AN ASSESSMENT OF SOUTH

AFRICA’S SME LANDSCAPE

Challenges, Opportunities, Risks &

Next Steps

SPONSORED BY RESEARCH PARTNER

 Adclick Africa is one of South Africa’s fastest growing marketing agencies
offering best in class digital solutions that drive revenue growth for
brands. Our unique results-based approach operates on real time in-
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service delivery. Established in 2013 by Velly Bosega , the company also
owns SME South Africa, a business unit that offers business content,
data and B2B advertising services to brands.

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SME South Africa, a division of Adclick Africa, commissioned Africa-focused research consulting firm
In On Africa (IOA) to conduct a comprehensive assessment of the state of SMEs in South Africa, with
a focus on the key challenges, opportunities, risks and proposed next steps. This publication has
been compiled by IOA for public release by SME South Africa, and presents a summary of the key
findings from this research.

The research was conducted from IOA’s offices in Johannesburg and through a web survey with
more than 1,000 SME owners across the country. While IOA, SME South Africa and Adclick Africa
believe that the information and opinions contained herein are reliable, they do not make any
warranties, express or implied, and assume no liability for reliance on or use of the information
or opinions contained herein. Furthermore, IOA, SME South Africa and Adclick Africa indemnify
themselves from unforeseen errors due to certain sources being gathered from third parties.

© SME SOUTH AFRICA. 2018

 TABLE OF CONTENTS

Introduction 4

SME Landscape 8

Regulatory Environment 10

Funding for SMEs 12

Support for SMEs 14

SMEs and Technology 16

Conclusion and Recommendations 18

Section 1 I INTRODUCTION

Background

The small business sector in South Africa is a It is within this context that SME South Africa has
critical part of the national economy. In 2018, the recognised the critical need to support and
national unemployment rate has grown to 27.2%1 develop the SME sector. In order to better
and more than 250,000 jobs have been lost in understand the challenges and opportunities
three key South African industries (manufacturing, in the sector, SME South Africa partnered with
community work and trade).2 Government is research and publishing firm, In On Africa
therefore looking to small businesses in its efforts (IOA), to conduct research on the state of small
to achieve the 2030 National Development Plan businesses in South Africa.
(NDP) objective of creating 11 million new jobs by
2030.3 The research highlights the reality of SMEs that are
often neglected yet are an essential component
However, SMEs continue to struggle in South of the economy. These are small businesses
Africa due to a wide range of challenges, and that are in their early years of establishment,
their survival rate is concerningly low. In 2016, do not receive enough support and funding
most small businesses in South Africa (including opportunities. As such, they struggle to generate
micro businesses) did not survive beyond five enough revenue to keep afloat in tandem with
years.4 The rate of survival beyond 3.5 years employing more people.
– what the Global Entrepreneurship Monitor
(GEM) identifies as the length of time required to This publication presents a summary of the
become established – is similarly poor.5 key findings and recommendations from this
research, aiming to serve as an important
resource to help inform future decision-making
in the SME sector.
Methodology

The study included both desktop and primary research, and was conducted between May and
August 2018.

Desktop Questionnaire Online

Research Development Survey

Existing literature and Questions for a web A web survey

data on South Africa’s survey were developed was created and
SME sector were in collaboration implemented with more
collected, assessed between IOA and SME than 1,100 SME owners
and analysed. This SA, guided by the across South Africa,
included more than 80 desktop research study. forming the basis of this
sources. publication.

1
‘SA’s unemployment crisis in numbers’, Engineering News, October 2018. [Link]
unemployment-crisis-in-numbers-2018-10-02/rep_id:4136
2
Head, T. ‘Jobs Summit: Six alarming figures on South African unemployment rates’, October 2018. [Link]
jobs-summit-unemployment-south-africa/

