Small businesses still under pressure

Johannesburg - Almost half of small business owners in South Africa reported an increase in turnover in 2010, according to a survey.

49% reported an increase, while the remaining businesses reported stagnated or decreased revenue, accounting software provider Pastel Accounting said in a statement on Thursday.

"Despite the seemingly good news, profit margins were squeezed with just more than a third of small and medium enterprises (SMEs) (32%) reporting an increase, and an almost equal amount (29%) facing a decrease in profitability," managing director Steven Cohen said.

Participants blamed market uncertainty, due to the current economic condition, for the slump in profitability.

The Pastel SME Survey, which would become an annual review, was conducted online amongst small businesses nationally in December 2010.

Of the 2000 respondents 63% reported an annual turnover of less than R5m. Only 5% turnover more than R50m and the other 32% were evenly spread between these values, he said.

When it came to employee size, 52% of survey participants currently employed a maximum of 10 people, 17% employed 10-20 and 14% up to 100 people.

"The survey provides us with empirical data that the financial success of SMEs is based on a delicate balance of factors, not all within the control of the business owner. And the marked increase in 2010 in the price of electricity, rates and taxes, labour and inflation has put many small businesses under severe pressure as they have had to keep their own prices low to remain competitive," he said.

In contrast, JSE trading statistics for the first half of 2010 were up year-on-year in volume by 22% and value by 17% to R1.5bn.

Cohen said these numbers often masked the struggle SMEs faced.