Small business experts have slammed the South African government for its inability to compile accurate and periodic statistics on the sector. They say the absence of good data stymies the state’s ability to support the sector.
Their recent comments follow the release in January of a partly flawed small business survey, by Stellenbosch University’s Bureau for Economic Research (BER), for the Small Enterprise Development Agency (Seda).
The survey is the latest in a string of reports that have attempted to estimate the contribution of small, medium and micro enterprises (SMMEs). It is essentially an update of a 2008 report on the sector by the department of trade & industry.
No regular census, study
Unlike a number of other emerging economies, SA does not have a regular census (as India and Malaysia have) or a periodic survey (as Chile and Brazil have) that tracks the performance of the sector. The dearth of data has led to wide-ranging estimates on the sector’s contribution to GDP and employment.
While the BER report estimates that there were 2.25m SMMEs in the second quarter of 2015, previous estimates have ranged from at least 1m by the Unilever Institute to just under 6m by the Finscope 2010 report. The 2014 Global Entrepreneurship Monitor (Gem) report has it at between 1.5m and 4m.
Estimates of the sector’s contribution to GDP have also differed wildly. A 2007 a Seda report put it between 27% and 34%. In 2014, small business development minister Lindiwe Zulu said the sector contributed 45% of GDP. Her deputy, Elizabeth Thabethe, put the figure in 2013 at 52%-57%.
Using Statistics SA’s Quarterly Financial Survey data, the BER reported the sector’s contribution as 42% in the second quarter of 2015, up from 33% in the fourth quarter of 2010.
However, after the Financial Mail questioned researchers’ calculations, the BER replaced them with figures to reflect the sector’s contribution per gross value add (GVA) for the entire economy (private and public sector combined), with SMMEs contributing 18% and 22% respectively.
As a percentage of private-sector firms (as SME contribution worldwide is usually depicted), the GVA for the SMME sector still mirrors that of BER’s initial GDP contribution calculations, namely 42%.
BER senior economist Cobus Venter admits that the bureau’s errors show how little is actually known about the sector. He agrees that a survey should ideally be based on a standardised methodology with credible and coherent numbers produced by the public sector.
Gem executive director Mike Herrington (pictured above) says the Gem team in South Africa has been unable to get a handle on small business statistics since the country joined the survey in 2001.
“If the government, with all its resources, is unable to tell us how many SMMEs exist in SA, then I think it is not possible to formulate a reasonable strategy for this sector, which contributes enormously to the GDP of the country,” says Herrington. He says government tends to ignore small business research.
He says Gem has recently launched policy briefs and country profiles for many countries and most have good information about small businesses.
Osiba Management head Septi Bukula describes as “madness” SA’s lack of credible small business data and says the failure to rectify this is one of the most frustrating experiences in his 22-year career as a small business researcher.
“It is totally unacceptable that 21 years after the 1995 white paper we are still thumb-sucking like this.”
He refers to the National Development Plan, which says the debate around small businesses and their ability to assist in employment growth has “become heavily weighted with ideology, assumptions and anecdotes” in the absence of robust data.
A key recommendation of a 2011 review commissioned by trade & industry minister Rob Davies, which Bukula helped draft, was to set up a dedicated small business research unit, preferably within Statistics SA. But this, it seems, has come to naught.
In its 2014-2019 strategic plan the department of small business development listed a reliable survey as a priority.
The Department of Trade and Industry has previously looked at running a census, but dropped the idea in favour of a survey, as a census would prove too costly.
Statistician-general Pali Lehohla says Statistics SA has long been ready to hold such a regular survey, but the small business department needs to bring the funding for it. “The ball is in everyone else’s court,” he adds.
This story originally appeared in Financial Mail (go here for the original version). Click here to download the BER survey.
Stephen Timm is a