SME development critical to state of the nation

12 Feb 2015

As the country prepares to hear President Zuma's State of the Nation address today, 12 February 2015, key questions remain around the country's progress in sustainably developing the SME sector. Despite showing a marginal decline in unemployment, Statistics South Africa's (Stats SA) latest quarterly labour survey indicates that the country still needs to make significant progress in creating jobs as nearly 5 million citizens are still unemployed.

According to Sanjeev Orie, CEO of Value-Adds at FNB Business, "South Africa needs to use multiple approaches in order to create jobs, as it is already behind the National Development Plan (NDP) target of creating 11 million jobs by 2030. It is time to make bold decisions and take concrete, measurable steps to kick-start almost two decades of entrepreneurial growth.

"South Africa's challenge of developing entrepreneurs needs to be approached in the same manner that the country addressed financial inclusion. Fifteen years ago, financial inclusion seemed an impossible challenge but the country has since made significant inroads in extending financial services to the majority of the country's population, through mobile technology and other means. Similarly, the task of alleviating the plight of SMEs will need a joint commitment by public and private sectors."

Three approaches

Orie says the three following approaches are essential to addressing SME development and decreasing unemployment:

Formalise Township Economies - There is a great deal of entrepreneurial activity taking place in townships across the country, such as spaza-shops, car-washes and hospitality start-ups. These and other businesses need to be formalised so that they can access financial assistance and the necessary support. Provinces such as Gauteng have already indicated their commitment to facilitating the development of township economies and this model needs to be implemented across the country.
Integrate SMEs into the supply chain of various industries - SMEs, especially those that are looking to service or supply goods to major industries, stand a better chance of being sustainable if they have a reliable client-base. However, they first need to demonstrate that they can offer reliable services to businesses and this is where Government could bridge the gap by facilitating the partnerships.
Approach SME develop according to key sectors - Stats show that South Africa's trade balance continues to rely heavily on imports rather than exports, an indication that there is a gap in the market for locally produced goods. We need to identify the gaps and enhance support for local businesses that could potentially benefit from such an opportunity.

"It is important to remember that South Africa only has 15 years to realise the target of 11 million jobs by 2030. This means that the country will need to consistently create nearly 1 million jobs per annum to meet the target," concludes Orie.