1. Annual Review on Small Businesses in South Africa

2. Why the need for Annual Review
To present an analysis of the SMME sector and its ecosystem in a way that would be both academically rigorous and policy-relevant with the mandated focus to establish:
A description of trends and an assessment of SMMEs in the broader context of the South African economy
Provide a consisted conceptual framework for such analysis
Establish key impediments and challenges faced by SMMEs which can inform further research/policy or programme intervention
Identify areas for growth potential
Determine the effectiveness/ineffectiveness of government interventions

3. Approach followed for the 2016/2017 Annual review
LITERATURE REVIEW
Contextualize and inform further research
STATISTICAL ANALYSIS
Establish trends and the features of the sector at the time of the research
QUALITATIVE INTERVIEWS
Establish government and industry experiences and assumptions
PROVINCIAL CASE STUDIES
Analyse the implementation of specific government policies
QUANTITATIVE RESEARCH & QUALITATIVE AUGMENTATION
Establish the needs and challenges of SMMEs and to understand their perceptions regarding government initiatives

4. Sector performance
Number of People Identifying as Self-Employed in South Africa from
2008
2010
2014
2016
% change since 2008
Number of people identifying as self-employed
-3.04%
Working Age Population
16.25%
(Data: QLFS)
Evolution of the Size Distribution of SMMEs in the Formal Sector
2008 (%)
2010 (%)
2014 (%)
2016 (%)
Percentage point change since 2008
Micro
7.82
6.68
5.69
5.87
-1.95
Very small and small
54.93
50.97
48.71
50.27
-4.66
Medium and large
37.25
42.35
45.60
43.86
6.61
(Data: QLFS)
Evolution of the Size Distribution of SMMEs in the Informal Sector
2008 (%)
2010 (%)
2014 (%)
2016 (%)
Percentage point change since 2008
Micro
98.41
98.09
98.28
98.44
0.03
Very small and small
1.46
1.77
1.62
Medium and large
0.13
0.14
0.11
0.10
-0.03
(Data: QLFS)

5. Sector Performance Business ownership
Majority of SMMEs and co-operatives are black owned, i.e. 87% (39% in formal sector, although still dominant in the informal sector it is showing a downward trend)
Majority of business owners between ages 36 and 65-years old accounting for 82% of all business owners
Gender divide remain persistent in all population groups
Employment
SMME contribution to employment estimated at 67%
Dominate sectors remain Wholesale and Retail Trade as well as Construction
Contribution to GDP
Small and Micro 48,04%
Highest Wholesale, Retail and Tourism
Lowest Manufacturing, Electricity, Gas and Water supply

6. Sector Performance Ease of doing business
Ranks higher than most BRICS countries in terms of the most of the indicators used by World Bank Ease of Doing Business project 2017
Competitiveness
Although SA remain above average for policy effectiveness & implementation these are on a downward trend. Key factors to be addressed are Policy Reform; Access to finance; and Education and Training
Entrepreneurship
2017 GEM Report - for every person considering to start a business 1.5 persons exit (41.2% exited because business was not profitable; 25.9% exited because of lack of finance compared to 5.9% exited because of opportunity to sell the business and 6.8% who exited because they found another job opportunity – research thus suggest the high rate of business discontinuances due to economic and business environment.

7. Key findings from the research
Government targeting and differentiation should focus on the different size categories and sectors
Government agencies lack the necessary systems and procedures to effectively implement their policies
Government initiatives not adequately targeting highly vulnerable groups
The regulatory and legislative system is too burdensome on SMMEs and co-operatives
SMME uptake of government projects is low due to the quality and accessibility of these initiatives

8. Key recommendations
Consolidate government information through the development of a national database
Standardize government processes and systems and improve key performance indicators
Develop a comprehensive tailor-made SMME growth package that caters for SMMEs and co-operatives in each stage of the business journey