4
 Sample Summary – 1,157 South African SME Owners

47% 56%
OF SMEs ARE
OF SMEs EMPLOY 2-5 PEOPLE
LOCATED IN
39% GAUTENG

OF OWNERS ARE THE ONLY EMPLOYEE

MALE FEMALE

13% 52% 47%

OF SMEs EMPLOY >5 PEOPLE
*1% PREFER
NOT TO SAY

59% 11% Western Cape

9% KwaZulu-Natal
OF SMEs LESS
24% Other Provinces
THAN 3
YEARS OLD
19%
71%
CONSULTING
*26% of SMEs
are 3-5
years old OF SMEs GENERATE
A TURNOVER OF
14%
CONSTRUCTION
<R200 000

BLACK WHITE
72% 12%
13%
FOOD & BEVERAGES

20%
9% 5% OF SMEs GENERATE
COLOURED
*2% PREFER NOT TO SAY
INDIAN
12%
MANUFACTURING
R200 000 - R1MILLION

3
Tandwa, L. ‘ANC’s Jeff Radebe insists it will reach its 2030 NDP targets’, news24, July 2017. [Link]
News/ancs-jeff-radebe-insists-it-will-reach-its-2030-ndp-targets-20170702
4
Friedrich, C. ‘Why do 70% to 80% of Small Businesses Fail Within Five Years,’ MoneyWeb, December 2016. [Link]
[Link]/mybusiness/why-do-70-to-80-of-small-businesses-fail-within-five-years/
5
‘Global Report 2017/18’. Global Entrepreneurship Monitor (GEM), April 2018. [Link]

5
SME Demographics

In comparison to other sub-Saharan African Many of the SMEs (39%) that were surveyed are
countries, South Africa has one of the lowest 1-(wo)man operations, while close to half (47%)
rates of established businesses.6 This reality employ 2-5 people. These results suggest that
of a landscape of relatively young businesses SMEs in the country may currently be contributing
is reflected in the findings of our survey of SME less to local employment than what has been
owners in South Africa. reported in other studies.

FIRST BUSINESS?
Owner 39%

70% 30% 2-5 employees

47%
6-10 employees
YES NO
11-20 employees 9%
21-50 employees 3%
1%

OTHER The SMEs were predominately very young, with

BUSINESSES? around 60% of owners noting operation for less
than 3 years. For the most part, SME owners were
ESSES
SIN operating their first business (70%).
1 TO 2 BU

61% +20 years 2%

1%
3%
SSES
NE
Age of Business

9%
SI
26 %
3TO 5 BU

37% 35 %

24 %
ESSES
SIN 0 years
6 TO 10 BU

1% Less than 1 Year 11-15 Years

1-2 Years 16-20 Years
3-5 Years Over 20 Years
6-10 Years

In line with our results, research by the Small Business Institute (2018) reports estimates that are
considerably different to what is commonly believed about the contribution SMEs make toward the
economy. More specifically, initial findings of their study on SMEs purports that the small business
sector only employs 29% of South Africans.

6
Herrington, M., Kew, J. & Kew, K. ‘The Crossroads: A Goldmine or a Time Bomb?’ Global Entrepreneurship Monitor, 2014. [Link]
[Link]/30312979/2014_GEM_SOUTH_AFRICA_REPORT_South_Africa_The_crossroads_a_goldmine_or_a_time_bomb

6
Maturity VS Employment and Turnover

The majority (71%) of our survey respondents its revenue and, therefore, also to the number of
operate small businesses that generate a employees. The potential for job creation grows
revenue of under R200,000 annually. Coupled as a small business matures. This paints a positive
with the fact that almost 60% of SMEs surveyed picture of the role of small businesses in helping
have been in operation for less than three years, to create jobs, and demonstrates the importance
it is understandable (and highly relevant in the of ensuring that SMEs receive the necessary
context of South Africa’s high unemployment) support early on (i.e. in the first 3-5 years) to
that SMEs report fairly limited employment mature to a stage where they are equipped to
numbers. As is illustrated in the two graphs significantly contribute to job creation.
below, the age of a business is closely linked to

