SACCI
SACCI NEWSAbsa/SACCISmall Business Growth IndexA new index that will serve as a yardstick for the growth and development of small and mediumenterprises in South Africa has been initiated by Absa Bank’s SME Business Unit, the South AfricanChamber of Commerce and Industry (SACCI) and the Bureau of Market Research (BMR) as the researchpartner. BMR outlines here how the index will be based on regular surveys and gives a detailedassessment of what the SBGI hopes to achieve in the context of the South African SME landscape.The Absa/SACCI SmallBusiness Growth Index(SBGI) was launchedin February 2025with the Bureau ofMarket Research as theresearch partner.South Africa’s small, medium and micro-enterprise (SMME) sector is a key driver of economic activity, employment and innovation. Ofthe estimated 2.67-million SMMEs in South Africa, approximately one-third operate formally, while two-thirds are informal. Collectively,the sector provides an estimated 11.4-million jobs, with small and medium enterprises (SMEs) comprising 91% of formal businesses,contributing around 60% of employment and approximately 34% of the national GDP.Despite their critical role in the economy, SMMEs face persistent challenges that inhibit growth and sustainability. The Small BusinessGrowth Index (SBGI) was designed to provide a comprehensive understanding of the SME landscape (50 or fewer employees), offeringdata-driven insights to inform policy interventions, improve business strategies and enhance SME resilience. The lead parties involved inthe SBGI initiative include Absa Bank’s SME Business Unit, the South African Chamber of Commerce and Industry (SACCI) and the Bureau ofMarket Research as the research partner.Key trends in the SME sector• The number of small businesses, employment rates and financialperformance within the SME sector continue to decline.• New SME entrant numbers remain low, with nearly a quarter of SMEshaving operated for three years or less.• SME profitability has declined dramatically, indicating systemicchallenges affecting SME business sustainability.• Higher failure rate of SMEs than elsewhere in the world with 70% to80% of South African SMEs failing within the first five years.These concerning trends highlight the need for a structured approachto support SMEs in overcoming both external challenges (exogenousfactors) and internal weaknesses (endogenous factors).External challenges (exogenous factors) affecting SMEsExogenous factors refer to external conditions that impact SMEgrowth, including economic, regulatory and infrastructural constraints.Addressing these challenges requires coordinated efforts fromgovernment institutions, financial bodies and industry stakeholders.ChallengeEconomic conditionsAccess to financeRegulatory andcompliance burdensInfrastructuredeficienciesMarket competitionCrime and corruptionGlobal supply chaindisruptionsIntervention requiredImplement SME-friendly tax incentives, lower interestrates, create economic stimulus programmes.Expand SME-funding programmes, reduce collateralrequirements, promote alternative financing(eg venture capital, crowdfunding).Simplify business registration, reduce red tape andprovide compliance training to enhance the ease ofdoing business.Improve electricity reliability, expand broadband accessand develop SME-friendly industrial zones.Strengthen SME participation in supply- and globalvaluechains, enforce local procurement policies andsupport fair competition.Strengthen law enforcement, offer financial supportfor business security and improve anti-corruptionenforcement.Encourage local manufacturing, diversify import sourcesand provide incentives for domestic production.ResponsiblestakeholdersGovernment, financialinstitutionsGovernment, banks,private investorsGovernment, businesschambersGovernment,infrastructure agenciesGovernment,large corporationsGovernment,security agenciesGovernment,trade associations8 | www.opportunityonline.co.za
SACCI NEWSHow the SBGI addresses exogenous challengesThe SBGI will provide critical insights to policymakers, financial institutions and industry stakeholders to develop targeted solutions to addressexternal challenges. By leveraging data from SME performance indicators, the SBGI will:• Inform economic policies that support SME-friendly fiscal measures.• Identify gaps in financial accessibility, ensuring that funding initiatives are directed effectively.• Highlight regulatory constraints, enabling streamlined businessregistration and compliance.• Offer sector-specific insights on infrastructure needs and advocatingfor better resource allocation.• Monitor SME participation in domestic and export markets topromote a level playing field.