Business in South Africa – Annual Review of Small Business in South Africa – 2003 Output vs. outcome or impact Conceptual framework: data & methodology Quantitative & qualitative elements Nuanced analysis: context Synthesis of relevant research

Outline Review of: Trends Performance Basic statistics Sector reviews Provincial review Thematic issue Link to DTI Strategy

Review of Trends & Performance Conceptual framework

Review of Trends & Performance Economic environment World growth World trade SA growth – SMMEs insulated SA trade performance – SMMEs somewhat insulated Domestic expenditure On balance… environment not supportive

Sector Reviews Tourism - Highlights Pyramid sector structure Established (white-owned) tourism SMMEs are often linked to ‘lifestyle entrepreneurship’ Advantages: volume of capital, access to information Problems: tourism marketing; unnecessary regulation; and infrastructure development for tourism, especially skills training. Emerging tourism SMMEs Problems: domination of sector by existing large or established SMMEs, product development, marketing and access to government support programmes. TEP - successful support initiative addressing some of the issues faced by emerging SMMEs.

Sector Reviews Tourism - Conclusions Differing constraints require different interventions For emerging SMMEs Competition policy, Marketing support, Regulatory issues

Food processing - Highlights Sector Reviews Food processing - Highlights Sector is highly concentrated and dominated by several integrated companies Recently new entrants, including SMMEs, linked to the liberalisation of agricultural markets and the country’s trade regime Food processors affected by concentration in retail sector: formal retail chains estimated to control 70% of sales Food processing sector is ‘buyer-driven’ – retailers play a dominant role in the value chain

Food processing - Highlights Sector Reviews Food processing - Highlights Characteristics of food processing SMMEs: Most sell outside of formal retail chains, e.g. independent retailers, spaza shops, restaurants, banks, hotels etc. Supply local (mostly) or regional markets Competitive position based on price or quality, not volume. Growth challenges Growth challenge strongly linked to South Africa’s concentrated retail structure Retail chains are ‘buyer driven’ – supplying retailers involves meeting volume and ‘production process’ requirements Requires investment in infrastructure and equipment Also requires a new ‘business model’ – long payment delays, rebates, discounts, storage, increasing volumes

Food processing - Conclusions Sector Reviews Food processing - Conclusions Policy implications: Franchising appears to be one successful model for emerging SMMEs AgriBEE also recognises the problems facing emerging SMME agri-businesses – target is that 50% of retailer preferred suppliers are black and/or SMMEs. Can the dti’s support structures for SMMEs in general meet the specific needs of food processing SMMEs?

Provincial Review Free State Objective is to provide key findings from research on the SMME manufacturing economy, 1994-2003 Major finding - general stagnation; SMME component grown Sectorally, growth has occurred mainly in clothing SMMEs and fabricated metals with significant declines in the traditional food/agro-processing sector Spatially growth is occurring in only two areas of the Free State – the Bloemfontein and Harrismith nodes

Provincial Review

Provincial Review

Free State - Conclusions Provincial Review Free State - Conclusions Established versus emerging SMMEs in manufacturing show different characteristics and constraints Established SMME economy is in a fragile state with many entrepreneurs considering closure or relocation Emerging entrepreneurs are struggling with typical problems of localised markets, poor premises and lack of access to finance In policy terms the Free State SMME economy requires an array of new support interventions to assist new entrepreneurs and existing producers, including a MAC