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

2. Terms of Reference Role of the dti Output vs. outcome or impact Conceptual framework: data & methodology Quantitative & qualitative elements Nuanced analysis: context Synthesis of relevant research Background

3. Review of:  Trends  Performance  Basic statistics Sector reviews Provincial review Thematic issue Broad themes arising from the Review Outline

4. Conceptual framework Review of Trends & Performance

5. Economic environment  World growth  World trade  SA growth – SMMEs insulated  SA trade performance – SMMEs somewhat insulated  Domestic expenditure On balance… environment not supportive

6. Regulatory Environment  Tax and labour regulation regimes unchanged  Total admin. burdens for VAT and RSC high  Discourages graduation of informal to formal  But, regulations serve public good purpose… many govt. initiatives underway already Review of Trends & Performance

7. Institutional Environment

8. Entrepreneurial Dynamism/Opportunities  Number of businesses increased – informal  Probably necessity not opportunity  Barriers to entry low for some sectors  Formal sector declined – macro environment  African women esp. good growth Review of Trends & Performance

9. Entrepreneurial Capacity  Failures are costly  New registrations stable  Liquidation rates increased – but not substantial  Contribution to employment – established vs. new  Contribution to GDP – largely static Review of Trends & Performance

10. Contributions static overall Very small and small segment growing But, SMME contribution is significant! Basic Statistics Employment

11. Contributions static overall Very small and small segments growing SMME contribution significant Basic Statistics GDP

12. Basic Statistics Non-VAT registered businesses

13. Macroeconomic environment and outlook crucial Entrepreneurial dynamism present but barriers to entry in some sectors and esp. formal sector Institutional environment Growth stems from new SMMEs increasing competition and lowering returns Established SMMEs stagnant Review of Trends & Performance Conclusions

14. Sector performance Tourism’s impact on job creation & SMME development. Sector Reviews Tourism - Highlights

15. 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 - Highlights

16. Differing constraints require different interventions For emerging SMMEs –Competition policy, –Marketing support, and –Regulatory issues are key. Sector Reviews Tourism - Conclusions

17. 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 Sector Reviews Food processing - Highlights

18. 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 Sector Reviews Food processing - Highlights

19. 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? Sector Reviews Food processing - Conclusions

20. 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 Free State

21. Provincial Review

23. 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 Provincial Review Free State - Conclusions

24. Overall Annual Review Conclusions Scale of the sector is substantially largely than originally thought Entrepreneurial dynamism is not necessarily a constraint Barriers to entry remain a key issue for new entrants Entrepreneurial capacity is weak leading to only limited ‘graduation’ Cannot separate SMME economy from general SA economy – highlighting the need for coordinated industrial policy Annual Review – 2004 Sectors, Provinces etc