Age of business VS Annual turnover % share of survey sample

8% 17% 8% 8% 33% 25%

16-20 Years
17% 26% 11% 20% 11% 6% 3% 6%

11-15 Years
30% 25% 11% 14% 14% 4% 3%

6-10 Years
64% 20% 8% 4%2% 1%

3-5 Years
79% 12% 4% 2%1%

1-2 Years
92% 4% 1% 2%1%

0-1 Years
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

< R200,000 R201, 000 -R500,000 R501, 000 -R1 Million R1,1 Million - R2 Million

R2,1 Million - R5 Million R5,1 Million - R10 Million R10,1 Million - R50 Million R50,1 Million - R100 Million

Age of business VS Number of employees % share of survey sample

42% 33% 17% 8%

16-20 Years
20% 46% 9% 9% 17%

11-15 Years
13% 49% 25% 9% 4%

6-10 Years
30% 52% 11% 6% 1%

3-5 Years
43% 50% 6%1%

1-2 Years
58% 38% 4%

0-1 Years
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Only Employee 2-5 Emloyees 6-10 Emloyees 11-20 Emloyees

21-50 Emloyees 51-100 Emloyees

7
 Section 2 I SME LANDSCAPE

Nature of Entrepreneurship

With most SME owners starting their businesses out of idealistic and intrinsic reasons, the support
mechanisms that exist should encourage this drive of SMEs to positively impact the world around
them.
Reasons for starting a business
% share of survey sample
WHY? Respondents could choose multiple reason options
0% 20% 40% 60% 80%

To have a positive impact / change the world 74%

To pursue my passion 72%
The idea of being able to create something 65%
Necessity to earn a living 57%
Future opportunities that the business may present 56%
The idea of being my own boss 55%
Work flexibility to dedicate additional time 54%
To learn new skills 49%
Being able to lead 49%
An opportunity presented itself 48%

Market Access & Competitiveness

SMEs in South Africa tend to have limited market SMEs are currently operating within highly
access.7 This was clearly illustrated by survey competitive business environments, and given
respondents in relation to areas of support that the current state of South Africa’s economy and
is needed, for which “access to markets” was the level of unemployment, this will likely continue
selected by a total of 85% of respondents. for the foreseeable future.

3% 3%
8% 12%
3%

5%

Assistance
with Industry
accessing 52% competitiveness 40%

33% markets 40%

A lot of assistance needed The Industry is extremely competitive

Some assistance needed The Industry is quite competitive
Neutral / I don’t know Neutral / I don’t know
Little assistance needed The Industry is a little competitive
No assistance needed The Industry is not competitive

7
‘Market Access Vital for SME growth’, Fin24, 2015. [Link]
growth-20150527

8
SME Expansion Opportunities

When asked which industry/sector SME owners might expand into, they were most drawn to
agriculture and manufacturing, followed by education, technology and real estate.

Top 10 sectors / industries that SME owners would like to expand into
% share of survey sample
10,7% 10,4% 6,0% 5,6% 5,5%

Agriculture Manufacturing Education Technology Real Estate

5,2% 4,9% 4,8% 4,8% 4,8%

Consulting Finance & Food & Retail Construction

Business Beverages Trade
Business owners in the top four most well-represented industries are inclined to expand within their
current area of focus.

Top Most Well-Represented Food &

Consulting Construction Manufacturing
Industries Beverages
Finance &
#1 Industry For Expansion Manufacturing Food & Beverages Manufacturing
Business Services

#2 Industry For Expansion Consulting Construction Agriculture Real Estate

#3 Industry For Expansion Education Agriculture Manufacturing Retail Trade

The search for new business opportunities is the primary driver for expansion across industries.
Growth prospects per industry are additional stimulants in pushing SME owners to explore the
available opportunities.
Main reasons for wanting to expand into selected industries
Thematic analysis of responses
0% 25% 50%

44.3% Available
26.0% Growth prospects business
23.1% opportunities
Entrepreneurial drive
22.8% Social responsibility
9.0% Job creation
7.3% Passion for the industry
6.2% Previous experience
4.9% Technological improvements
4.0% Education and training

