Small business policy is based on wrong assumptions, study shows
Ramaphosa will need to change tack and consider counterintuitive facts if SA is to have effective strategies, write Bernard Swanepoel and Chris Darroll
President Cyril Ramaphosa has asserted that "the growth of our economy will be sustained by small businesses, as in the case of many countries". Indeed, most of SA’s policy documents since the 1995 white paper have laid out the government’s ambitions to emulate the job-creating power of small, medium and micro enterprises (SMMEs) around the world. It turns out, however, that SA is an international outlier. Unless the country conceives and implements policies that pay heed to the facts, the president will need to look elsewhere for growth and employment.
The Small Business Institute (SBI), in partnership with research company SBP, has been working in 2018 on SA’s first baseline study of SMMEs. We have completed the first phase and have learned that: There are only about 250,000 formal SMMEs in SA — a far cry from the range of 1.2-million to 6-million estimated up until now; Despite comprising a relatively high proportion of formal firms (98.5% in 2016), SMMEs provide a relative...