Data published by StatsSA paints an interesting picture of where small businesses are making a substantial contribution to economic activity in South Africa. Stats SA’s latest Quarterly financial statistics showed that the private sector earned a total of R2.1 trillion in turnover during the last quarter of 2015, covering the months of October, November and December.
Large businesses contributed almost two-thirds (64%) to this total, followed by small (27%) and medium businesses (9%). Breaking the stats down further, StatsSA showed that utility industry in particular is dominated by a few large companies. Eskom as an example generates the bulk – 93% – of the nation’s electricity to the national grid, with small players (such as the Kelvin Power Station and Sasol’s synfuels plant) contributing the rest.
Small businesses, however, are playing the field pretty well in the business services, trade and construction industries, according to the data. Small businesses were responsible for reaping almost half of total turnover in the business services industry, compared with smaller contributions within the utilities industry.
“Think of all the doctors, dentists, estate agents and lawyers with their practices (personal and business services); the corner cafes (trade); and small-scale sub-contractors working on large building projects (construction),” StatsSA said.
Stats SA’s survey is focused on enterprises in the formal business sector, taking note of income and expenditure items, inventories, capital expenditure, the carrying value of assets and selected operating financial ratios. Research conducted by World Wide Worx, albeit in 2014, showed that as many as 38% small and medium enterprises (SMEs) are unprofitable in SA, while the other 62% are turning small to large profits. The SME Survey questioned 1,400 business owners.
The survey found that overall, only a small proportion of SMEs – less than one in five – is thriving. However, 17% are ‘strongly profitable’ while 45% are ‘just profitable’. However, a significant percentage of SMEs are under some distress, with 38% not making a profit.