Our 2030 goal: 1 million jobs created by SMMEs in South Africa

Author: Mr Mothunye Mothiba, Chief Executive Officer, Productivity SA

Productivity has always been recognised as a fundamental element for competitiveness and growth. From the public to the private sectors, wherever there is an opportunity for trade, there is potential for growth driven by productivity. And now, more than ever, we need to prioritise and energise our country’s’ performance levels, especially in the SMME sector, to assist our recovering economy, post-COVID-19.

The key to an inclusive & sustainable recovery: MSMEs

On 27 June 2022, The United Nations will commemorate Micro-, Small and Medium-sized Enterprises (MSME) around the world. According to the UN, among the private sector, MSMEs (or SMMEs for Small, Medium, and Micro Enterprises), especially those led by women, youth, ethnic minorities and migrants, suffered the most during the last two years. But, where there is a challenge there is opportunity, quickly followed by innovative solutions.

The importance of Small, Medium and Micro Enterprises (SMMEs), for long-term competitiveness and sustained inclusive growth

South Africa has identified SMMEs as the backbone and innovative productive drivers of long-term competitiveness and sustained inclusive growth. This acknowledgement is reinforced by empirical evidence that:

  • Globally, SMMEs account for an average of 33% of GDP and 45% of the workforce in high-income countries.
  • In emerging and developing economies the average is a jaw-dropping 60% of GDP and 70% of employment!
  • According to the World Trade Report (2016) Micro firms and SMMEs account for the majority of firms in most countries (95% on average), and for many jobs.
  • Data released by the International Labour Organisation (October 2019) shows that SMMEs, together with own account workers, represent a staggering 70% of employment worldwide.
  • The International Monetary Fund (2020) found that informal SMMEs account for about a third of low- and middle-income countries’ economic activity and 15% in advanced economies.
  • About 2 billion workers, or 60 % of the world’s employed population ages 15 and older, spend at least part of their time in the informal sector.

Issues relating to the importance of SMMEs also feature prominently in the UN Sustainable Development Goals (particularly Goal 8), which seek to encourage the growth of SMMEs in order to promote inclusive and sustainable growth, full and productive employment, and decent work for all.

A timeline of progress in South Africa

Evidence to confirm the value that South Africa attaches to SMMEs commenced in 1994, and immediately after our democratic dispensation with the 1995 White Paper on SMME development. Since then, we have slowly but surely started implementing various initiatives and programmes to assist our country’s growing SMME sector:

  • 1996: The National Small Business Act, No. 102 of 1996 (as amended by Act No. 29 of 2004), which was duly benchmarked in other jurisdictions, including Brazil, India, Kenya, Malaysia, Nigeria, Taiwan, United Kingdom, and United States.
  • 2008: Implemented policy, strategies, and programme interventions, including the publication of the Department of Trade and Industry’s (DTI) comprehensive report on the SMME sector.
  • 2014: South Africa established a Ministry and Department of Small Business Development. This is to lead and coordinate an integrated approach to the promotion and development of entrepreneurship, Small, Micro and Medium Enterprises and Co-operatives. This is in addition to ensure an enabling legislative and policy environment to support their growth and sustainability.

In the National Development Plan (2014), government prioritises and highlights the importance of these businesses for job creation, innovation, and competitiveness. Our ultimate goal by 2030: 90% of the 11 million new jobs will be created by SMMEs in South Africa.

A breakdown of turnover by business size shows that in 2019 SMMEs were responsible for generating R2,3 trillion (or 22%) of the R10,5 trillion generated by industries in the South African formal business sector (StatSA Annual Financial Statistics (AFS), 2019)

Therefore, successful entry and growth of these firms may create a sustainable mechanism through which the wages of those at the bottom of the wage distribution can be increased and the level of inequality reduced (Haroon Bhorat, et al. 2018).

Accordingly, SMMEs are crucial to the future of work, not just for employment creation and economic growth, but also to drive innovation and competition in markets. They are also more likely to hire from traditionally economically marginalised groups with lower chances of finding employment such as youths, women, older workers, and less-skilled workers.

The SMMEs in the informal economy employ between 50 and 60 percent of the country’s workforce across all sectors and is responsible for a quarter of job growth in the private sector. By creating employment opportunities for these marginalised groups, SMMEs have also been credited with democratising the labour market and driving more inclusive economic growth.

Productivity leading a future workforce and strong economy

Productivity improvement is the most effective way of ensuring ongoing competitiveness, long-term business success, economic growth and, consequently, tackling the triple challenges of unemployment, poverty and inequality.

If you would like to learn how we can help your organisation achieve these goals, expand and become a sustainable economic-contributing business, reach out to us for a consultation.