South Africa hostile to Small Businesses, Study finds
Johannesburg, 21 February 2013 (SBP) - The survival of South Africa's Small and Medium Enterprise (SME) community is under both immediate and long-term threat. This stark and uncomfortable picture emerges from the second round of the SME Growth IndexTM, Easier/Harder for Small Business in South Africa, produced by business environment specialists SBP, which is being released today.
The SME Growth Index is a multi-year research project, investigating the views and experiences of a panel of some 500 SME operators in the South African economy. These firms employ between 10 and 50 people, and are active in three sectors of the economy regarded by government as having growth potential: manufacturing, business services and tourism. The first and most comprehensive such study of its kind in the country, it allows the dynamics relating to firms' growth, survival or decline to be tracked over an extended period of time. The first round was conducted in 2011 (published in a report in that year under the title Priming the Soil, available for download on SBP's website www.sbp.org.za), and the second in 2012.
Some 35% of the sample report having experienced a threat to their survival during the course of the preceding year. Moreover, nearly three quarters of the firms surveyed, or some 74%, feel that it had become more difficult to operate a business in the year preceding the survey. A mere 6% feel that it had become easier. Manufacturers are most negative about the business environment, with around 81% feeling that things have become more difficult. Some 71% of business services panellists feel that things have become more difficult, and only 7% that they have become easier.
All in all, the sense is of an increasingly unwelcoming business climate, with serious implications for the ability of the SME community to generate the wealth and jobs that international experience shows it is capable of.
Driving these concerns are a number of factors. The top concern, cited by some 27% of firms, is the rise in input prices, followed by market contraction (17%), increased red tape (14%), as well as increased competition and increased electricity costs (11% each). A further 15% had experienced the loss of key staff, undermining the firms' productivity and profitability.