These SMEs contribute significantly to the economy, roughly 34% to South Africa’s GDP (Gross Domestic Product). They also play a vital role in the economy as drivers for reducing unemployment.
With the formal sector continuously letting go of employees, SME’s make up the bulk of labour with estimates of 60% of the work force.
What are a SMEs?
SMEs are independent businesses with assets, turnover and number of employees that are below a certain level. Each country has their own way of defining the level of a business. The legal definition of a SMEs in South Africa changed in 2019 when the categories were updated after 15 years to reflect new inflation levels. In this country only two metrics are looked at to legally determine the size of a business – the number of employees and annual turnover. Asset value no longer counts.
With regard to employees, a start-up/micro enterprise can have a maximum of 10 employees. A small business between 10 – 50 employees and a medium-sized enterprise can have up to 250 employees.
These businesses represent a number of different sectors, with each sector having a maximum turnover threshold. For example, R220 million is the highest a wholesale company can reach to still be categorized as a medium enterprise. Find the table which lists the sectors and their maximum threshold for micro, small and medium enterprises.
A large percentage of SMEs are characterized as innovative, with many others being technology-based. Due to their innovative nature, they play an important role in developing new markets and are quicker than large enterprises at responding to new opportunities. SMEs pioneering qualities creates competition between them and their product offering, prices and efficiency – leading to a healthier economy overall. These businesses have the potential to grow not only on a local and regional platform, but internationally. SME’s also play a crucial role in helping large enterprises, perhaps by supplying them with raw materials or assisting with delivery of products.
Number of challenges
that face SMEs
The failure rate of SMEs in South Africa is very high. Many businesses are not able to reach their full potential and fail to grow. Reasons for this include:
Lack of management skills and insufficient skilled labour.
Inadequate technology and low production capacity (includes access to electricity).
Corruption and crime.
Limited finances and difficulty
Lack of access to markets and developing relationships with customers.
Regulatory issues are a big obstacle for SMEs.
How can we help?
At Connect Space we do our very best to support SMEs and to aid them on their journey to success. We understand that financially it is not easy setting up and running a business, and the need for decision makers to constantly weigh up risk vs benefit. This is why we offer flexible rental agreements with fully furnished office spaces – reducing initial start-up costs substantially. Included in your agreement, you have access to world-class technology with fast and reliable Wi-Fi, with a back-up failover – making loadshedding an issue of the past. In our environment there are endless opportunities for networking and collaboration, which is something your business might just need to help it succeed. Being surrounded by like-minded individuals can contribute to creativity and take your business in new directions you never even dreamed of.
Contact us to see how we can help you…
We are Connect Space! Humans spend so much of their lives working, striving to find purpose and create a meaningful impact. The world of work has changed so drastically, yet one truth has endured – humanity is better when we work together. With a focus on creating collaborative workspaces, at Connect Space we tailor our space offerings to our Client’s needs, making areas that are unavoidably productive with agreement terms that suit your business. Need an hourly rate for hot desking? We can do that. Need a weekly solution while you’re in town? We have you covered. We pride ourselves in going the extra mile to formulate the best agreements with our so they can focus on what they do best. Our 3 locations in Musgrave, Umhlanga and Mount Edgecombe are conveniently located close to major transport routes. We offer a prestigious address that includes serviced offices, meeting rooms and coworking spaces, with fast and reliable wifi and shared break-out areas – perfect for meeting others and collaboration. Better together – Let’s connect and see how we can accommodate you and your business’s needs!