Small businesses are considered the world over to be the most promising drivers of sustainable economic growth and job creation — but they need support targeted at their needs if they are to reach this potential.
Though small in size individually, collectively they represent 90% of all businesses and account for about 40% of global GDP and more than 50% of global employment, according to the World Bank.
The picture in SA is similar but differs in the key aspect of employment.
South African micro, small and medium enterprises (MSMEs) account for about 34% of our GDP but lag on job creation, with some studies indicating they contribute less than a third of jobs in the formal sector.
In terms of new job creation, SA’s 1,000 largest employers, including government, were responsible for 56% of new jobs created between 2011 and 2016, according to the SA Small Business Institute.
A large proportion of MSMEs have only one employee, the business owner; and SA studies consistently find that micro and small enterprises are not significantly growing their employee numbers.
Only about 1% of micro enterprises that start with less than five employees have managed to grow to 10 or more, according to research at the University of the Western Cape.
Coupled with the high failure rate of MSMEs — 70-80% do not make their fifth anniversary — this indicates small business is not yet playing its envisaged role in reducing SA’s high unemployment rate and is unlikely to meet the National Development Goal that 90% of the 11 million new jobs forecast by 2030 will be created by MSMEs.
Against this backdrop, the Business Chamber established an Entrepreneurship Desk in April 2022, to act as a single point of contact for services and interventions to support the growth and sustainability of small businesses.
MSMEs that join the EDesk have access to free one on-one advisory and support on key issues such as access to markets, exporting, entrepreneurial skills development, access to finance and business-to-business linkages.
The Desk also shares information on business development and funding opportunities in the entrepreneurial ecosystem and connects small businesses with key strategic stakeholders.
Members have free access to legal consultation on commercial matters, skills training workshops, networking events and business breakfasts, information sessions with various public and private sector funding entities, and access to a dedicated resource who responds to their queries and shares information such as trade opportunities.
That such a one-stop point of contact and information is needed in the small business community is indicated by steadily increasing numbers of entrepreneurs signing up to the E-Desk, now standing at 240 in under two years, of which 55% are women-owned and about 70% black-owned.
We believe this is a clear signal that our services are targeting the right groups, those most in need of greater job creation and economic inclusion.
The businesses registered with the Desk are already making a significant economic impact in the Bay — together employing nearly 1,100 people and generating annual turnover of more than R280m.
The core mission of the EDesk is to ensure that our services and interventions are relevant and targeted at the core growth challenges of our members, hence we surveyed them recently to gain deeper information on their respective challenges and how small businesses can fill the gaps hampering their growth.
In addition to the crises around reliable electricity supply, and logistics and transport, which disproportionately affect small businesses as they cannot always afford alternative solutions, we identified a clear pattern of challenges.
Only 10% of the Desk members employ more than 10 people and 40% have the owner as sole employee, overstretched and missing opportunities because they play the multiple roles of accountant, marketer, sales rep, legal adviser, admin staff and many more.
Like all businesses, entrepreneurs need to build a team of skilled, knowledgeable and educated employees working together to achieve the company’s goals.
To assist Desk members, the Chamber has partnered with several public and private development agencies to place interns who can provide operational and administrative support (with positive progress thus far with some interns acquiring permanent employment).
MSMEs are encouraged to develop legally compliant human resource policies and employment contracts, and have access to pro bono consultations on HR and industrial relations matters.
A lack of understanding, and ability, in legal matters is another gap which leaves a small business vulnerable in areas such as nonpayment by creditors and employee disputes.
A large proportion of the MSMEs misguidedly enter contracts and agreements unfavourable to them, or rely on a “gentleman’s agreement” with partners, suppliers, and/or customers.
Two legal firms, members of the Chamber, offer pro bono consultations and advisory to members of the Desk to address this lack of knowledge and skills.
A crucial gap, and the key reason for the high failure rate of MSMEs, is the lack of business knowledge and skills, causing avoidable mistakes or the business to stagnate.
An IT specialist, for example, setting up a computer sales or repair business may not have the know-how in business planning, financial management, HR management, marketing and so on to drive a successful, sustainable business.
Business planning support is thus a key focus for the EDesk, through mentoring, oneon-one advice and workshops aimed at producing a business plan as the end product.
Alongside this, we have successfully placed 37 interns at eligible Desk members to further promote the creation of jobs among small businesses.
Skills workshops and pro bono consultations on all aspects of running and scalingup a business are offered by the Desk.
In addition to this, we are in the process of launching an Accelerator Programme to provide small businesses with critical skills and to put them in a stronger position to access funding.
As a result of lessons learnt from small businesses themselves, we will continue to tailor and focus our services to make a sustainable difference to the prospects of small business as engines of economic growth and job creation.