More than a million people, or one in six adults, in Gauteng run small businesses. The range is vast, from street hawkers to sophisticated and fast-growing enterprises. With small businesses accounting for 35% of Gauteng’s employment, the economic and social contribution of this sector is significant.
The survey provides information on how to make it easier for small businesses to operate and access the financial system. In particular, the researchers wanted to find out, using a truly representative sample, how many small businesses there were in Gauteng and to get a better understanding of their needs by segmenting the market in a totally new way.
The small business market is so varied that it requires a classification tool that does not merely look in a one-dimensional way at the formality, size or legal status of the business. It needs to look at the continuum of small business from informal street vendors to more formal, sustainable businesses. Hence a Business Sophistication Measure (BSM) has been created. This confirms, among other things, how critical it is for Government and the financial sector to focus on the relatively small number of transitional companies that seem to be successfully moving out of sole trader status and becoming employment-generating entities of greater sophistication.
The survey found that:
On access to financial services the survey raises the question of how the banks will achieve their commitments on small business finance under the Financial Sector Charter when credit extension to Gauteng’s small businesses is so low.
Other information gathered around access to finance included:
The survey contains a wealth of information, on the participation of women in business, access to finance, entrepreneurial attitudes of small business owners, the economic and social contribution of small business, banking needs and compliance with the law, to name but a few areas.
Almost a half of Gauteng’s small business owners say they would take a formal job with regular income if they were offered it; however, 40% of formally registered business owners said they would not, suggesting a reasonably high level of commitment by those businesses with the greatest propensity to grow. There is a thirst for training and development among these same formal businesses, with 42% saying they needed training and development to improve their business skills. Seventy percent of formal businesses said that government support programmes were not working for them.
“When it comes to small business development, there are no simple solutions and multiple interventions are needed. Segmenting the market in this new way should allow government and the financial sector to target their small business strategies more effectively,” said FinMark Trust CEO Mark Napier.
FinMark Trust says the survey points to some specific measures that might benefit small business development, including:
Business skills to be included in the educational curriculum, and education could help develop a mindset that is not averse to competition and risk-taking.