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
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%
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
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.