9
 Section 3 I REGULATORY ENVIRONMENT

CIPC Registration

Registering with the CIPC is a requirement for Of those who have not registered, a third (34%)
businesses that want to work within the formal feel that their businesses are too small and
sector. An encouraging 89% of SME owners that another third (33%) feel that they have not had the
were surveyed have registered with the CIPC. financial resources required – it is approximately
R200 to register.8

TERED 89
EGIS % REGIS
R OT T

ER
WH Y
Not Registered

ED
11%

?
34% I think my business is too small to be registered
33% I haven’t had the financial resources
16% I don’t know what the benefits would be
13% Other
3% I haven’t had the time
Perceptions of Government Regulations

SME owners were quite evenly split in their opinions regarding whether or not government regulations
are restrictive. Just over half (53%) believe that they are. In particular, these owners pointed to
licenses/permits (44%) and tax/tariffs (35%).

It is important that the government creates an environment that is less restrictive and more enabling
to ensure that SMEs are able to compete and succeed. Assistance from government is important in
both reducing the SME failure rate and helping small businesses to grow.

Are government regulations restrictive?

% share of those who feel that regulations are restrictive

Which regulations are restrictive?

NO 47%
E S/ P E R M / TARIFF U IF O TH E R
NS AX
E

YES
T
LIC

ITS

44% 35% 18% 4%

53%

8
The CIPC provides a clear guide to registration - ‘Step by Step Guide: New Company Registration’: [Link]
files/6914/1102/7352/Step_by_step_guide_-_Private_company_registration_v1_0.pdf

10
 Perceptions of Labour Law

A third (32%) of owners feel that South African SME owners who believe that labour law does
labour law inhibits SME growth, while 37% act as an inhibitor highlighted compliance with
indicated that labour law does not. The remaining regulatory bodies (47%) and minimum wage
31% are unsure, suggesting that many owners are restrictions (42%) as the biggest concerns.
not aware of the possible impact of labour law on Dismissal procedures were also noted by more
their businesses. than a third (37%) of these owners.

Perceptions on whether Labour Law acts as a growth inhibitor?

% share of survey sample
W
KNO
N'
T YES Largest Labour Law Inhibitors?
O

31% 47% Compliance with regulatory body

ID

42% Minimum wage

37% Dismissal procedures
32%
33% Trade Unions
32% Employment benefits
37% 6% Other

NO

Most SME owners feel that industry compliance has either some or a great impact on their businesses.
16% 25%

5% 15% 39%

Has little impact No impact at all Neutral Has some impact Has great impact

Compliance with regulatory bodies appears to Conversely, dismissal procedures become

become less of an issue as businesses grow their increasingly challenging as SMEs make more
annual turnover. Larger SMEs are able to meet money. This suggests that bigger SMEs are put
tough regulatory compliance as they increase under greater pressure to retain staff - even if
their pool of available capital and human they become less productive and profitable in
resources. doing so.

Labour Law and Regulations vs Annual Turnover

% share of survey sample
70%
60%
50%
40%
30%
20%
10%
0%
Compliance with Dismissal Minimum Trade Unions Employment
Regulation Procedures Wage Benefits

< R200,000 R201, 000 -R500,000 R501, 000 -R1 Million R1,1 Million - R2 Million R2,1 Million - R5 Million R5,1 Million - R10 Million

11
 Section 4 I FUNDING FOR SMES

Government Funding

Financing is an important factor that affects the forms of funding, such as grants, tax incentives,
growth and survival of any small business. It is loans and equity finance options.9
especially important as the business starts out
and before it has its own steady revenue stream. 94% of our survey respondents indicated that
While South Africa prioritises entrepreneurial they have not received funding from government.
spirit, there are many barriers in the path of Only an incredibly small portion of the sample
entrepreneurs who are looking to start their (6%) indicated to having received government
own businesses. For small businesses and funding. The small number of SME owners who
entrepreneurs, finance can (theoretically) be have received government funding poses a
accessed through a wide range of sources, considerable challenge for small businesses,
including government and the private sector. particularly start-ups.
The government alone provides several different

SMEs that have received government funding

% share of survey sample

100%
80%
60% 94%
40% 6%
20%
0%

Main sources of government funding

100% Government Grants

Department of Trade and Industry (DTI)

