38% of SA SMEs do not make money

New research finds that as many as 38% small and medium enterprises (SMEs) are unprofitable in SA, while the other 62% are turning small to large profits.

However, the survey, conducted by World Wide Worx, noted that SMEs owned by women have a better chance of being profitable than those run by men.

The SME Survey 2014, sponsored by the Small Enterprise Development Agency (Seda), Business Connexion and Microsoft, questioned 1,400 business owners.

It found that SMEs owned by couples or a mix of genders are substantially less likely to be profitable than those operated by either male or female-owners.

“While this result may seem like a big win for women, it comes with an immediate qualifier: the level of female ownership is exceptionally low,” said Arthur Goldstuck, SME Survey principal researcher and MD of World Wide Worx.

The survey found that overall, only a small proportion of SMEs – less than one in five – is thriving. However,  17% are ‘strongly profitable’ while 45% are ‘just profitable’.

However, a significant percentage of SMEs are under some distress, with 38% not making a profit.

Of the male-owned SMEs:

  • 20% are strongly profitable;
  • 49% are just profitable

Of the jointly-owned SMEs:

  • 16% are strongly profitable;
  • 37% are just profitable

And of the female-owned SMEs:

  • 15% are strongly profitable;
  • 63% just profitable

This equates to a total of 78% of women-owned businesses being profitable, well ahead of the 70% for men.

With a considerable difference recorded in jointly-owned organisations, where just 53% are profitable, Goldstuck said: “This arguably shows that there are additional challenges which come with owning a business together with your spouse or partner, or where joint owners have different personal agendas or management styles.”.

In terms of overall ownership, men dominate, with 48% owning SMEs, while jointly-owned businesses account for 44%. Just 8% of South African SMEs are female-owned businesses.

“There is a massive gender imbalance in entrepreneurship,” said Goldstuck. “This tells us that women are not given enough encouragement or support to become entrepreneurs.”

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38% of SA SMEs do not make money