pment Develo SMME f tatus o S ctions

pment: Develo SMME f tatus o S ctions. e Refle Som benkele or Ed B siness Profess nt of Bu e epartm nt D ageme man 59 1378 011 5

Format of presentation 1. Introduction 2. Classifications 3. Nature of business 4. Business start up challenges 5. Business performance and Entrepr. Orientation 6. Banking practices 7. Small Business Support

Introduction 1. GDED and UJ: Research Observatory on SMMEs, Cooperatives and Informal sector. 2. Research covered SMMEs, Informal sector and Cooperatives 3. Proportions recommended by GDED 4. Johannesburg, Ekhurluleni, Sedibeng, Tshwane, West Rand. 5. 701 sample size

1. SMME Classifications BSM 1 -2 Survivalists Lower end BSM 3 Very small enterprises Low medium BSM 4 Micro enterprise Medium BSM 5 Small enterprises Lower upper BSM 6 -7 Medium enterprises Upper end

BSM groupings

Consider q Natural stages o o Start up Stabilization Growth Maturity q Tailor appropriate Interventions ü ü Business development Financial requirements Business Infrastructure support Family business training

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2. Nature of Business § § § Overall 50% of SMME involved in buying and selling BSM 1 (71%) to BSM 4 (56%) 20% offer services: plumbing, paining, hair dressing, (more common in BSM 5 to 7) 10% BSM 5 to 7: catering and events, gardening, car washing etc. Men (23%) offer more skilled services than women (17%). 11% of women added value than males. Recommend: § Making products ( Value chain – construction: crushing stones, door and window frames) § National Productivity can greatly assist § Business infrastructure needed (Common shared facilities)

3. Business Start-up Challenges

What problems did you face in starting your business? BSM 1 BSM 2 BSM 3 BSM 4 BSM 5 BSM 6 BSM 7 Total Sourcing capital Business premises 85% 19% 67% 15% 78% 14% 79% 23% 70% 14% 63% 18% 67% 18% 73% 17% Too many competitors 15% 10% 13% 16% 18% 10% 13% Selling who to sell to 12% 9% 11% 13% 4% 8% 16% 11% Electricity and water connection 5% 7% 12% 16% 10% 7% 13% 10% Government agencies not helpful 8% 5% 5% 12% 14% 15% 13% 9% Transport to buy stock 5% 6% 9% 9% 12% 17% 8% 9% Complying to Laws and Regulations 5% 5% 5% 8% 10% 12% 13% 8% Crime from outside No problems at all Registering business 5% 3% 1% 2% 9% 5% 9% 7% 9% 11% 7% 4% 8% 6% 10% 13% 12% 13% 5% 10% 8% 7% 7% Communicating product/service to consumers 3% 2% 4% 5% 8% 15% 13% 6% I did not have skills Crime / theft by staff Banks very unhelpful 9% 3% 3% 5% 3% 2% 5% 5% 4% 8% 8% 10% 2% 10% 6% 14% 13% 6% 6% 5% Pricing the product/service 1% 3% 5% 5% 4% 8% 13% 5% Distribution issues 0% 3% 3% 7% 8% 13% 8% 5% Finding the right people to employ 3% 2% 2% 1% 8% 13% 11% 5% Complying with Tax laws 1% 0% 3% 1% 6% 13% 11% 4% Product to make and sell 0% 3% 4% 1% 10% 8% 5% 4% Opening a business account 1% 1% 5% 1% 8% 5% 5% 3% My staff do not have skills 0% 0% 1% 0% 4% 8% 13% 3% I have the wrong staff 0% 1% 2% 4% 0% 5% 5% 2% My staff is not supportive 0% 0% 4% 3% 6% 1%

Problem experienced during start-up

4. Business Performance

How would you describe the success of your business?

Disagree % Agree % Do not know Entrepreneurial : Entrepreneurial and future orientation 1. Being passionate is more important than doing careful research 17% 82% 1% 2. Networking with other people is important 4% 94% 2% 3. I am prepared to take calculated risks 9% 89% 2% 4. I like being in charge and completing things 5% 94% 1% 5. Once I make up my mind, I go for it and all the way 3% 94% 1% 6. I always keep a close eye on what competitors are doing 17% 82% 2% Future orientation 7. I am thinking of getting out of South Africa 72% 23% 0% 8. I am sure business will do better next year 79% 8% 13% 9. The political environment of South Africa will be stable in future 52% 21% 24% 10. If I was offered a very good job with big money, I would not take it 55% 41% 3% 11. I have the same opportunities like other people 67% 26% 7% 12. I am very happy with what I have achieved in my business so far 26% 71% 2% 13. I did not feel the impact of the recession 57% 37% 7% 14. I am not worried that business will shut down 32% 45% 3%

4. Business Registration

5. BUSINESS REGISTRATION: Why would you want to register your business?

If not registered, please give reasons why

6. Banking Practices

BSM and Banking

Which bank does your company mainly use for business purposes?

Banks understand needs of small businesses

Figure 57: Management of finances BSM 1 BSM 2 BSM 3 BSM 4 BSM 5 Very small Micro Small About 70% needed a maximum of R 500 to start. About 59% needed R 5 000 for start up. 40% needed R 5 000 for start- up. 37% needed R 100 000 for start up. Less than 30% needed R 100 000 for start-up. About 44% rely on personal savings. Also use family sources 34%. Did not need to borrow (71%) 54% rely on personal savings Family sources to a lesser extent. Did not need to borrow (85%). 58% rely on personal savings. Less reliance on family. Did not need to borrow (70%). 55% rely on personal savings. Few (19%) depend on family. Did not need to borrow (80%). 36% rely on personal savings. High (27%) rely on family. 70% did not need to borrow. Tried and loan denied 12%. Preferred as convenient and at no cost. Funds used for working capital (65%). Not usually for business growth. Funds used for working capital (54%). Business growth needs for funds. 50%. Do not need that much for working capital (38%). Funds more forbusiness growth (41%). Equipment and machines funded (21%). Do not need that much for working capital (39%). Funds more forbusiness growth (44%). Equipment and machines funded (21%). Pressures for funding business growth and working capital (48%). More need of funds for machinery and equipment (58%). Usually do not save money made(60%). 97% save for the future to use when needed. Save money 71%. 55% save for the future for unexpected needs. Save money 68%. 55% save for the future for unexpected needs and business growth. 75% save money. 55% save for the future for unexpected needs and business growth more prominent (37%). 75% save money. 55% save for the future for unexpected needs. Savings 41% to grow business to next level. Not member of stockvels (70%). Reason for membership; easy for getting money when needed. Exchanging ideas (17%). 63% not members of stockvels. Reason for membership; easy for getting money when needed. 64% not members of stockvels. 67% not members of stockvels. 75% not members of stockvels. Reason; easy forf getting money when needed. Reason; easy for getting money when needed. Generating business ideas and getting advice. Survivalists BSM 6 BSM 7 Medium Reason; easy for getting money when needed. Belong to stockvels to network and exchange business ideas (22%). Use word-of-mouth to market business and products (33%) in BSM 7.

7. Business Networks

Awareness of business organisations

Which of the following association(s)/ group do you belong to?

Conclusions. • Tailored interventions • Training with mentorship • NP involvement in creation of production. • Business infrastructure • Cross border trade: Trade missions • Out reach