• Output vs. outcome or impact

• Conceptual framework: data & methodology

• Quantitative & qualitative elements

• Nuanced analysis: context

• Synthesis of relevant research

Annual Review of Small

Business in South Africa –

2003

• Terms of Reference• Role of the dti• Output vs. outcome or impact• Conceptual framework: data & methodology• Quantitative & qualitative elements• Nuanced analysis: context • Synthesis of relevant research

Background

• Review of: Trends Performance Basic statistics

• Sector reviews• Provincial review• Thematic issue• Broad themes arising from the Review

Outline

• Conceptual framework

Review of Trends & Performance

Review of Trends & Performance

• Economic environment World growth World trade SA growth – SMMEs insulated SA trade performance – SMMEs somewhat

insulated Domestic expenditure

On balance… environment not supportive

• Regulatory Environment Tax and labour regulation regimes unchanged Total admin. burdens for VAT and RSC high Discourages graduation of informal to formal But, regulations serve public good purpose… many govt.

initiatives underway already

Review of Trends & Performance

Review of Trends & Performance

• Institutional Environment

• Entrepreneurial Dynamism/Opportunities

Number of businesses increased – informal

Probably necessity not opportunity

Barriers to entry low for some sectors

Formal sector declined – macro environment

African women esp. good growth

Review of Trends & Performance

• Entrepreneurial Capacity Failures are costly New registrations stable Liquidation rates increased – but not substantial Contribution to employment – established vs. new Contribution to GDP – largely static

Review of Trends & Performance

• Contributions static overall

• Very small and small segment growing

• But, SMME contribution is significant!

Basic StatisticsEmployment

• Contributions static overall

• Very small and small segments growing

• SMME contribution significant

Basic StatisticsGDP

Basic StatisticsNon-VAT registered businesses

• Macroeconomic environment and outlook crucial• Entrepreneurial dynamism present but barriers to entry in

some sectors and esp. formal sector• Institutional environment• Growth stems from new SMMEs increasing competition

and lowering returns• Established SMMEs stagnant

Review of Trends & Performance Conclusions

• Sector performance

• Tourism’s

impact on job creation & SMME development.

Sector ReviewsTourism - Highlights

• Pyramid sector structure• Established (white-owned) tourism SMMEs are often linked to

‘lifestyle entrepreneurship’ Advantages: volume of capital, access to information Problems: tourism marketing; unnecessary regulation;

and infrastructure development for tourism, especially skills training.

• Emerging tourism SMMEs Problems: domination of sector by existing large or

established SMMEs, product development, marketing and access to government support programmes.

• TEP - successful support initiative addressing some of the issues faced by emerging SMMEs.

Sector ReviewsTourism - Highlights

• Differing constraints require different interventions

• For emerging SMMEs

– Competition policy,

– Marketing support, and

– Regulatory issues

are key.

Sector ReviewsTourism - Conclusions

• Sector is highly concentrated and dominated by several integrated companies

• Recently new entrants, including SMMEs, linked to the liberalisation of agricultural markets and the country’s trade regime

• Food processors affected by concentration in retail sector: formal retail chains estimated to control 70% of sales

• Food processing sector is ‘buyer-driven’ – retailers play a dominant role in the value chain

Sector ReviewsFood processing - Highlights

• Characteristics of food processing SMMEs: Most sell outside of formal retail chains, e.g. independent

retailers, spaza shops, restaurants, banks, hotels etc. Supply local (mostly) or regional markets Competitive position based on price or quality, not volume.

• Growth challenges Growth challenge strongly linked to South Africa’s

concentrated retail structure Retail chains are ‘buyer driven’ – supplying retailers

involves meeting volume and ‘production process’ requirements

Requires investment in infrastructure and equipment Also requires a new ‘business model’ – long payment

delays, rebates, discounts, storage, increasing volumes

Sector ReviewsFood processing - Highlights

• Policy implications: Franchising appears to be one successful model for

emerging SMMEs AgriBEE also recognises the problems facing emerging

SMME agri-businesses – target is that 50% of retailer preferred suppliers are black and/or SMMEs.

Can the dti’s support structures for SMMEs in general meet the specific needs of food processing SMMEs?

Sector ReviewsFood processing - Conclusions

• Objective is to provide key findings from research on the SMME manufacturing economy, 1994-2003

• Major finding - general stagnation; SMME component grown

• Sectorally, growth has occurred mainly in clothing SMMEs and fabricated metals with significant declines in the traditional food/agro-processing sector

• Spatially growth is occurring in only two areas of the Free State – the Bloemfontein and Harrismith nodes

Provincial ReviewFree State

Provincial Review

Provincial Review

• Established versus emerging SMMEs in manufacturing show different characteristics and constraints

• Established SMME economy is in a fragile state with many entrepreneurs considering closure or relocation

• Emerging entrepreneurs are struggling with typical problems of localised markets, poor premises and lack of access to finance

• In policy terms the Free State SMME economy requires an array of new support interventions to assist new entrepreneurs and existing producers, including a MAC

Provincial ReviewFree State - Conclusions

Overall Annual Review Conclusions

• Scale of the sector is substantially largely than originally thought

• Entrepreneurial dynamism is not necessarily a constraint• Barriers to entry remain a key issue for new entrants• Entrepreneurial capacity is weak leading to only limited

‘graduation’• Cannot separate SMME economy from general SA economy

– highlighting the need for coordinated industrial policy

• Annual Review – 2004• Sectors, Provinces etc