Lack of support sees most SMMEs doomed from the start
Spokazi Jojo is an accountant who is passionate about educating and empowering small businesses. However, she believes that because small, medium and macro enterprises (SMMEs) are “funded” instead of being “empowered”, the majority are doomed.
“While they contribute more than 30% to the GDP, [statistics reveal] they are expected to fail within the first five years of their existence. My biggest concern is that SMMEs are given money, in most cases by government and private funders, and everything ends there.”
She said working with SMMEs had shown her there was no follow-up or monitoring of the growth and contribution of a business. It was assumed the business would be a success and yield dividends on the grant received, and that it would be able to repay the loan.
“Some of the businesses are granted funds based on bogus financial predictions because it is not a requirement by funders that the information must be verified by a qualified accountant. Mostly their demise is inevitable because they were not financially viable in the first place.”
SMMEs should be driving economic growth and employment. Yet they consistently contribute less than 28% of jobs, well short of the government’s target of 90% within the next 10 years. She said larger businesses were able to afford a team of professionals and SMMEs should be given a chance to survive by ensuring they were linked to the same expertise.
She said currently the country was shedding far more jobs than it was creating. This is especially so with the larger businesses, which are retrenching thousands of employees monthly.
“This is at the same time the government has publicly declared it is bloated with employees and working on finding ways to solve this, which may include retrenching staff. Should things continue as they are, more pressure will be put on SMMEs to contribute to the economy.”
She believes most entrepreneurs start their businesses due to necessity, and also that they are not based on a sound business idea. If people lose a job or are retrenched, a start-up seems like a viable solution. Or, she said, they might have a passion.
Unfortunately many entrepreneurs have a common failing before they even open the business doors. They are blissfully ignorant of the masses of red tape that almost seems purposefully strung out to trip up the unwary and poorly informed.
A lack of knowledge is quickly followed by non-compliance with regulations regarding tax, VAT, labour requirements and many other laws. Running a successful business required access to many professions, people whose knowledge could smooth the way to sustained success and long-term profitability, and with it job creation. These include accountants, lawyers, financiers and bankers.
“It is concerning that in most cases very few professionals are consulted when drawing up a business plan. It is, therefore, up to the entrepreneur to think beyond managing the day-to-day activities of the business and investing in the bigger picture. It should be a norm that each SMME funded should also be empowered by creating a link to professionals.”