Finding a home in a big pond

It is often said that small businesses hold the key to economic growth. Recently released data paint an interesting picture of where small businesses are making a substantial contribution to economic activity.

Stats SA’s latest Quarterly financial statistics reports 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 December¹. Large businesses contributed almost two-thirds (64%) to this total, followed by small (27%) and medium businesses (9%)².

Notice in the chart below how large businesses dominate turnover in the mining and utility industries? The utility industry in particular is dominated by a few large companies; think of how Eskom generates the bulk – to be more precise, 93%³ – 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 rest⁴.

Small businesses, however, are playing the field pretty well in the business services, trade and construction industries. 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). Some industries are historically conducive to small business operation.

At a recent business incubator conference, government committed itself to providing opportunities to small businesses, in particular to those in mining and manufacturing⁴. In time, it would be interesting to see if an updated version of the graph above will show if government’s initiatives have made progress.

¹Stats SA’s Quarterly Financial Statistics survey provides financial information on enterprises in the formal business sector: income and expenditure items, inventories, capital expenditure, the carrying value of assets and selected operating financial ratios. These estimates are widely used for various purposes, including comparative business and industry performance analyses.

Download the Quarterly financial statistics report here. https://www.statssa.gov.za/?page_id=1854&PPN=P0044

²Range for classification of small, medium and large enterprises based on turnover. Source: National Small Business Amendment Bill – DTI 2003 (adjustments made by Stats SA).

³Electricity generated and available for distribution, December 2015. Download the release here. https://www.statssa.gov.za/?page_id=1854&PPN=P4141&SCH=6400

⁴ A list of power stations (Eskom and privately owned) are available from: South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons. Public-Private Infrastructure Advisory Facility (PPIAF), Appendix 1, page 42. Click here to download. http://www.gsb.uct.ac.za/files/PPIAFReport.pdf

⁵ Government creates environment for small business to thrive, AfricanBrains (click here). http://africanbrains.net/2016/03/15/government-creates-environment-small-business-thrive/