SMEs - a South African perspective on SME start up and growth

A major problem that exists in South Africa, is simply that no one knows how many SME's exist! Current estimates vary from 1.2 million to 3 million. The margin of variance is too vast to make any meaningful contribution to the debate regarding SME development in South Africa.

Legislation that forces the use of incorporated entities such as closed corporations, cooperatives and various forms of companies, when tendering for government business, has seen a massive increase in the number of legal business entities registered. This has skewed the data massively, and therefore no true assessment of the growth in the SME establishment rate can be made.

The problem is further skewed by the fact that no one tracks the establishment of sole proprietors and partnerships, and often partnerships such as law practices often make use of legal entities for the trading component of their partnership. This leads to increased duplicate numbers of businesses being counted if at all.

Previously all businesses had to be registered with their local municipality. This has largely fallen away and is longer a requirement in most towns and cities. As a result overtrading is common in many towns. Examples include IT suppliers, tyre fitment and signwriting businesses.

It is imperative that a database of SME's in South Africa be established which is accurate, so that interventions and their impact can be correctly assessed. Only once we have established a means to evaluate our interventions can we measure their success and change them if necessary to be meaningful. Like any good business, market research and intelligence is critical in our decision making.

It would also help in establishing sustainable businesses, by providing guidance to businesses to reduce overtrading.

Rob Smorfitt To learn more about this author, visit Rob Smorfitt's Website.

Like this article? Share it with your friends

E-Mail | Print | More

Related Articles
SMEs - opportunities in Africa
	An overview of opportunities in Africa for SMEs
Facts about SMEs in Africa
	Very few countries have working definitions of SMEs, except some members of UEMOA/WAEMU and Mauritius and Morocco. So data on this is hard to compare, though patterns can be seen and countries can be ranked by exte...
Expanding the supply of finance through the non-financial private sector - Increasing SME Access to Finance: A Four Pronged Approach
	Financial institutions are not the only source of money for SMEs. Apart from remittances by nationals working abroad, which are a key boost to private-sector growth, the interdependence between SMEs, large firms ...
Restricted Access to Finance
	Africa’s SMEs have little access to finance, which thus hampers their emergence and eventual growth. Their main sources of capital are their retained earnings and informal savings and loan associations (tontines)...
Helping SMEs meet the requirements of formal financing - Increasing SME Access to Finance: A Four Pronged Approach
	Apart from the need to boost SME capacities, some financial instruments can help provide missing information or reduce the risk stemming from some SMEs’ lack of transparency.

---

Related Forum Posts
	Re: In-House or Outsource?
	God's Diet
	What do you do to give back?
	Australian Computer Franchise looking to be taken Globally!
	Lack of controls can hurt.
	Chris Gardner: Entrepreneur
	Outsourcing for SMEs
	Giving back