Small and medium businesses are more flexible and better able to adapt to external shocks

SME business support is vital to a more robust South African economy.

Under the right conditions, a strong SME community can be a dynamic transformational force. In the words of the World Bank, “relative to larger firms, SMEs enhance competition, entrepreneurship, job growth and drive economy-wide efficiency, innovation and economic growth.” Entrepreneurial activity and small business ownership play an essential role in the resilience of local and regional economies. A vibrant SME sector provides business diversity that helps shield countries from the economic impact caused by external shocks, such as Covid19.

Unlike their larger counterparts, SMEs are more flexible, and therefore, able to adapt faster to sudden market changes. It is even argued that SMEs through innovative activities, can take advantage of economic shocks and the disequilibrium and emerge stronger than before. These characteristics mean that SMEs may be more likely than larger firms to pursue growth-orientated strategies in recessions, thus boosting local economic resilience.

COVID19 or not, it is now time that we get involved in our economic future. It is just not in the government’s coffers to do this on their own.

The South African small and medium enterprise (SME) business sector is as vibrant, diverse, and remarkable as the colour spectrum of our rainbow nation. However, the SME sector is just not big enough to provide us with the benefits and shock absorbent characteristics that a healthy SME sector should provide. Therefore SME business support and growth is vital for our economy. For all the shortcomings of government, the relatively small size of the SME sector in South Africa is, unfortunately, not another thing we can solely blame on government. Only we, as South Africans, have it in our power to change this. The fastest and cheapest way to mobilise and grow our small and medium businesses is through our absolute support of them, as a nation.

SME business support is vital for the South African economy

The South African SME segment is an outlier internationally in respect of SMEs’ contribution to GDP, employment, and the fiscus. When taking the participation of informal businesses into account internationally, SMEs contribute more than half of employment and GDP in most countries irrespective of income levels.

Compared to The Organization for Economic Cooperation and Development (OECD), SMEs are the predominant form of enterprise, accounting for approximately 99% of all enterprises. Also, SMEs provide the primary source of employment, accounting for about 70% of jobs on average, versus only 28% in South Africa.

South Africa’s SME employment figures also lags that of other emerging economies, where SMEs contribute up to 45% of total employment and 33% of GDP. It is no surprise then that the government’s National Development Plan 2030 (NDP 2030) looks to SMEs to be significant sources of employment and drivers of growth in our economy.

Many initiatives are being explored by policymakers to accelerate the success and growth of SMEs in South Africa. It is too early to determine any real success of these measures. Given the COVID19 lockdown restrictions and the negative effect on many SMEs, the balance between big and small business will become more vulnerable in the future. This disparity will continue to influence the competitiveness of our economy, and make us even more vulnerable in the future. Therefore in a time of (inevitable) economic restructuring, we should focus on building a longer-term economic infrastructure, better able to protect our economy and people in the future.

The spirit of UBUNTU is uniquely ours, and is the overriding philosophy to much of our success as a nation.

Archbishop Desmond Tutu explains that “Ubuntu is the essence of being human. Ubuntu speaks particularly about the fact that you can’t exist as a human being in isolation. It speaks about our interconnectedness … We think of ourselves far too frequently as just individuals, separated from one another, whereas you are connected and what you do affects the whole world. When you do well, it spreads out; it is for the whole of humanity.”

In the spirit of Ubuntu, it is now up to us in our capacity as consumers, customers, suppliers, service providers, mentors, or funders to prioritise our support to South African SMEs. While virus-related market changes will bring about new risks, it will also create new opportunities. We need to support these new opportunities and innovations from our SMEs, to change the course of our economy.

Ubuntu speaks about our interconnectedness. It is not only up to government, funders and other perceived powerful and hopeful interventions that will protect and grow our economy and nation. It is frankly up to you, and me. Be Lekker, Be local, Buy Local.