21%
National Youth Development Agency (NYDA)
17%
Small Enterprise Development Agency (SEDA)
16%
Gauteng Enterprise Propeller (GEP)
15%
Other
15%
Small Enterprise Finance Agency (SEFA)
13%
National Empowerment Fund (NEF)
2%
0%
1%

9
‘South African SMME Government Grants’, Thinkroom, n.d. [Link]
african-smme-government-grants
12
Non-Government Funding

Of the 9% of all SME owners who indicated most SMEs are self-funded. Nearly a quarter
that they receive non-government funding, cited business incubators as their primary source
the majority of funding was sourced personally (24%) while a further 20% pointed toward large
and/or from family. This is in support of current financial institutions such as big banks.
literature on small businesses which asserts that

SMEs that have received non-government funding

% share of survey sample
vernm
f n on-ghooose mult ent fun
s ots could und din
c iple f
ce n ing g
ur nde
o
op f o
ti o
sp

so

rS
Re

ns
in

M
Ma

Es
NO 91% YES 9%

Seed Funds 6%
SA SME Fund 7%
Debt financing 8%
Venture capital 9%
Other 10%
Big banks 20%
Business incubators 24%
Private / personal / family 50%

Funding Refusal

Out of the 1,157 SME owners surveyed, 33% are not aware of what is required to qualify for
indicated that they have been refused funding. funding such as having a good operating history
These findings demonstrate that SME owners and adequate cash flow.

SME owners who have been refused funding

% share of survey sample

50% Insufficient operating history

40% Inadequate cash flow
34% Limited collateral
NO 67% YES 33%
27% Bad credit score
16% Other
13% Poor business plan

13
 Section 5 I SUPPORT FOR SMES

Development Assistance Needed

In the recent GEM report for 2017/2018, South A combined 88% of respondents indicated that
Africa was found to be one of the least supportive they need either some or a lot of funding-related
countries in terms of providing support for support. The lack of support in accessing markets
entrepreneurs.10 This is confirmed by our was similarly prominent, followed by the need to
research findings, with our survey respondents gain a better understanding of laws, regulations
emphasising various kinds of assistance they and growth strategies.
need to grow their business.

Development assistance needed by SME owners

% share of survey sample
4% 6% 2% 23% 65%
Access to funding
3% 8% 3% 33% 52%
Access to markets
7% 15% 5% 30% 44%
Understanding laws and
regulations
4% 11% 3% 38% 44%
Business growth strategies
10% 14% 7% 35% 34%
Technological applications
9% 16% 9% 36% 30%
Employee skills developnment
8% 22% 7% 39% 24%
Business knowledge
11% 22% 8% 35% 23%
Managerial Skills

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

No assistance needed Little assistance needed Neutral / I don’t know Some assistance needed A lot of assistance needed

Perceptions of Government Support

A high percentage of SME owners (85%) indicated The perception that government is not providing
that they believe that government is not providing enough support increases parallel to the turnover
enough support, with only 15% of the sample of small businesses.
believing that government is providing ample
support.

Perceptions on government support VS Annual turnover

ent prov
e rnm ide
o v s 6%
15% 16% 13%
g

en
er

oug
n wheth

R201,000 R501,000
h support

Total Sample <R201,000

R500,000 R1 Million
ns o io

to
pt

ce 85% SM 84% 87% 94%

Per Es

NO YES

10
‘Global Report 2017/18’. Global Entrepreneurship Monitor (GEM), 2018. [Link]

14
Thematic Analysis of SME Support Needs

In addition to SME owners rating the level of South Africa can access government and non-
development assistance needed (see previous government funding. It illustrates that many
page), they were also posed an open-ended SME owners continually struggle when it comes
question about areas of critical support. Through to accessing funds throughout different stages
a thematic analysis of their responses, it was of their business operation. Skills development
found that, around a third of SME owners (32.4%) is another key area that must be prioritised to
indicated that there is a need to increase access better support the SME sector – 27.4% of SME
to funding. This finding is consistent with earlier owners referred to skills development gaps when
findings that only a small number of SMEs in asked about the kind of support that they need.
Critical support required by SMEs to improve business performance
% share of survey sample

