SMMEs in South Africa - an overview.

South Africa is currently home to approximately 2,6 million Small, Medium and Micro Enterprises (SMMEs), where micro-enterprises comprise approximately 54%. According to the South African Department of Trade and Industry, the number of SMMEs in South Africa is expected to increase significantly in 2023 to over three million, with the majority of businesses in the service, manufacturing and retail sectors. It is furthermore suspected that 40% of the new businesses will be based in rural and semi-urban areas, compared to 15% in 2023. 

According to the Small Enterprise Development Agency (SEDA), the success rate of SMMEs in South Africa is estimated to be between 40-50%, higher than the global average, which is estimated to be between 25-30%. It was also reported by SEDA that SMMEs are responsible for 60% of job creation, which amounts to over a third of the total employed population in South Africa. SMMEs also contribute to over 60% of South Africa’s gross domestic product (GDP). These beforementioned figures demonstrate the vital role that SMMEs play in the South African economy, as it contributes to more than 40% of the total economic output in South Africa. 

While the sector possesses great potential for job creation, new SMMEs face many challenges. Amongst these challenges, the most significant include inadequate access to finance and funding, lack of access to markets, and lack of skills and capacity. A lack of access to technology, infrastructure and markets, along with complying with bureaucratic, tax and legal regulations also presents as growth and success inhibitors. On management level, the lack of financial and operational management skills are also significant hurdles for many SMMEs. These challenges, coupled with the fact that SMMEs are the backbone of the South African economy, highlight the need for effective policy interventions to support this sector. Hence, the success of these businesses may be the key to unlocking South Africa’s economic potential and creating a more inclusive and prosperous future. 

In short, the success of SMMEs relies heavily upon access to appropriate resources. On average, only 10% of SMMEs survive beyond their first three years of operation. The success rate of SMMEs can thus be increased by taking advantage of available technology and utilizing digital tools to automate processes and streamline operations. By investing into an ERP system, companies can better develop a well-defined and clear business strategy, setting realistic and achievable goals, optimize marketing and advertising, as well as finding and utilizing the correct resources. This will enable SMMEs to stay ahead of same-level competition and to potentially compete with the larger business sector.

Factual aspects on SMMEs in South Africa:

1. SMMEs contribute around 40% of South Africa’s GDP, creating more than 60% of new jobs. 
2. SMMEs generate more than 50% of South Africa’s private sector income.
3. There are more than 3.2 million SMMEs in South Africa. 
4. The informal sector employs more than 15 million people which is nearly 40% of South Africa's total workforce. 
5. SMMEs account for more than 70% of total exports from South Africa. 
6. The majority of SMMEs in South Africa are located in the agricultural, retail, and construction sectors. 
7. SMMEs are the most vulnerable to economic shocks due to their lack of access to capital and resources. 
8. SMMEs are the backbone of South Africa’s economy, representing 95% of all firms. 
9. SMMEs employ more than 50% of non-agricultural employees in South Africa. 
10. The South African government has implemented various initiatives to support SMMEs such as tax relief, grants, and access to finance.