Crime has been identified by small and medium-sized enterprises (SMEs) as the third-biggest challenge that could hinder their operations over the next six months, according to SME financing company Business Partners Ltd.
The company’s executive general manager David Morobe highlighted these statistics at an SME summit held in Bryanston, in collaboration with the Small Business Institute, on Wednesday.
According to the SME confidence index for the first quarter of 2024, entrepreneurs were most concerned about cash flow in their businesses, the country’s economic conditions, and rampant crime levels in the areas in which they operated. This third-place ranking shows a significant increase in concern about crime on the part of business owners since 2017, when crime was an aspect of doing business they were least worried about.
Morobe said entrepreneurs were faced with robberies that derailed the growth of their businesses, while others had to deal with extortion.
“I mean, if you look at what is happening with the construction mafias and what they impose in that sector, it shows that businesses have a reason to be worried. Something needs to be done, as crime affects SMEs across the board,” he said.
Former police minister Bheki Cele said significant strides had been made in clamping down on the construction mafia since April 2023. According to Cele, between April and October last year, 61 suspects were arrested across the country in connection with construction mafia-related offences, with more than 27 convicted.
The index also found there had been a recovery in the SME sector, with close to 908,000 such businesses now operating in the country. While Morobe noted this figure was nowhere near pre-pandemic levels, he said there had been a significant increase in growth in the sector in the last four years.
“We now have 40,000 fewer SMEs than we did in the same period in 2019. We still have a long way to go, but the recovery is notable.”
Looking at the outlook for the country’s SMEs over the next five years, William Gumede, an associate professor at Wits University, said that with the formation of the government of national unity businesses could see a shift in the focus from the government, in terms of which it looked to give more support to SMEs.
With smaller parties now a part of government, we can see certain economic changes for the first time, where small businesses become the engine of the economy. In the last 30 years, the ANC focused on big businesses, despite SMEs creating more jobs in the country
— William Gumede, Wits University
“With smaller parties now a part of government, we can see certain economic changes for the first time, where small businesses become the engine of the economy. In the last 30 years, the ANC focused on big businesses, despite SMEs creating more jobs in the country,” said Gumede.
About 60% of South Africa’s workforce is employed in the SME sector, and entrepreneurs are calling on the government to provide it with more support. Gumede said it was important for SMEs to be proactive in approaching the government [and asking it] to engage with them, rather than simply waiting for assistance.
“There is renewed energy in the government, and there are different voices now. But it’s important for small businesses and civil society to fight for what they want, and to approach the government instead of waiting for officials to come to them.”
Earlier this month, small business development minister Stella Ndabeni-Abrahams outlined the department’s R2.437bn budget for the 2024/2025 financial year. In her speech, she said the department had a five-point plan to accelerate growth in the SME sector.
As access to finance was a priority for small businesses, a small, medium and micro enterprises and co-operatives funding policy was being developed by the department to expand access to finance and early-stage investment, Ndabeni-Abrahams said.
Saki Zamxaka, CEO of the Gauteng Enterprise Propeller, said responsibility for funding small businesses should not lie only with the government, and that it could put in place legislation that forced investment in risk capital.
“It’s not like South Africa — and I’m not just talking about the government — does not have the money to fund SMEs and help improve their growth. What’s not there is the risk appetite. There isn’t really a robust environment in the country that forces such investment from big corporations to happen,” he said.
Zamxaka said developing small businesses was not only about job creation in the short term, but also about generating revenue that could be put into infrastructure, which would improve the country for the future.
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