32.4% Increase access to funding

27.4% Provide avenues for skills development

17.1% Increase support

15.3% Expand on business opportunities

14.3% Provide more mentorship

12.7% Reduce red tape

6.1% Increase market access

4.7% Address corruption

4.3% Support marketing initiatives

4.2% Increase access to information

3.3% Nothing

15
 Section 6 I SMES AND TECHNOLOGY

Use of Technology

With the ever-changing nature of the technological landscape, small businesses are continuously
adopting new ways of doing business. The decentralisation of technological services has enabled SMEs
to access new markets, reduce business costs, and increase efficiency. Our surveyed SME owners
were asked about the kind of technology they use in their business. A large majority (86%) indicated
that they use smartphones in their business “all the time”. In contrast, only 20% use e-commerce on
a regular basis, and just 22% make regular use of cloud services.
Kinds of technology used
% share of sample survey
es ks (
3G/4G/5G
p uters
on p s
or
)
om
ph 3% 3%
to
5%
6% w 5%6%

pC
7%
p
rt

et
24%
La
Sma

Mobile N

Deskto
11%
16%
49%
9%
LTE
77% 16%
86% 71%

DSL, Fibre) ce e
t (A s rvi erc
ne let S e m
er

m
b

20%
d
Ta
Fixed-line int

o
Clou

27%

E-c
30% 27% 33%
35%
39%
46% 22%
9% 11% 19%
14% 16%
12% 20% 6% 9%

All the time Sometimes Neutral / I don’t know A few times Not at all

Technological Limitations Hindering Growth

SME owners were asked whether technological 60% of respondents as the principal obstacle. This
limitations pose an obstacle to growing their may be directly linked to the previous findings
business. There was an exact 50/50 split between that SME owners are not maximising the use of
the respondents. Of the 50% of SME owners who e-commerce and cloud services. This emphasises
indicated that technology poses a challenge, the huge need for improved and cheaper internet
stable and reliable internet access was cited by access in order to grow the SME sector.

50%

Technological
limitations inhibiting
business growth

60% 57% 45% 44% 7%

50%
Internet Software Tech Hardware Other
Access Skills
NO YES

16
 Technological Limitations Across Sectors

Our data suggests that SMEs working in the play in achieving this. E-learning, for example, is
education sector (68%) are most significantly one way of making education more accessible.
impacted by technological limitations, followed As such, SMEs working within the education
by hospitality and tourism (64%). There is a sector (and many others) require more access to
definite need to make education more efficient different kinds of technology.
and accessible, and technology has a key role to

Media and Broadcasting

Hospitality & Tourism

Communications
68% 64% 62% 61% 60%

Publishing
Education
Technological limitations to business

32% 36% 38% 39% 40%

growth versus sector

Automotive
53% 53% 52% 52% 52%
Agriculture
Healthcare

Consulting

Sport

47% 47% 48% 48% 48%

Readiness for Disruption

The 4th Industrial Revolution is defined as “a range 35% of SME owners surveyed believe that their
of new technologies that are fusing the physical, businesses are prepared for disruption while
digital and biological worlds, and impacting all 32% feel their businesses are quite ready for
disciplines, economies, and industries.”11 It is innovation. It is important for SMEs to use
disrupting the way business is done across sectors technology to better position themselves to take
while creating opportunities for businesses. advantage of opportunities for growth when
presented.

