South Africa’s SME community faces a tough hostile environment, despite regular declarations of its importance to the country. The second round of the SME Growth Index – the most comprehensive gathering of firm-level data yet undertaken in South Africa – finds that around one third of firms report a threat to their very existence, and large majorities believe it is becoming more difficult to do business. It analyses the critical issue of whether firms are in fact growing in the current environment, and the related question – central to national concerns – of whether they are taking on new employees. It also examines the aspirations of SME operators. The results are intriguing and often sobering, but provide a detailed picture of an enormously valuable resource that should not, and need not, be wasted.

A regulatory system has to be understood from the point of view of what it hopes to accomplish. Regulation without intention is meaningless, and cannot be described as anything but a deadweight on society. Economic regulation is of course a multifaceted concept, and different contexts will demand different interventions.

In May this year, the speaker of the National Assembly, Max Sisulu, chided its members for the poor quality of legislation that it was approving. Such measures would be returned for correction, either by the National Council of Provinces or after having been found in court to be unconstitutional. Rightly, he reminded the Assembly’s members that they had an obligation to ensure that the legislation processed was both in line with the country’s constitution, and processed with an appropriately diligent and professional understanding of the matters at stake. Failure to do so, he suggested, would compromise the country’s most vulnerable.

Business regulation, and small business regulation in particular, suffers from a case of ambiguous motivation. In some cases, it is not clear what considerations lie behind substantive measures. Why would they be desirable or necessary?

Measures under consideration illustrate this point well. A strong feature of the draft Business Registration Bill was to be the formalization of unregistered and informal enterprises. At first glance, this seems understandable – why should anyone object to bringing businesses operating semi-illegally into the legislative net, not least regarding tax obligations? But the bill demands more……..Current State of legislation in South Africa

The Manufacturing Circle released their Manufacturing Bulletin for the first quarter of the year showing the latest trends in South Africa’s manufacturing sector.  The Bulletin features the recent results of an ongoing survey compiled by economist Dr Iraj Abedian, and a prominent article by SBP on the findings of the 2011 SME Growth Index relating specifically to the concerns and challenges of small domestic manufacturing firms.

The Bulletin, published quarterly by the Manufacturing Circle, aims to serve as the voice for manufacturing firms in South Africa. The first quarter Bulletin is available here …Manufacturing Circle bulletin

We have noticed an increase of web search traffic on our site relating to labour laws and their affect on SMEs.  If you wish to know more on this topic, you may view the Regulatory Impact Assessment (RIA) report that was conducted in 2010 on selected provisions of the recently proposed Labour Amendment Bills.  SBP was integral to the development of the RIA report, which is freely available for download at www.labour.gov.za or you can download it here.FINAL_RIA_PAPER_13Sept2010-1

In the rich layer of data produced by SBP’s SME Growth Index a relief of the underlying
structure of the South African economy is clearly visible, and it does not look good for
the development of established small and medium enterprises, and consequently for
economic growth.

The picture that emerges is of a landscape inhabited by lumbering giants – corporates,
parastatals and conglomerates – that can easily squash any smaller species that do not
find a way of hanging on and moving with them. Click here to download the paper

“Rapid and sustained economic growth is critical to stem the tide of job losses. Our prospects of achieving such growth are highly dependent on the economy’s entrepreneurs and businesses. Without a strong business sector and bold entrepreneurs, we have as little chance of prospering”

“Despite acknowledgment of SMEs’ potential as employment generators, they are a poorly understood and inadequately documented sector. Even information on the number of SMEs is unreliable. State efforts to assist the sector have had very limited success. Moreover, partly due to the lack of robust data, the debate around SMEs and their ability to assist in employment growth has become heavily weighted with ideology, assumptions and anecdotes.”

Download the SME Growth Index report here

“Experts on business development have coined the term “gazelles” to describe high growth companies. The gazelle encapsulates characteristics such as speed, energy and dexterity, and provides an apt description for successful, expanding firms. The gazelle, however, is not an animal given to domestication. Studying it requires a process of patient observation. Similarly, understanding what differentiates the small business that scrapes by year to year with no real prospects of growth, from the firm that achieves gazelle status and expands employment, requires careful and considered analysis, over a period of time.”

SBP alert – Growing Small Firms, Growing Employment

SBP hosted a small high-level roundtable discussion at the end of September. Participants in the roundtable were drawn from government – including the Presidency – business chambers, parastatals, research organisations, and major private sector players engaged in small business development. This SBP Alert is an edited version of the day’s discussion, summarising key points that emerged.

SBP_alert_-_Accelerating_Small_Business_Growth_in_South_Africa.pdf

Effective small business development on the scale needed in South Africa requires a new, sustained engagement between the private sector and government at national, provincial and local levels. There is a large and pressing agenda, but crucial issues include improving the regulatory, administrative and operating environment, and ways to expand market development for SMMEs. Most important of all, small business development initiatives must get down to the level where small businesses actually operate, and must be closely targeted in different sectors and value chains, and in specific localities – in our cities, small towns and rural areas – to grapple with their diverse characteristics, needs, constraints and opportunities.

SBP_ALERT_smme_development_in_SA.pdf