Why it’s great to be an SME owner, in spite of the challenges – blog by Steven Cohen

It is no secret that small to medium sized enterprises (SMEs) are vital to the lifeblood of our economy, contributing about half of South Africa’s GDP and employing 60% of its labour force. In some developed countries, the SME sector contributes up to 90% of a country’s GDP, but according to a recent Gallup world poll, sub-Saharan Africa has the highest percentage of adults globally (20%) planning to start a business in the next 12 months.  What is needed to encourage and support this kind of intent is public sector support and this, is where South Africa is lacking.

Every year when the finance minister presents his Budget, for example, small business owners wait with bated breath for tax breaks, the loosening of labour regulations and increased access to funding. This year, a dipstick survey of our SME clients, of which there are 200 000, was conducted just before the Budget Speech and revealed that an overwhelming majority (92%) of respondents felt that government could do more to lighten their load. However, 86% did not expect any Budget changes that would affect them and unfortunately, they got what they expected.  When asked to rank the legislative changes that would most benefit their business, 31% of our survey respondents wanted tax incentives to employ more people – making it the overall number one choice. However also on the wish list was the need to lighten labour laws which continue to be a bug bear. Government’s proposed infrastructure plan will pour billions of rands into public works projects in an attempt to absorb the unemployed. But just think, if even a fraction of this money was accrued to SMEs in the form of tax incentives to hire and train workers, a sustainable solution to unemployment would be possible, particularly with there being anything between one million and three million SMEs in South Africa.

Another obstacle, which I hear from our clients all the time, is funding. Funds are difficult to come by, regardless of the intended use, especially if money is needed just to get over a financial hump caused by rising input costs like fuel and electricity. Regulation and red tape also continue to be a costly administrative burden for SMEs, further restricting growth.

The good news is that the nation is increasingly acknowledging the value that SMEs contribute and we’re adopting a culture that respects and supports entrepreneurs. I think we are seeing some very exciting initiatives aimed at the SME space which is great! Major financial institutions are driving big sponsorships for SMEs through competitions that are being aired on national TV and radio channels. Banks are in fierce contest with one another to roll out specific products, business accounts, and insurance packages just for this sector.

Running a smaller enterprise is also fun! The ability to make and execute decisions on the fly is just one of the advantages. While large corporations may have more finances to invest in research and development, their sheer size makes it slower to get new innovations out into the market. Smaller enterprises have a much closer relationship with their customers, giving them direct insights into market trends.  In an economic downturn, a small enterprise means greater agility to adapt and lay down new business propositions, while large companies are slower to react to rapidly changing circumstances.

Innovations in the IT space in the form of cloud computing mean even more fun is to be had. Now operating a business can be done remotely from anywhere in the world! All the services and business applications you could possibly want can be accessed online, without the costly setup of IT infrastructure.

To all small business owners out there, I would like to say hang in there! It is tough, but you are truly the wheels of change and with greater public and private sector support, you have the ability to shift South Africa’s economy for the better. After all, a restless and turbulent economy is one full of opportunity for those with the energy and drive to take full advantage.