Absa’s SME Index reveals the latest figures on growth, employment and entrepreneurship amongst SA SMEs. And the news is not good.
Over the past three years the retail, wholesale and restaurant trade sector has been in decline, with -3.1% growth. This sector has the highest concentration of business, 45% compared to any other sector in South Africa.
Mike Schüssler of Economists.co.za, said that the decline in the sector was worrying, as it is the backbone and driver of all other small businesses.
Positive growth for construction SMEs
In contrast, the second and third largest sectors, construction and personal services, both saw positive growth in the same period. In addition, the construction sector experienced the highest level of growth in the last quarter of 2012. Schüssler attributed this to the high level of start-ups that are found in this sector.
The index states that the upsurge in the construction sector was supported by “bigger civil projects as well as home improvement” which it says “has kept business numbers and employment alive”.
The transport and communication sectors followed, showing the second and third highest growth with 10.8% and 5.0% increases respectively.
Agriculture and mining suffered the greatest losses. The profit margins in agriculture are currently suffering at 4% decline.
Less employers and employees
The index also indicates that employer numbers are in a decline. The number of employers is 10% lower than before the recession. There were 707 000 employers in SA, as of the fourth quarter of 2012.
Employers are also hiring fewer employees. Currently, the average business in South Africa employs 12.6 people, but in the nineties employers were hiring about 23.8 people.
Schüssler says that this indicates that small business are hiring less people, taking into consideration technological improvements that decrease the demand for human capital.
Manufacturing on the other hand, saw an increase in employment numbers in the last quarter; this might be due to consolidation in the sector.