Failure rate of S.African SMMEs under spotlight

Panelists from various public and private sector organisations, such as Aurik Enterprise Development, Tiger Brands and the Small Enterprise Finance Agency (SEFA), engaged on the topic.

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Author: Tebogo Mokwena

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South Africa has one of the highest failure rates for SMMEs, with five out of seven of them failing within the first year. According to the consulting firm, Cova Advisory, only six percent of SMMEs in the country said they had received government support.

The firm, which offers advisory services on government programmes such as grants and tax incentives, recently held a webinar on how to grow the SMMEs. Panelists from various public and private sector organisations, such as Aurik Enterprise Development, Tiger Brands and the Small Enterprise Finance Agency (SEFA), engaged on the topic.

They concluded that a greater effort to form partnerships between the public and private sector would ensure that SMMEs received practical and relevant support, which was accessible. “SMMEs play a big role in addressing the major challenges of unemployment and inequality in our country, but we are not doing well,” said Cova Advisory Director Tumelo Chipfupa.

“The failure rate in South Africa is higher than many other places in the world, with access to finance being a major stumbling block,” Chipfupa emphasised how crucial SMMEs were for job creation due to their capacity to absorb labour, with a lower average capital cost per job created.

Head of Business Development at Aurik Enterprise Development, Tanya Fouche, said that the government was under a lot of pressure to create jobs.

It was using enterprise and supplier development programmes to drive startup businesses. “We are seeing that working with existing businesses and driving them into a more sustainable growth model creates more jobs and a greater contribution to the economy,” she said.

“There seems to be a great shortage of businesses in this space and so we are seeing a lot of startup business programmes designed to support the inception of these businesses. “Currently the greatest gap for companies in reaching their preferential procurement points is in procurement with black, women-owned businesses, as well as the designated groups such as youth and the disabled,” Fouche explained.

Fungai Blake, from Cova’s Incentives and Finance Raising Team, told the webinar that there was government support through the Trade, Industry and Competition Department. It helped finance supplier development through its black industrialist support scheme. “There is a focus on the development of suppliers which are involved in manufacturing, agri-processing, mineral beneficiation and manufacturing-related services sectors of the economy such as logistics and distribution,” she said.

Tiger Brands Enterprise and Supplier Development Director Litha Kitta said that the government’s criteria were not well designed for black-owned small businesses to access support funds, or for corporates to offer assistance in this regard.

He stressed that funding was critical to unlocking the participation of black businesses in the supply, value and distribution chains of Tiger Brands. “Government funding is incompatible with business timeframes,” he pointed out.

“There is a mismatch between what the government is offering and what the private sector needs.”

SEFA’s Don Mashele insisted that there was government support. “Our focus in on small black-owned businesses… we need to build businesses that corporates can buy from,” he said.

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