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SMEs – SMEs struggling in South Africa. Why?
| Guest post by: Dr. Rob Smorfitt |
Article Overview: Are there economic reasons for the problems of SMEs in South Africa?
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Free Download - SMEs – SMEs struggling in South Africa. Why? By Dr. Rob Smorfitt |
SMEs – SMEs struggling in South Africa. Why?
Many white-owned businesses have struggled since 1994. Many
new businesses owned by all races since 1994, have found it difficult to
establish themselves and grow.
Obviously the pre-1994 white-owned businesses allocate blame
to the change of government. While this is a logical conclusion to draw, how
accurate is it? There is no doubt that this had an impact on those businesses who
had previously been a supplier to government, as government made an attempt to
make their purchases reflect the country’s demographics.
However, what many of these business people have forgotten
is that soon after 1994 South Africa rejoined the WTO. Furthermore, many
businesses that had previously not been trading in South Africa due to
anti-Apartheid trade restrictions, suddenly appeared at the front door to trade in
South Africa and to use South Africa as a stepping stone into the rest of
Africa.
Yes, globalisation had arrived! The problem is that very few
South African SME business people have realised this. They still think they can
continue to run businesses suited to lifestyle entrepreneurs without changing
their businesses. They are still trying to understand why their profit margins have
dropped and remain low. This is purely about globalisation. Thanks Walmart.
While consumers may be happy with lower profit margins, SMEs are not. Low
margins demand much higher volumes to stay in business.
The questions that this raises are whether these SMEs have
increased sales volumes, have they tried to bypass the volume solution by
becoming niche players in order to reduce the impact of the high volume/low
price competitors? While my comments are based on anecdotal research, it
appears to me that not many have changed how they do business. They all seem to
be focused on the good old days instead of the future.
SMEs need to accept that they need to carve out a niche for
themselves or scale up. The problem is that South Africa offers an incredible
lifestyle opportunity, and this can distract attention away from the important
issues. The problem is that our new SME owners have arrived bearing similar
attitudes and expectations, and are wondering why they cannot make it. We all
need to change our thinking going forward, because whether we like it or not we
are part of the global village.
SMEs - my PhD topic and African context
Restricted Access to Finance
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SMEs in Africa - do interventions help SMEs
SMEs - opportunities in Africa
SMEs - a changing trend in SME failure
Facts about SMEs in Africa
Helping SMEs meet the requirements of formal financing - Increasing SME Access to Finance: A Four Pronged Approach
SMEs - surviving the recession in Africa
SMEs in Africa: the “Missing Middle”
Leverage Subject Matter Experts
SMEs - SMEs and labour rigidity
SME's - left wing politics in the new South African government
5.2.1 The MIT-SME section: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
What can business and governments do to promote SMEs?
SMEs - the impact of corruption has deep roots
SMEs - African confusion with entrepreneurship
5.5 Energy access as market failure: Enterprise solutions to poverty
SMEs - are African governments doing it right
Improving business conditions - Increasing SME Access to Finance: A Four Pronged Approach
Article Tags: Africa, globalisation, SMB, SME, SMME, Smorfitt, South Africa
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About the Author: Dr. Rob Smorfitt RSS for Dr. Rob's articles - Visit Dr. Rob's website Have an MBA and a PhD in entrepreneurship. Three key areas of ongoing research are entrepreneurship and innovation in large business strategy, the impact of legislation on SME development and SME finance. Run my own SME blog at http://sme-smb-smme.blogspot.com as well as an entrepreneurship and innovation for large businesses blog at http://innoveur.blogspot.com I have been self-employed since 1982. I have started or purchased in excess of 50 businesses since then. Most were sold again and a few were shut down because of a lack of profitability. Many were run by staff or family while I worked full time in my bigger businesses. Author of 6 books. Written articles for various magazines, newspapers and websites. Experienced in research within developing countries.
Click here to visit Dr. Rob's website  
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- Unfortunately, in the South African context, very few SMEs see outsourcing as an option. They believe it is too expensive, and they are paranoid that someone will "steal their ideas".
I believe that the three main functions that cannot be outsourced are marketing, sales and strategy. These must be done in house I believe. If you do not have the marketing skills then get them. Hire a consultant or attend a course, but get the skills. Even if you use a consultant, you need to understand what marketing is about, as no one knows your market like you do. Marketing is made to seem difficult and complex, but everyone who really understands their markets, can easily learn to do their own marketing.
In South Africa, labour legislation is extremely inflexibile, and consequently labour broking is a large industry. This is an ideal starting point for SMEs in South Africa, as it is a legally complex area, whih comes with severe penalties.
I say do it!
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