The excessive value of dwelling together with the alarming price of unemployment has meant that many South Africans have been plunged into what some name “getting their bread” by way of entrepreneurship, unwillingly so, in accordance to Momentum and Unisa’s (University of South Africa) Science of Success report.
“As such, many of them are unskilled or unprepared to enter the world of self-employment. If given the opportunity, they would rather work for an employer than become an entrepreneur,” it reads.
Nevertheless, even for many who envisioned themselves being empowered by way of beginning their very own enterprise and having one thing that’s solely their very own and an prolonged expression of self, the truth is that this: it’s nonetheless exhausting to achieve success and thrive as a enterprise proprietor in South Africa, the report notes.
“It’s a daily fight for SMMEs (small, medium and micro enterprises) to stay in business in South Africa.”
The report says the impact of the Covid-19 pandemic continues to be felt extra so on SMMEs, which are sometimes principal sources of revenue for enterprise house owners and their staff. It notes that the sector has not but recovered to pre-Covid ranges.
It says that whereas there was a complete of simply over 2.6 million SMMEs in the third quarter of 2019 (Q3 2019), that the quantity barely decreased to about 2.3 million in Q3 2020 and settled at 2.4 million in Q3 2021. This, it notes, interprets to 150 000 much less SMMEs in contrast to 2019, earlier than the onset of the pandemic and the next lockdowns.
The report additional signifies that whereas solely 56% of SMMEs make use of a couple of particular person, that in 2021 they supplied employment to over 9 million folks, accounting for 68.3% of all jobs in the nation in the course of the interval.
In the same style, one other type of entrepreneurship that has turn out to be popularised by the leniencies of distant working notably throughout exhausting lockdown is the rise of the “side hustle”. The research notes that facet hustle entrepreneurs have already got a principal supply of revenue, they usually begin their very own enterprise – formal and/or casual – to add an extra supply of revenue.
Momentum/Unisa’s family finance survey (2022) discovered that the variety of households buying an extra revenue from a facet hustle additionally decreased to about 11.4% (2 138 282 households) in 2021, in contrast to 14% in 2020.
According to monetary economist and senior lecturer on the University of Cape Town Dr Thanti Mthanti, the decline in SMMEs and facet hustles is basically attributable to the dearth of economic help notably in the course of the onset of the pandemic.
“Some SMMEs, along with big businesses, took loans before the beginning of the Covid-19 pandemic became a reality. When Covid hit, it shook up the finances of many companies and especially SMMEs. What we saw is that finances and cash flow started to dry up quickly.”
“Larger companies had reserves and could get more loans. But a lot of SMMEs lost jobs and had to shut down because of the lack of funding.”
Mthanti says regardless of their potential impression on employment and the economy, SMMEs will not be considered areas for investments. “These SMMEs sit in a space where they aren’t really funded by government and also where the private sector believes its too risky to invest in them.”
“If you look at the amount of funding that is available to SMMEs, one of the things you pick up is that the sector is large in terms of the economy and its contribution to GDP. But if you assess the scale and learn about the sort of support the sector requires, its simply not sufficient.”
Mthanti says with South Africa’s estimated R6 trillion economy, of which about R1.2 trillion is attributed to the SMME sector, SMME funding establishments or traders want to match that quantity in order to help and subsequently enhance the sector, which might in flip profit the economy considerably. “R300 million of funding is not enough in that regard.”
Strategic insights advisor at Momentum, Monique Schehle, additional notes that load shedding, the rise in crime and the July civil unrest affected many small companies.
Commenting on the stress added from altering shopper behaviour patterns, Schehle says one other subject exacerbating the scenario for SMMEs are native value factors versus low cost worldwide value factors.
“Many South Africans prefer buying on Shein or external suppliers, as opposed to shopping at local designer stores. And its understandable because its cheaper to buy clothes, for instance, from international online stores but the cost of production does not come cheap in South Africa.”
While she admits that the excessive way of life pushes customers to go for cheaper items that “the buying power should be going towards local SMMEs”.
Moreover, the report says authorities and society at giant are placing “extreme pressure” on SMMEs to play a task in the reconstruction of South Africa’s economy.
Wayne McCurrie, economist and portfolio supervisor at Ashburton Investments, says regardless of not being the largest contributor to the economy, that SMMEs are important for job creation, notably after they succeed.
However, he cautions that large companies, authorities and labour unions want to work collectively to mobilise the capital wanted to enhance South Africa’s SMME panorama and economy at giant.
“The big thing that is missing is a coordinated plan between major players. There is a lot of uncertainty surrounding the future of start-ups and the economy, this includes power-related issues, Transnet, water, and dysfunctional municipalities.”
“What the country really needs is for everything to work efficiently. Only then will we see South Africa getting more investments that will boost facets of the country’s economy especially funding for small to medium businesses,” he notes.
Nondumiso Lehutso is a Moneyweb intern.
