The FinScope survey of small, micro and medium enterprises (SMMEs) in 2020 found that South Africa has an estimated 2.6-million entrepreneurs, 46% of whom are female, running 3.2-million SMMEs.
The estimate aligns with previous studies such as the FinScope survey in 2010, which found 2.8-million SMMEs; the 2019 StatsSA Quarterly Labour Force Survey report, which found 2.5-million SMMEs; and the 2016 Global Entrepreneurship Monitor report, which found 2.9-million SMMEs in South Africa.
These figures tell us that the level of entrepreneurship and the number of SMMEs has remained fairly flat over the past decade, which means they are not able to contribute to national economic growth.
However, South Africa’s SMMEs currently contribute 40% towards GDP. The majority of SMMEs, 84%, operate in either the personal services (for example hairdressing, landscaping, auto repair) or wholesale/retail trade sectors where there are limited opportunity for value addition and by extension limited impact on GDP.
Just over half (54%) are largely micro enterprises and operate on an informal basis. Only 37% are formally registered with the Companies & Intellectual Property Commission or other government registration channels such as local municipalities, and only 30% are registered for tax purposes.
However, those SMMEs that are formally registered are a significant driver of the economy, contributing more than R2.9-trillion to GDP. In addition, SMMEs provide 87% of employment opportunities in the country, estimated at 2-million to 3-million formal full-time jobs.
Only 13% employ someone (most are self-driven as micro enterprises) and of those with employees 84% employ fewer than 15 individuals, while 48% employ between one and five people. According to a department of trade, industry & competition baseline study, 70% have an annual turnover of less than R50,000. We also know that about 70% — 80% of small businesses fail within five years, impacting especially on the disadvantaged communities that need the jobs and economic activity the most.
Recent studies have also shown that for every rand we spend on a local business, about 68c remains in the local economy. This means that supporting small businesses is an investment in the prosperity and growth of our local communities.
These statistics tell us:
• There is appetite for entrepreneurship;
• The sector is contributing to job creation although this is precarious and jobs are not secure;
• The sector has the potential to grow and contribute to economic development but has remained largely static for many years;
• Entrepreneurs are not being capacitated to upscale and become sustainable; and
• Although there are instruments aimed at supporting transformation of the economy, these are not filtering down to where they are most needed.
What are we doing with such information? What are we doing at the level of legislation and policy? And more importantly, what are we doing at the level of practice on a daily basis?
Let me share the experience of Wiphold, which I cofounded in 1995 with my visionary business partners Louisa Mojela, Nomhle Canca and Wendy Luhabe. I say visionary because we collectively recognised that women had to be at the centre of the transformation of the country — the political transformation was already under way, but work needed to be done economically.
Wiphold has therefore focused on putting women at the centre of our programmes, knowing that their families and communities would follow. Many years later more than 200,000 people have benefited from our programmes.
Yet when one considers that this is one entity, led by women, putting women at the centre and working in the most vulnerable communities, this is a story of impact where it matters the most
These numbers do not sound that significant when one considers the extreme need in our country at the most basic level of food security and sanitation. Yet when one considers that this is one entity, led by women, putting women at the centre and working in the most vulnerable communities, this is a story of impact where it matters the most.
Could we imagine just for a moment if we had five more Wipholds, or 10, or 100? What could we have collectively achieved?
One of the biggest things we have had to do was derisk projects in the rural and peri-urban areas so that investors would come in. One of the projects that has yielded significant returns is in Centane, in the Eastern Cape. The community had until at least a decade ago been facing the legacy of systemic poverty and inequality created by apartheid. It manifested in hunger, joblessness and abject poverty.
Wiphold decided to take on all the risks to address these issues. By derisking the process, we were able to bring on board significant investment. In 2013 Wiphold, Nedbank and Old Mutual came on board to bring the initial investment to R100m, with each of the parties contributing R33m. And so began a maize and soya bean project in the Mbhashe and Mnquma municipalities.
Other corporate entities have since come on board with this project, having found a commercially viable platform to support. A decade later, which is the blink of an eye compared with the hundreds of years of apartheid and colonialism, 2,287ha are under production with 2,234 landowners in 35 villages.
Farmwise is the off-taker and is helping with marketing the products. Afgri has donated 15,000t of bunker storage and a maize dryer, and helps to manage the project on our behalf.
This is the first ever commercial storage facility for the Eastern Cape and is a significant catalyst for change in the province.
What all of this means is that we have created food security and restored dignity to many of the most vulnerable in this community; we have reduced poverty and facilitated the development and transfer of skills; we have enhanced social cohesion by creating more economic opportunities for more people, in an equitable way; and we have created the conditions for sustainable and durable change.
Put simply, this community will never be the same again. If we can continue the progress we have started, we would have broken the cycle of generational poverty in this community forever!
This is not to blow the horn of Wiphold; this is aimed at showing what can be done if we use our collective resources and experiences. Expanding the reach of economic growth and development is good for everyone and although this is a cliché, everyone wins! Everyone!
It may not always be apparent, but SMME development is good for many of our social issues as well. We need to stop seeing SMME development as a burden or a handout. We need to change our lens if we are to begin to address the issue differently. This was what drove our intervention in Centane as well.
Entrepreneurship requires daily work and consistency. It requires a constant commitment and it requires that your dream be your lodestar, your guiding light.
We stand on the cusp of a new year. Is it not time that we, the ones who have “made it”, stand up with renewed vigour to offer a hand-up to the next layer, the next generation of those that will break the mould?
We have to put our hands up to work with the government because we have done the work practically. The government is doing the work of putting in place the legislative and policy interventions. We will need all parts of the process to come together if we want to see transformation so that we are not having this same conversation 30 years from now.
* This is an edited version of Serobe’s keynote address to the Entrepreneur of the Year event in Houghton, Johannesburg, on Thursday.
- Serobe is co-founder of Wiphold
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