula Enterprise Finance and Export Marketing and Investment Assistance, among others, with the aim of creating 5-million jobs by 2020.

The fact that scant progress is being made is thus not the result of a lack of money. Rather, Ngwenya says, entrepreneurs typically lack the knowledge to run a business.

“Identifying their problems and then providing appropriate training should be a priority, ” Ngwenya reasons.

“The economy is highly competitive and good managerial skills are vital. SAIPA members, the country’s growing cadre of professional accountants are, in fact, positioned to play a key role in providing SMEs with just these skills.”

Ngwenya ’ s research pinpoints some of the major causes of SME failure and thus

– areas where help is needed. These include a lack of management, financial, marketing and human resources skills.

Contributing factors are a limited culture of family businesses, failure to control business growth and an overemphasis on financial reward.

In general, researchers have found that SMEs are bad at setting strategic goals, are unwilling to adapt to change and are reluctant to seek advice.

“Many SMEs don’t access government funding because they simply are ill-informed,” Ngwenya says.

“But more than money, what they need is training and mentoring to make them sustainable over the long term.”

Ngwenya ’ s paper forms part of a broader project that aims to identify a framework for measuring SME success. – Sapa