- Cape Times 20 September 2010

Article by Samantha Enslin-Payne

Two thirds of sector’s 6 million enterprises are one-person shows, but collectively it provides 9 million jobs.

There are almost 6 million small businesses in South Africa, most of which are survivalist enterprises providing work for one person. While the sector will not alleviate poverty on a significant scale as the government intends, it does provide a safety net for an estimate 9 million people.

This is one of the findings of the Finscope South Africa Small Business Survey 2010, which was released on Friday.

Neil Higgs, the director of innovation at TNS Research Surveys said the sector provided about 9 million jobs in both the formal and informal sector. “Given that 12.7 million people are employed in South Africa this sector provides significant employment,” he said.

He added that the monetary contribution of this sector was not huge, both to gross domestic product and to those employed, but its social contribution was significant as it provided work for so many “although it may not be very well paid” work.

THS conducted the survey on behalf of FinMark Trust, the Department of Trade and Industry, the Swiss State Secretariat for Economic Affairs, Absa, Standard Bank, the Tourism Enterprise Partnership and the Business Trust.

Higgs said one of the most interesting findings was the sheer numbers involved: with 5.98 million small businesses run by 5.6 million people.

Of these, 67 percent have no employees other than the owner, 27 percent employ fewer than five people and 6 percent provide work for five or more people. By definition, a small business employs fewer than 200 people.

Almost 80 percent report sales as their main activity and the balance provide services. Of those in retail, almost half add no value to the products sold. “These basic businesses are not profit driven and do not have good margins,” Higgs said.

About a third add some value by repackaging, cooking, making clothes or growing and selling fruit and vegetables.

Services provided by small businesses include daycare, mechanical repairs, car washing and payphone booths, while 5 percent of them provide professional services as doctors, lawyers or architects.

Higgs said there was a direct link between value added by a business and it employing more people. “Once you hit four or five employees the nature of the business changes and added value increases.”

But Nikki Viljoen, an internal auditor and business administration specialist who runs her own company assisting small businesses, Viljoen Consulting, said employing more people was often when a small business failed, as owners were not aware that policies and controls needed to be put in place to ensure things were done correctly and consistently.

Likewise, she warned that small businesses fell short if they grew too fast and did not put in place infrastructure for compliance, administration and human resources.

The survey shows two thirds of small business owners have not completed secondary school, more than half are between 35 and 59 years old and 65 percent used their own sources of money to start up these enterprises, which on average is R900. This includes savings, salaries, retrenchment packages, government grants or stokvel payouts. Those who did borrow did so mostly from friends and family.

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