More than a million Gautengers — one in six adults — run small businesses ranging from survivalist street hawking to sophisticated and fast-Âgrowing enterprises, a survey has found.
Finscope project manager Darrell Beghin says the survey found there was an increasing vibrancy in Gauteng’s small-business sector. The sector contributes 35% to Gauteng employment.
“The survey shows the extent to which small businesses are contributing to the economy of this province, despite major challenges. People running small businesses are still lacking in skills development, business acumen and don’t know how to access finance,” Beghin says.
The survey, commissioned by the Gauteng Enterprise Propeller (GEP) and the FinMark Trust, is the first of its kind in South Africa and it is intended to extend to other provinces, including rural areas.
It was commissioned to remedy a lack of reliable and accurate information on small businesses. The survey also provides information on how to make it easier for small businesses to operate and access financial systems.
There are more than 200 000 street hawkers in Gauteng, 88 000 of whom are not of South African origin.
The survey says about 180 000 small businesses, on average employing five workers, were likely to develop into engines of economic growth.
About 69% of small businesses in Gauteng are run from home by people who do not have a post-matric qualification. Many informal traders operate survival businesses; a fifth of small businesses surveyed earn income between R750 and R900 a month.
Only 8% of small business entrepreneurs used government financial support mechanisms, the most common being the Umsobomvu Youth Fund. A generally low awareness of BEE among entrepreneurs was found. Only 27% of the businesses surveyed had a proper business plan designed to exploit 2010 opportunities.
Credit extension to Gauteng’s small businesses was found to be very low — with only 2% of respondents acknowledging the use of loans. Many establishments realise the importance of banking, but 27% said they had no need to access finance.
Most of the small businesses do not generate enough income to sustain the establishments in fast-paced Gauteng. Almost half of the street hawkers and spaza-shop owners surveyed said they would take up formal jobs if there was an offer. But 40% of formally registered small-business owners said they would not take up formal jobs.
“When it comes to small-business development, there are no simple solutions and multiple interventions are needed,” said FinMark Trust chairperson Mark Napier.
Starting up
Women are more likely to start a business because they cannot find other employment.
People working in the informal sector have a slightly better quality of life than the formally employed. Without informal business activity poverty would be exacerbated.
Entities involved in the sale of goods, mostly fail to add value to the items being sold. This impedes market differentiation and increases their vulnerability.
Most small business owners start alone.
On average the small business owner has engaged in formal employment for about 5,2 years before starting up his/her own business.
There is an average annual turnover of R61 799, which equates to just more than R5 000 a month.
Entities whose owners hold tertiary qualifications tend to have the most impact on job creation.
Business owners aged 35 to 49 are the biggest job creators.
Only 12,5% of small business owners have had business training.
Family and friends are the main source of financial borrowing.