The National Development Plan (NDP) places the responsibility of creating 90% of all jobs in South Africa on small, medium and micro enterprises (SMME).
Currently in South Africa, it is estimated that SMMEs create about 60% of all jobs, which means that we are still a bit behind most regions in the world. In most nations, SMMEs account for the most jobs in their economy.
According to the EuroFund, SMMEs constitute more than 99% of European companies and account for about two-thirds of private sector employment and job growth.
To achieve the NDP target, the white paper published by 22 On Sloane in January 2024, estimates that South Africa will need to create 3.2 million new SMMEs in the next seven years in order to achieve the NDP target. Which means that with an average of 3.7 employees per SMME, the country could likely create around 11.9 million new jobs by 2030.
During the recent Global Entrepreneurship Congress Africa in Cape Town, the Minister of Small Business Development, Stella Ndabeni-Abrahams, said that “the challenge I would like to put to delegates and entrepreneurship support organisations today is how we think scale and how we practically work together to achieve greater impact?
“Is it reasonable to conceive of an ecosystem that is geared to deliberately grow 1 million new competitive and sustainable SMMEs by 2030? At the current average of 3.7 jobs per SMMEs, this could create 3.7million jobs which would nearly halve unemployment. What needs to be done to strengthen our ecosystem to make this feasible? What entrepreneurship policy reforms are needed? What financial and non-financial support partnerships do we need to put in place?”
According to the United States Chamber of Commerce, in the US there are 33.2 million small businesses, which combined account for 99% of all US businesses.
Small businesses are credited with just under two-thirds (63%) of the new jobs created from 1995-2021 or 17.3 million new jobs. Small businesses represent 97.3% of all exporters and 32.6% of known export value ($413.3 billion or R7.9 trillion). They also employ almost half (46%) of America’s private sector workforce and represent 43.5% of gross domestic product. In 2021, a record breaking 5.4 million new business applications were filed in the US.
There is no doubt that SMMEs remain the engine of any economy that wants to grow. It is plausible that the Minister of Small Business Development is envisaging a situation where new 1 million SMMEs could be added into the economy to help get us closer to the NDP target. Although this does not achieve the NDP target, it does get us closer to the goal.
South Africa is faced with myriad of challenges and unemployment remain a threat to the economy. With its burgeoning youth population, private and public sector stakeholders need to invest heavily to support the development of small and medium sized businesses in the country. Creating 1 million new businesses, as the Minister suggested, means that the country has to create about 140 000 new businesses each year in order to achieve the target of 3.7 million new jobs by 2030.
To achieve this, constant and precise collaboration going forward remains key.
Kizito Okechukwu is the Executive Head of 22 On Sloane and Co-chair of the Global Entrepreneurship Network (GEN) Africa.
BUSINESS REPORT