Big business and government must work closely together to create a thriving small business economy if South Africa is to meet its real growth potential and create decent, sustainable jobs over the next five years.
That’s according to Ivan Epstein, of Sage, who says that SMEs hold the key to unleashing the growth of developing countries. “SMEs tend to be labour-intensive rather than capital intensive, so they’re good at creating employment,” he says. “What’s more, they’re also good at promoting inclusive ownership of the economy and give previously marginalised people an opportunity to participate in wealth creation.”
Epstein notes that the government’s National Development Plan envisages creating 90% of the new jobs it is targeting by 2030. However, the 2013 Global Entrepreneurship Monitor (GEM) shows that less than 14% of South Africans plan to start a business in the next three years.
South Africa's rate for new business entrepreneurs and early stage entrepreneurs is still significantly lower than that of other Sub-Saharan countries. Even more worrying is that GEM’s stats show that more established businesses are closing down than new ones are being founded.
“As government and business, we need to work together to close this gap,” says Epstein. “As a company that has years of experience in providing business solutions to thousands of SMEs, we believe we could work closely with government to stimulate increased entrepreneurial activity, and to help existing SMEs to thrive.”
Epstein says that in Sage’s experience, some of the challenges SMEs face include regulatory compliance, access to finance, skills development and mentoring. “We still remember our roots as a start-up, so we understand how these factors impact small businesses,” he adds. “And we interact with small businesses every day, so we’re continuously in touch with their challenges.”
One of the major barriers to the success of SMEs in South Africa is education, believes Epstein. “We believe that there’s plenty of scope to further drive interest in entrepreneurship at schools and universities, as well as in the workplace” he adds.
“We are involved in supporting accounting learning programmes at schools. We would be keen to work with other businesses and government to step in and promote the possibilities of entrepreneurship to the youth.”
In addition, Sage also invests in education and research that benefits the country’s SMEs. Through its national training academy, Sage provides user training to SMEs, as well as training in general business skills, such as tax year-end compliance, basic bookkeeping and financial literacy, and HR management.
Another example of how Sage promotes SME growth in South Africa is by sponsoring the Talk Radio 702/Cape Talk Sage Small Business Awards, which recognises small businesses and provides them with a platform to promote their business, and continued growth. The annual Sage Business Index Survey provides insight into the challenges SMEs face, their attitudes towards the local and the global economy, and their level of business confidence.
“We have noticed a demand in South Africa for this level of support for SMEs,” says Epstein. “We believe that many small businesses fail not due to a lack of innovation, but rather because they don’t have access to this sort of skills development and training to help create and run a successful business.”