Readiness for
Disruption

7% 14% 11% 32% 35%

Not ready at all Somewhat ready Neutral / I don’t know Quite Ready Completely ready

11
‘Why building your digital enterprise is pivotal to success’, T D Global, 2018. [Link]
of-digitisation
17
 Section 7 I CONCLUSIONS AND RECOMMENDATIONS

Conclusion

Through this research, SME South Africa undertook to deepen its understanding of South Africa’s SME
sector, the challenges and risks faced by SME owners, and the opportunities available to the sector. The
research also endeavoured to bring to light important insights to inform strategic recommendations
to fast-track the growth of SMEs.
Through its collaboration with IOA, this research serves as a platform from which to build. Key insights
will be used as a basis for discussion and debate, and it is our hope that the results will help to inform
future projects, interventions, businesses and policies.
As with all research, it is important to take into consideration the limitations when looking to generalise
the results to the broader population of SMEs in South Africa. This research provides a snapshot of
just some of the hundreds of thousands of SMEs in the country.
The results do, however, provide some incredibly valuable insights into the challenges faced by SMEs
in the country, and from these insights, we have drawn a wide array of strategic recommendations
to inform the way forward. What follows is a handful of quotes from SME owners that took part in the
survey and a selection of some of our strategic recommendations.

Entrepreneurs create and My passion for business is

bring to life new technologies, influenced mostly by the area
products and services and I live in… there are so many
create new markets and jobs unemployed people with lots of
along the way. It has been talent and skills but no knowledge
proven that the country’s nor funds to help them forward.
economy needs more people So, I want to eradicate that
who are entrepreneurial and because it’s something that can
innovative to progress. help our community.

The full maximizing of funding Entrepreneurship can be

opportunities is key as funding introduced at the early stages
remains the common obstacle of education. That’ll give people
shared amongst SMEs. The ideas enough information as early as
presented by SMEs across SA possible, so they’ll be able to
are developmental and fit but make informed decisions as to
without sufficient funding they whether business is for them or
remain just ideas. not.

18
Strategic Recommendations

• The current regulatory framework hampers the growth of SMEs to a considerable

degree. The government should look to revisit existing laws and what could be
amended in order to encourage SME growth.
• While government expects SMEs to comply with various regulations, it should offer
assistance to entrepreneurs on how to navigate the stringent business environment.
With red tape and dismissal procedures highlighted as impeding factors to business
growth, one of the solutions would be for the government to provide larger tax
breaks for SMEs in tandem with loosening legislation.
Regulations • The government should encourage partnerships between SMEs and larger
companies through providing incentives for collaboration. This will enable SMEs to
gain additional access to markets.

• More information about funding should be made available to SMEs, from where it
needs to be accessed to additional guidance on what the requirements are to secure
funding.
• Funding sources need to provide constructive feedback to entrepreneurs who
have been refused funding, as well as those who have been successful, in order to
increase the success rate of future funding applications.
• Both government and the private sector need to take the initiative to train and
Funding mentor SME owners on various business aspects, including how to write good
business plans, how to integrate accounting systems into their operations and how
to better manage their businesses.

• As highlighted, the maturity of an SME directly impacts its employment contribution

and revenue stream, and thus SMEs require substantially more support during their
initial years of operation.
• Providing support in these initial stages can help SMEs contribute to employment
while reducing the current high rate of failure.
• Entrepreneurs need to be encouraged to think about innovative ways of doing
Support business. This could be achieved through receiving mentorship from successful
business owners who operate within a niche.

• Small business owners should better-utilise technology that is easily accessible –

such as their smartphones – to take advantage of web-based services that can help
to grow their business.
• In order for this to happen, education on the use, benefits and cost-effectiveness of
technology, such as e-commerce and cloud services, needs to be offered to SMEs to
proactively encourage uptake.
• There is a critical need for affordable and quality internet access in the country.
Technology One way of doing this is through deregulating the telecommunications industry and
ending the monopoly of the existing companies by allowing more entrants to the
market.

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 SME SOUTH AFRICA
CONTACT DETAILS

011 704 2641

smesa@[Link]
[Link]
Unit 5, Oaks Office Park,
368 Oak Avenue, Ferndale
Johannesburg

ADCLICK AFRICA
CONTACT DETAILS

011 704 2641

info@[Link]
[Link]
Unit 5, Oaks Office Park,
368 Oak Avenue, Ferndale
Johannesburg

IN ON AFRICA (IOA)
CONTACT DETAILS

011 027 4027

info@[Link]
[Link]
6 The Vines Place, Fairland,
Johannesburg

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