A report from the SME Monitor Seminar Reply

Prof Derick Blaauw attended the SME Observatory’s SME MONITOR SEMINAR on 29 April 2015 at the University of the Free State.

SME seminaar

This SME monitor was the first of its kind in South Africa. No less than 720 SMEs participated in the survey. This represents 20 sectors and 41 towns and one metro in five district municipalities in the Free State. The  study looks at prevailing market conditions for SMEs in the Free State.

Speakers for the day included:

  • Ms. Gadija Brown – Acting Deputy Director General: Department of Economic, Small Business Development, Tourism and Environmental Affairs Free State Province;
  • Prof. Miroslav Rebernik from the University of Maribor, Institute for Entrepreneurship and Small Business Management, Faculty of Economics and Business, Slovenia. He talked about: “Frame the Slovenian Entrepreneurship Observatory and Global Entrepreneurship Monitor, and lessons learned”;
  • Mr. Taka Gomo (Yo-Afrika) described the methodology for SME Monitor Survey in Free State;
  • Dr. Deidré van Rooyen discussed the main findings of SME Monitor survey in Free State, and
  • Prof. Lochner Marais discussed sectors in more detail.

The SME Observatory initiative and its results are viewed by the provincial government as a game changer in the SME world in South Africa. It remains important for policy makers to really understand what is happening on the ground. This data informs strategy and policy formulation and incentives for SMEs for the Free State province.

Prof Robernik presented an overview of history and challenges for SMEs in Slovenia. It was realised in Slovenia that SMEs were not merely a provider of employment, but more broad discussions of SME policy was needed urgently. SME research was fragmented and unsystematic and done on an ad hoc basis. Available data were not easily accessible. The majority of reports were prepared by government and semi government institutions and therefore not independent. There were no annually updated data leading to mere islands of knowledge. This was the driving force to establish the Slovenian Entrepreneurship Observatory. Advantages included independence and freedom to comment as well as cooperation with government yet avoiding issues of subordination. Policy action can be suggested regardless of the political situation e.g. who is the governing party. This provided a consistent source of data for policymakers and it can be the same in South Africa. The condition for success is of course that this advice is followed on and implemented by government. The issue of implementation is of key importance therefore.

Some lessons learned during the research process were the following:

  • Research has to be longitudinal;
  • There are different role-players in SME knowledge market with different incentives. E.g. politicians want reelection and have a short term horizon versus academics who have a more long term view.
  • Consultants want more work, academics want no responsibilities and bureaucrats are fearful of impact of research on their status.
  • Policy actually made by lower levels of government not by speech writers.

What is needed all over the world is better data and to engage researchers that can make a difference. Researchers must get their hands dirty and the main beneficiaries must be the entrepreneurs themselves!!!

Dr Deidre van Rooyen highlighted some key findings from the study in the Free State:

  • Average employment of SMEs in the Free State is 12.5 people on full and part time basis.
  • Founding period: 47 % of SMEs were founded since 2000.
  • Years in operation is on average 22 years.
  • The first three years are the critical period for success.
  • 33 % of the managers interviewed were women. They are mainly found in the personal service and tourism sectors.
  • 42 % perceived no barriers experienced by female managers.
  • 8.1 % of the enterprises were foreign owned. 84.7 % of these are Vat registered. This is a surprisingly high figure given the common perceptions out there.

Prof Lochner Marais presented the following comparison of sectors:

Manufacturing is responsible for 45000 jobs in the Free State, and 18 000 people are employed in tourism; in 1996 it was only 3500. A high percentage of agricultural services enterprises make use of innovative technology. Agriculture is clearly changing into a knowledge economy. Water and electricity issues hit the tourism industry the hardest. The percentage of productivity loss due to water unavailable is 24.5 % in the tourism industry and the percentage of productivity loss due to electricity shortages is 33.4 % in the tourism industry. A gap analysis indicates that local roads and roads to access markets are the biggest problems for tourism and Factory / processing sectors.

The results were used to construct a Business confidence indicator for the province consisting of four pillars. Each contributes 25% of the indicator. These are Business turnover; satisfaction with services; investment confidence and employment expectations.

This was measured by sector, location, and SMME type. Investment confidence in the Vehicle sector is the lowest in the province. Financial, legal and real estate has the highest overall business confidence with 70.2. Professional Services – education has the lowest at 63.3. Business confidence is the lowest among Micro enterprises (64.4). (less than 5 employees), Large businesses had the highest value.

In conclusion, other provinces will find significant benefits from engaging in similar initiatives to assist SMEs and support economic growth and development in South Africa. Similar work is needed among informal businesses, perhaps with a focus on qualitative research.

 

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