SMME Sector Kicked While Down

The small, medium and micro enterprise (SMME) sector, already bleeding from the effects of the global recession, expects things to get far worse.

Confidence in the sector shrank in the second quarter, according to a survey released by the Africagrowth Institute.

SMMEs contribute about 35 percent of gross domestic product and employ about 3.8 million people, or 34 percent of formal employment.

The survey says confidence in the industrial sector fell to 31.33 percent in the second quarter from 36.87 percent in the first quarter; the services sub-sector dropped to 41.69 percent from 42.92 percent.

An average of all the indices shows a decrease of 0.79 percentage points to 40.23 percent.

The results are based on the responses drawn from 133 SMMEs out of 1 432 surveyed during the period as part of a study sponsored by the Industrial Development Corporation in conjunction with the WK Kellogg Foundation.

Of SMMEs surveyed, 80 percent felt banks and the government were not doing enough to support them, said Nicholas Biekpe, the president of the Africagrowth Institute.

"They cited high operating costs, high taxes, lack of access to finance and employee costs as key factors affecting their businesses," he said.

When asked what support their businesses needed, they said they wanted banks to reduce interest charges on loans and ease the conditions imposed on loans, Biekpe said.

However, despite the dip in business confidence, Biekpe said there appeared to be a glimmer of hope for the future compared with future expectations in the first quarter.

"More specifically, SMME operators within the trade and services sectors express optimism about the future of their businesses. This is probably a result of the upcoming Fifa World Cup," he said.

Christo Botes, the executive director at Business Partners, said he understood why the confidence was so low.

"I think the situation of downward spiralling is beginning to bottom out. Some of my clients' revenues are beginning to shape up. I just think that in the third quarter things will level up," he said.

Martin Brink, who set up and runs Mr Recycle, said the company was creating jobs and combating climate change, but was threatened by a new law that requires expensive certification for waste removal firms.

He was optimistic his business would survive, in spite of drawbacks presented by state actions, and he felt that the government was not doing anything positive for small businesses. "It has taken a decade to set up this sustainable system and I have approached a few banks to no avail," he added.

Colin Geoffreys of Bell Products said the black-owned and -managed cleaning materials maker had seen a 25 percent downturn in revenue.

Geoffreys said the Fifa Confederations Cup and Indian Premier League cricket tournament had softened the effects of the recession.

Maria Viljoen, the owner of a guest house and game lodge, said she tried unsuccessfully to get funding from the Department of Trade and Industry. She struggled getting trained staff, so she regularly ran her own training, but often lost staff to bigger companies.

Rapid Motors, a panel beater in Johannesburg, had been running for 50 years and this was the first time the business was making a loss, Corrado Bosman, a director, said yesterday. If the company took loans from the banks, they would have to close down due to the costs.

Currently employing 40 people, Bosman said his company was under pressure to retrench staff but was holding off doing so for as long as possible.

Banks, the National Empowerment Fund, Khula and the Umsobomvu Youth Fund were not available to comment.