Skills shortage, red tape hinder SMEs

Professor Neil Rankin presents key findings in the 2013 SME Growth Index.

The SME Growth Index is an annual research project aimed at establishing a solid, evidence-based understanding of the country’s SMEs. It was released by an independent private sector development and research company, SBP, specialising in improving the business environment.

The report paid particular attention to the factors impacting on company growth and linked the findings to an assessment of the country’s competitiveness. The report suggested the challenges of the difficult business environment appear to be driven mainly by domestic factors, as opposed to global conditions.

Professor Neil Rankin of the University of Stellenbosch and director at SBP said the SME sector was generally aging. Rankin added that year-on-year growth in output was diverse. “We have firms (40 percent) who are growing their turnover by 10 percent and we have 22 percent who are shrinking in turnover and a middle group who are stagnant or growing very slowly,” he said.

The research is based on an annual survey that tracks the experience of a panel of 500 established firms in the manufacturing, business services and tourism sectors.

Despite rising sales, over 70 percent of the panel members said it was harder to operate a business in the country in 2013 than in the previous year.

Business owners identified the top barriers to growth to lack of skills (15 percent), red tape (12 percent), lack of finance (10 percent) and the cost of labour (10 percent). Together these five factors accounted for almost 60 percent of the panel’s responses.

The report found that SMEs spent an average of 75 hours a month, an equivalent of eight working days per month, dealing with red tape.

Inefficiencies at the South African Revenue Service were identified as a major burden, such as tax refunds and the issuing of tax clearance certificates.

The index also revealed that the time required to start a new business was greater than previous research had suggested: The World Bank’s Doing Business Survey 2013 found that opening a business in South Africa took 19 days, however the index found that it took 60 to 90 days.

Gazette Reporter

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