How many jobs are created by small businesses in South Africa

 ·1 Aug 2018

Policy makers and researchers agree that a thriving SMME sector is the key to job creation in this country, but accessing finance, particularly in the early stage of a business, is very difficult.

This results in many small businesses struggling to reach the point at which they are able to create these much-needed jobs, says Darlene Menzies, CEO of Finfind, an online platform linking finance seekers with matching lenders.

With the National Development Plan predicting that by 2030 SMMEs will generate 90% of the 11 million new jobs aimed for, the future could be very bright, said Menzies.

However, a report on SMME access to finance, conducted by Finfind, identifies access to funding as a major hurdle for many formal micro, small and medium enterprises (SMMEs) in South Africa.

Without finance, the probability of business growth and the creation of this number of jobs is unlikely.

“The problem is not a lack of funding, there is a lot of finance available for viable SMMEs – the issue being able to access it. The Finfind report highlights some of the key obstacles that SMMEs need to overcome to do this and similarly, it also emphasises areas that funders need to address, to ensure that many more finance applications are approved for this vital sector,” Menzies said.

Sponsored by the South African SME Fund, the report is based on a data sample of 11,033 SMME funding requests, making it one of the most comprehensive studies on access to finance in the sector.

Some of the common problems faced by SMMEs when accessing finance, identified in the report include:

  • Not knowing who the funders are or how to find them.
  • Lacking the knowledge required to choose the appropriate type of funding product for their finance needs.
  • Struggling with financial recordkeeping and as a result, not being able to produce the financial statements required by funders to assess their bankability and their ability to
    service the required debt.
  • The challenge of poor personal and/or business credit records.
  • Lack of collateral or third parties to stand surety.

The report estimates that formal SMMEs employ between 2 to 3 million full time employees, with 39% of the jobs being generated by medium size businesses who represent 3% of the total number of SMMEs in the report sample.

Analysis done on job figures showed that new businesses created 28% of all jobs in the last four years, with 86% of these jobs being created by fast growing businesses.

This aligns with global research findings that highlight the importance of young and high growth firms in creating new jobs.

Read: The alarming truth about the number of small businesses in South Africa

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