Government and big business must work together to grow SA’s SME sector

As Nigeria’s economic growth has eclipsed South Africa’s, it brings to light areas where the country’s growth potential is not being realised.

Growing the SME sector is a viable option for growing a country’s economy, but this does not just happen without input from the government and bigger, more established, businesses. For the best impact, big business and government should work together — and not in silos — to help stimulate the SME sector.

South Africa’s population is one of the youngest in the world, with an average age of 24.9. Now that’s a lot of potential young entrepreneurs that could start companies, create jobs and positively impact the economy — if the right training, knowledge-sharing and example is made upon them.

Big business and government must work closely together to create a thriving small business economy if South Africa is to meet its real growth potential and create decent, sustainable jobs over the next five years because SMEs hold the key to unleashing the growth of developing countries.

SMEs tend to be labour-intensive rather than capital intensive, so they’re good at creating employment. What’s more, they’re also good at promoting inclusive ownership of the economy and give previously marginalised people an opportunity to participate in wealth creation.

The SA government’s National Development Plan (NDP) envisages creating 90% of the new jobs it is targeting by 2030. However, the 2013 Global Entrepreneurship Monitor (GEM) shows that less than 14% of South Africans plan to start a business in the next three years.

South Africa’s rate for new business entrepreneurs and early stage entrepreneurs is still significantly lower than that of other Sub-Saharan countries. Even more worrying is that GEM’s stats reveal that more established businesses are closing down than new ones are being founded.

Government and business need to work together to close this gap. For example, companies that have years of experience in providing business solutions to SMEs should work closely with the government to stimulate increased entrepreneurial activity, and to help existing SMEs to thrive. As we all know, SMEs face a variety of challenges including regulatory compliance, access to finance, skills development and mentoring. These factors impact small businesses.

One of the major barriers to the success of SMEs in South Africa is education, and there is plenty of scope to further drive interest in entrepreneurship at schools and universities, as well as in the workplace. Bigger businesses should work together (and with the government) to step in and promote the possibilities of entrepreneurship to the youth.

In addition, more established businesses could set up training programmes to help teach budding entrepreneurs general business skills such as tax year-end compliance, basic bookkeeping, financial literacy, and HR management. This mentoring could also be more specific to a business’s industry. You never know what kinds of partnerships you might groom from such programmes.

Bigger businesses should get out there onto media platforms, from blogs to radio, to promote the SME sector, discuss the challenges thereof and share the success stories too. This knowledge-sharing will serve to not only inspire, but also give practical advice for younger entrepreneurs.

There is a demand in South Africa for this level of support and interaction for SMEs. Many small businesses fail not due to lack of innovation, but rather because they don’t have access to skills development and training to help create and run a successful business.

Image: Adam Selwood via Flickr.