How are SMEs Contributing to Employment in South Africa?
SMEs play a crucial role in ensuring economic growth in a country. They help by stimulating economic development and growth through providing employment opportunities. For context, here we describe what an SME is and the difference between small, medium and micro enterprises.
The level of unemployment is a significant challenge in South Africa. According to Statista, the unemployment rate in South Africa was around 27.3 percent at the end of 2019. Government is relying on small business to assist with employment levels in the country. The National Development Plan (NDP) envisioned that by 2030 SMMEs will generate 90% of the 11-million new jobs in South Africa. While we believe that SMEs have the potential to play a crucial role in reducing the level of unemployment, in reality, this is not the case.
SME Employment Statistics in South Africa
Source: SME South Africa, An Assessment of South Africa’s SME landscape Challenges, Opportunities, Risks and Next Steps, November 2018.
The data above shows that SMEs are not yet making a meaningful difference to unemployment. As shown in the exhibit, data from SME South Africa indicates that 87% of SMEs employ less than 5 people in their businesses and only 13% of SMEs employ more than 5 people, indicating that we are far from reaching the desired result.
When we include micro enterprises (i.e. SMMEs instead of just SMEs), a study by the Centre for Risk Analysis estimate that SMMEs currently account for 28% of jobs. The level of SME employment (or lack thereof) raises the question about how sustainable SMEs are and whether they survive long enough to be able to meaningfully contribute to the level of employment in the country.
If we are to reach the goals of SMEs generating 90% of the 11-million new jobs in South Africa by 2030, we need to do something about the sustainability of SMEs now.
Being able to monitor the financial health of your business is key to ensuring its sustainability. Boraine Consulting assists SMEs with a full suite of accounting, tax and consulting services to ensure that SMEs accurately monitor their finances and make informed decisions.
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