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SMEs fall short of job creation hopes

Feb 25 2013 13:36


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Johannesburg – South Africa's small and medium enterprise (SME) community  is shedding rather than employing staff, despite the official expectation that SMEs – in line with international trends – will drive employment creation in South Africa, a survey found.

This emerged from the SME Growth Index, produced by business environment specialists SBP. 

The SME Growth Index is a multi-year research project, investigating the views and experiences of a panel of some 500 SME operators in the South African economy.

Of all the firms surveyed, about 44% reported having kept their overall employment numbers constant over the preceding year. Just over a third of panellists (34%) had boosted their staff numbers, while 22% had decreased theirs.

This was in line with the broader trend from Statistics South Africa’s Labour Force Surveys, which indicates that the share of employment in firms which employ less than 50 people has dropped substantially over the past 10 years.

However, when looking at the number of staff employed by these firms as a whole, a more nuanced and worrying picture develops.

Firms are increasingly choosing temporary employment options. Permanent employment was shrinking, with an overall decline of 6%. Among manufacturers, it declined by 8%, among firms in the business services sector by 7% and among firms in the tourism sector, by 1%.

Shrinking employment was most pronounced among larger firms. While those employing between 10 and 20 people saw no overall growth or decline in their permanent staff numbers, those employing more than 40 people saw a 19% decline.

This suggests that as firms increase in size, they are faced with even greater incentives to get rid of staff. In other words, their appetite for growth – particularly employment growth – is being pinched off.

All of this suggests that SMEs are adjusting themselves to limit their exposure to the labour market.

Driving this was a lack of demand, sharpened by poor overall economic conditions. Some 45% of firms cited this as the top barrier to employment. This was followed by a lack of suitably skilled people (16%) and unfavourable labour regulation (15%).

Lack of demand was a universal problem. Labour regulations hit manufacturers particularly hard, while business services and tourism firms were more concerned about the paucity of skills.

The proportion of respondents who identified skills as a barrier to employment in the latest SME Growth Index represents a sizeable increase over the previous survey's numbers. This is, in other words, a growing problem.

Firms named a wide spectrum of skills as being difficult to find. These included maths and science skills, computer abilities and financial skills. There were also widespread concerns about a lack of basic “soft” skills, such as literacy and life skills, as well as a view that many young workseekers lack a productive work ethic.

Taken as a whole, South Africa’s SMEs are struggling with a tough and constraining environment, which is retarding its ability to grow and produce the employment that is so desperately needed.  

 - Fin24


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sa economy  |  job creation  |  entrepreneurs  |  smmes
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