The small business community in South Africa has rapidly expanded over the past seven years. It is alive and kicking, with lots of painful growth, extraordinary successes, shattered dreams and ruined credit records.
No definitive figures exist, but estimates of the number of business owners in South Africa vary from 600000 (in the 1999 census) to about one million, or 4% of South African adults, according to the Global Entrepreneurship Monitor — which also estimates that 9,4% of adults are involved in entrepreneurial activity, if start-ups and survivalists are included.
If one weighs up the forces working for and against small business development, the former are stronger.
A key positive influence has been the political emancipation of the majority in 1994 and the human potential it unlocked. When one asks black small business owners when they started their businesses, the answer is often 1995 or 1996.
Outsourcing by the government, parastatals and corporates is open-ing up unprecedented opportunities. Government spending is estimated at R120-billion a year.
Coupled with this is affirmative procurement by the government. A preference policy exists for all levels of the government and parastatals, according to which previously disadvantaged business people can receive up to 20 points advantage, with 80 points going to the lowest price tendered.
The Department of State Expenditure is working on a system to calculate how much government business is going to black small business. Some estimates put it as high as 30% — or R40-billion a year.
A further impetus is the perception among white employees that career paths are closing in the corporates and they should start their own businesses sooner rather than later.
Relatively successful government programmes, including the Khula guarantee scheme and the Competitiveness Fund, have also contributed.
The small business myth and the lack of business management skills in South Africa are among the forces impeding small business development. Added to this is a strong labour movement and the misconception by oversight organisations, including Parliament, that labour costs for small businesses are measured in monetary terms.
In fact, they should be measured largely psychologically. The “gatvol” factor pushes small business owners back into employment.
A further drawback is the enormous need in corporates and the government for black management. The country’s most talented black entrepreneurs work for corporates and the state.
The Department of Trade and Industry incentive schemes are poorly marketed. For example, Cape entrepreneur Cobus Cronje made millions with an invention for diesel exhaust systems, but was almost ruined by the cost of international patents.
Only afterwards did he and his accountant discover that the government sponsors certain international patents by up to 75%.