• Provide real-time data to measure the impact of anti-corruption andsecurity initiatives on business operations.Internal weaknesses (endogenous factors) affecting SMEsEndogenous factors relate to internal institutional inefficiencieswithin SMEs, such as inadequate skills, poor financial managementand limited strategic direction. Addressing these gaps requiresbusiness development programmes, mentorship and capacitybuildinginitiatives.ChallengeLimited business skillsCash flow problemsWeak business strategyTalent and skillsshortagesTechnologyadoption lagPoor customer retentionIntervention requiredOffer SME training programmes in financial management,digital marketing and operations.Encourage better financial planning, promote SME-specificbanking products and improve payment terms.Provide mentorship, business coaching and strategic planningworkshops.Create SME internship programmes, offer skills developmentgrants and encourage industry-specific training.Offer digital-transformation grants, subsidised access tobusiness software, AI and e-commerce training.Promote customer service excellence training and encourageloyalty programmes.Responsible stakeholdersBusiness incubators,governmentSMEs, financialinstitutionsSME associations,private sectorGovernment,educational institutionsGovernment, tech firmsSMEs, business developmentorganisationsHow the SBGI addresses endogenous challengesThe SBGI will serve as a valuable benchmarking tool for SMEs, helpingthem identify areas of weakness and guiding targeted interventions. Byanalysing SME performance data, the SBGI will:• Identify training and skills development needs of entrepreneurs.• Identify cash-flow-management issues, leading to better financialliteracy programmes.• Guide SMEs in refining business strategies to align with industry trends.• Support technology adoption by measuring progress in digitaltransformation.• Provide comparative insights, helping SMEs improve customerretentionstrategies.• Explore and benchmark opportunities to increase access to markets.The strategic role of the SBGI in SME developmentBeyond addressing specific challenges, the SBGI will play a pivotal role inshaping an enabling environment for SME growth. The value propositionsof the SBGI are contained in this table:AspectData-driven policy makingEarly identification of challengesImpact measurementBenchmarking and competitivenessAccess to finance and investmentSkills and workforce developmentSector-specific insightsEncouraging formalisationStrengthening resilienceValue PropositionProvides real-time insights for evidence-based policy interventions.Detects trends in financial distress, market conditions and operational difficulties.Tracks the effectiveness of government and private-sector interventions.Enables SMEs to compare performance with industry peers.Provides data for financial institutions and investors to assess SME growth potential.Identifies emerging skills gaps, guiding education and training programmes.Highlights high-growth sectors, market opportunities and key barriers.Promotes SME participation in structured economic activities.Helps SMEs develop adaptability strategies against economic shocks.ConclusionThe SME sector remains a cornerstone of South Africa’s economy, yet it faces mounting challenges that threaten its growth and sustainability.The Small Business Growth Index (SBGI) is a critical business-intelligence tool that ensures targeted interventions, enhanced policy formulationand improved SME resilience. By leveraging periodic self-administered surveys, the index fosters collaboration between SMEs, policymakers,financial institutions and industry leaders – paving the way for sustainable small business growth and economic development in South Africa.The first SBGI survey will be distributed to SMEs for completion during April 2025 in all nine provinces of South Africa. This will provide SMEswith an opportunity to share insights regarding the growth and development challenges they are facing across regions, sizes and sectors. TheSBGI initiative will also offer small businesses an opportunity to register as small business ambassadors who will also be granted an opportunityto participate in planned future government lobbying events. The SBGI will be repeated in September 2025 to track changes in the dynamicsmall-business ecosystem of South Africa. In an aftermath of the two SBGI surveys in 2025, a Small Business Ambassador of the Year will benamed. The overall intention of the SBGI innovation is to use the small-business intelligence resulting from the SBGI surveys to influence smallbusinessgrowth and development policies and to realise the full potential of this crucial sector of the South African economy.Contact details: Bureau of Market ResearchKey SBGI personnel: Prof DH Tustin, Prof CJ van Aard and Prof PK KibuukaEmail: deon.tustin@bmr.co.zaWebsite: www.bmr.co.za
