The Absa SME index declined for the second time in a year during the first quarter of 2014, with a total quarterly decrease of 2.2% and a yearly decrease of 3.8%. The index declined to its lowest number in two years to 93.4 from 95.6 in the last quarter of 2013. Although South Africa has not yet entered into a recession, slower growth over the last few years is clearly reflected in the overall index.
Both the number of employers and the number of self-employed has declined to just above two million, representing around 13.3% of all South Africans at work. This is the lowest percentage since the Absa SME index started and extremely low for an emerging market economy. The number of employers declined by 2.5% for the year to end March 2014, which is not only faster than the GDP decline for the year, but also the biggest decline in two years.
Happy Ralinala, Head of Absa Business Banking, says: “The decline of the Absa SME index started in the third quarter of 2013 and seems to be continuing. While other numbers such as overall employment have improved, the number of employers and self-employed has not. South Africa’s economy clearly needs more entrepreneurs.”Self-employed take the brunt of the economic strain
Sluggish economic conditions over the last two years have had a major impact on the self-employed, with the numbers of people running their own businesses in decline for five consecutive quarters. Self-employment numbers declined by 6.8% over the last year to 1 253 000 adults. There was a 2.9% decline between the fourth quarter of 2013 and the first quarter of 2014, leaving the self-employment number at its lowest since the Absa SME index was first initiated in 2008.
Ralinala says: “Upheaval in the South African economy is impacting on the natural formation of smaller businesses. The number of self-employed stepping up to become employers themselves seems to have run out of steam. It is clear from our research that South Africa’s self-employed numbers are in rapid decline compared to the rest of Africa, where nearly half of the workforce is self-employed.”
The increase in fuel prices has further added to the already considerable pressure on SMEs, having increased by 138% since the start of 2009. This, coupled with electricity price increases and e-tolling, has forced many SMEs to become even leaner.
Ralinala concludes: “With critical sectors of our economy under severe pressure, there is a pressing need for the public and private sectors to create a supporting, access-conducive environment to nurture small enterprises. SMEs play a crucial role in our economy and are under increasing pressure to survive in the face of a protracted economic downturn.”
“Absa remains committed to going beyond traditional banking to contribute towards the development and growth of SMEs in South Africa. In 2013, we pledged R250 million towards the non-traditional funding of SMEs.”
The Absa SME Index is extrapolated from Statistics South Africa’s information on various economic indicators that are issued regularly. The index provides valuable information on the current state of SMEs in the country and the level and challenges of employment in South Africa. By creating an SME Index, Absa aims to provide valuable information that will allow SMEs to make better and more informed decisions, allow policy makers to make relevant policy decisions and inspire would-be entrepreneurs to take the plunge. SMEs do not have access to an economist desk, they do not have a currency expert and they require access to solid and reliable information that will help them grow their businesses.
Alan Straton
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