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SMMEs have traditionally been the largest employers in South Africa, employing three-quarters of the work force. There has, however, been a loss of a quarter of a million small and medium businesses (SMEs) over the past five years which has seen 2.5 million people lose their jobs.
The Global Entrepreneur Monitor (GEM) 2012 found that “banks in South Africa are becoming more conservative, requiring more security and a longer track record, which many start-ups do not have.
"Many entrepreneurs need to use their own private funds or extend their bonds if that option is available. Other means of financing include securing a loan in their personal capacity to finance the business, or approaching family and friends.”
Annekie Brink and Michael Cant of Unisa’s Department of Business Management report that half of all small businesses fail in the first five years, due to factors which include inadequate marketing, poor location, recruiting the wrong employees, failing to train employees, and poor management skills.Only 15% of SMME owners surveyed have had any management training, 36% struggle with labour law compliance, 52% struggle with the financial demands of the business, 42% complain of bad debt, a third fail to do financial planning, and 35% have poor cash flow management.
"SMMEs need to be successful and to employ,” says Kent.
The GEM found relatively small amounts of finance are needed. Just over half (56%) of the early-stage entrepreneurs required R10 000 or less to start their new business. Of the total number of entrepreneurs surveyed 80% required R50 000 or less to start their businesses, while 20% needed between R50 000 and R500 000 as seed capital.
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