Chapter 5 BMA

• Small business


  One that is independently owned and operated for profit and is not dominant in its field
• Small businesses are very important in the South African economy
• There were 2 550 540 small businesses in South Africa in the first quarter of 2019, providing 10 839 819 jobs
• Small businesses number 98.5 per cent of formal businesses in South Africa
• Small businesses contributed 28 per cent of the country's turnover in the first quarter of 2019
• 74 per cent of small businesses were launched with the aim of contributing positively to society
• Small businesses employ 29 per cent of all South Africans
• Informal sector


  Consists of businesses that are largely subsistence businesses, operated by entrepreneurs who are not registered with formal structures such as SARS and the CIPC. They make up what is also known as the 'shadow economy' and employ approximately one third of all South Africans
• The Quarterly Labour Force Survey for the second quarter of 2019 revealed an increase of 4.4 per cent in the number of SMMEs in South Africa
• 70 per cent of small businesses in South Africa fail within the first two years of operation
• Reasons for failure


  Mismanagement and lack of business know-how
• Industries that attract small businesses


  • Distribution (retailing, wholesaling, transportation, and communications)
  • Service
  • Production (construction, mining and manufacturing)
• Entrepreneurs


  • Entrepreneurial spirit
  • Independence
  • Desire to determine one's own destiny
  • Willingness to find and accept a challenge
  • Family background
  • Age
  • Motivation
• In South Africa, it is harder for women to enter business ownership for reasons including increased domestic responsibility loads, a generally lower level of education, unequal social status, lower levels of capital, and fewer female role models in business
• Many cultures in South Africa discourage women from being assertive and self-assured enough to foster their entrepreneurial mindset
• High-tech teen entrepreneurship is exploding
• Entrepreneurship has been growing among immigrants
• In South Africa, 70 to 80 per cent of all small businesses fail within their first two years
• Reasons for failure

  • Lack of capital and cash-flow problems
  • Lack of management skills
  • Overexpansion
• Small firms produce two-and-a-half times as many innovations as large firms relative to the number of persons employed
• More than half of the major technological advances of the 20th century originated with individual inventors and small companies
• Examples of innovations from small firms: Air-conditioning, FM radio, helicopter, instant camera, personal computer
• South Africa's National Development Plan aims to create 11 million new jobs by 2030, with small businesses envisaged as creating 90 per cent of these
• Small businesses hire a larger proportion of employees who are younger workers, older workers, women, or workers who prefer to work part time
• More accessible training and mentorship would help small businesses to succeed and be able to create the number of jobs that the South African economy requires for steady growth
• Small businesses cause larger, established businesses to become more efficient and more responsive to consumer needs
• Small businesses provide a variety of goods and services to one another and to much larger businesses
• Advantages of small businesses


  • Personal relationships with customers and employees
  • Ability to adapt to change
  • Simplified record keeping
  • Independence
  • Profit retention
  • Ease and low cost of going into (or out of) business
  • Ability to keep business information secret
• Disadvantages of small businesses

  • Risk of failure
  • Limited potential
  • Limited ability to raise capital
• Angel investors


  Private individuals who invest money in exchange for ownership in the company and who, at some point, hope to sell their ownership stake for a profit
• Crowdfunding


  An alternative to traditional financing in which entrepreneurs post descriptions of their project or business online and then invite people to contribute; contributors typically get a reward based on their contribution level
• Crowdfunding platforms


  • Kickstarter
  • Indiegogo
• Business plan


  A carefully constructed guide for the person starting a business
• Purposes of a business plan


  • Communication (to potential investors)
  • Management (to track, monitor and evaluate progress)
  • Planning (to guide through various phases of business)
• Components of a business plan

  • What is the nature and mission of the new venture?
  • Why is this enterprise a good idea?
  • What are the businessperson's goals?
  • How much will the new venture cost?
• Department of Small Business Development (DSBD)

  Mandate is to lead and coordinate an integrated approach to the promotion and development of entrepreneurship, small businesses and cooperatives, and to ensure an enabling legislative and policy environment to support their growth and sustainability
• DSBD programmes


  • Black Business Supplier Development Programme (BBSDP)
  • Cooperative Incentive Scheme (CIS)
  • National Informal Business Upliftment Strategy (NIBUS)
  • Shared Economic Infrastructure Facility (SEIF)
• Small Enterprise Development Agency (SEDA)


  An agency of the Department of Small Business Development, with a mandate to implement the government's strategy concerning small businesses, and to integrate all sources of government-funded support for small businesses
• SEDA programmes


  • Export Development Programme
  • Supplier Development Programme
  • Enterprise Development Tools
  • National Gazelles
• National Gazelles


  A support programme that identifies promising small businesses that show good potential for growth, and to support them financially and non-financially through training and mentorship