Small business in South Africa

While large corporations of the world are taking their countries forward on rapid innovation and development, it is small businesses that play a vital role in grassroots development contributing to a more equitable growth. South Africa’s small businesses are no different.

What is a small business?

The classification of a business as small is a relative term. In developing countries like South Africa, a small business is one that is usually entrepreneurial in nature, and employs around 100 people.

Small businesses in SA

A majority of South Africa’s small businesses operate in agricultural trade, tourism and construction industries.

While small businesses in developed countries contribute around 50 percent to the GDP, those in Asia contribute around 40 percent. In South Africa small businesses contribute only 30 percent to the GDP, 70-80 percent in employment, but less than 4 percent to export earnings. Why is this so?

For one, the South African economy is ridden with problems like a low growth rate, raging unemployment, high inflation rates and high taxes, such as value-added tax (VAT). The low performance of small businesses in South Africa can also be attributed to poor education levels, lack of management and work skills, lack of access to working capital, and low outlays for research and development. Yet, there is wide consensus among economic thinkers that small businesses are the means to power South Africa’s economy. The government is now waking up to the huge potential of small businesses, and has initiated efforts to invigorate this sector.

Organisations that support small businesses

Several organisations have been created to help small businesses, train entrepreneurs and provide technical know-how. Some of them are the Department of Trade and Industry (allocates loans to small businesses), Ntsika (non-financial support services and research assistance), Khula (financial aid) and BRAIN (Business Referral and Information Network for basic information and essential service links to entrepreneurs).

By providing employment opportunities to the masses and serving as feeder units to large industries, small businesses can contribute significantly to export earnings and create a sea change in South Africa’s embattled economy.

Also see:

Department of Trade and Industry

Ntsika

KHULA