Stronger employer performance boosts SME activity in South Africa
17 October 2013 | Surveys, Reports and Ratings | General | Sisa Ntshona, Absa
The Absa SME Index for South Africa rose to the highest levels in four years with employer numbers increasing 6% year on year. Self-employment showed a slight decrease from first quarter of 2013. The index showed two consecutive quarters of growth in the number of employers.
The Absa small and medium enterprises (SME) index, which provides a single index number on the state of SME business in South Africa, rose to its highest level in four years, indicating a growth in small business development and number of employers.
The index rose to 96.1 points in the second quarter of 2013, up 7,3% from its lowest point in April 2010, but still not close to the record of 101.4 points in the first quarter of 2009. Employer numbers increased 6% year on year (yoy) while over the last quarter the increase was 1,5%.
This positive trend is somewhat unexpected, given the low annualised GDP growth of 3%, says Economists.co.za chief economist Mike Schüssler, who compiles the index in partnership with Absa. "It does seem that entrepreneurial activity is continuing and small firms are at least still being formed, despite a sluggish growth environment. Much of the growth seems to be driven by smaller companies, as the average number of employees remained steady at 11,5 people per firm (excluding self-employed).”
Sisa Ntshona Absa’s Head of Enterprise Development for Business Banking says this is not only good news for job creation, but also for economic health. "Two consecutive quarters of growth in the number of employers is a positive sign of continuing entrepreneurial activity in our economy”.
The Absa SME index showed there were 737 000 employers in South Africa during the second quarter of 2013. "The weaker rand could be a contributing factor, leading to the establishment of more firms who are now in a better position to produce goods more cheaply.”
Self-employment declined slightly from the four year high of the first quarter, with an estimated 1,25 million self-employed business people in the country in the second term of 2013. "Micro businesses are not getting the benefit from the growth that the economy is slowly generating,” says Schüssler. However self-employment has risen by 4,5% since its lowest point in the second quarter of 2010, showing that most of the negative effects of the recession have abated.
The Absa SME index also reviewed the number of women entrepreneurs and examined the latest trends in female employment. Women account for 45% of all people in employment in South Africa, while 36% of all entrepreneurs are women.
"In South Africa women show more resilience when it comes to entrepreneurship as many start from a very small base without much in the form of capital,” says Ntshona, adding that 46% of all the self-employed entrepreneurs in South Africa are women.
Sisa adds that poverty and unemployment are the leading challenges facing youth today, who make up half of the 25% of unemployed people in the country, and the development of women as entrepreneurs can help to tackle this challenge.
