The Impact of SMEs on Socio-Economic Development in South Africa: A theoretical Survey

Bongani Mwale

doi:10.7176/ejbm/12-20-08

Abstract

This theoretical survey seeks to critically investigate the impact that Small and Medium Enterprises (SMEs) have had on socio-economic development in the South African (SA) context. A global perspective of the impact of SMEs is incorporated in order to have a feel of how other economies have benefited from this venture. The survey followed a desktop literature review research design in order to gather data regarding other economies in Europe, Asia, America, Latin America and select countries in Africa. Regarding challenges currently experienced by SMEs, the survey established constrained government support and lack of universally accepted standard unit measurement of SMEs. The survey discovered several varying socioeconomic roles played by SMEs in SA and other regions alike namely, job creation, reduction in rural and urban poverty, narrowing income inequality disparity and contributing towards the nation’s Gross Domestic Product (GDP). Given the undisputable significant roles played by SMEs particularly in SA, the following recommendations have been advanced in order to strengthen SME’s roles; firstly, streamlining stringent rules and regulations which inhibit SMEs in venturing into more rewarding business opportunities. Secondly, reviewing the prohibitive terms and conditions of accessing financial aid from the government and financial institutions. Thirdly, continuously empowering prospective entrepreneurs through tailor made capacity building initiatives. Keywords: Entrepreneurship, SMEs, socioeconomic development, South Africa. DOI: 10.7176/EJBM/12-20-08 Publication date: July 31 st 2020

Highlights

Introduction and research background Primarily, it is of paramount importance to note that a standard international definition of small and medium-sized enterprise (SME) does not exist since they are defined differently in the legislation across various nations and this is because the dimension “small” and “medium” of a firm varies depending on the size of the domestic economy
This research survey provides a synthesis of the contemporary state of affairs about small and medium sized enterprises (SMEs) and their contributions towards economic and social well-being
In its 2014 Congressional Budget Justification and FY 2012 Annual Performance Report, the Small Business Administration (SBA) laid out its strategic goals with the principle one being to grow businesses and create jobs by expanding access to capital through its lending network, ensuring that federal contracts are being given to a defined number of small businesses, fostering its entrepreneurial education and counseling services, and enhancing its focus on high-growth entrepreneurs, Organization for Economic Cooperation and Development (OECD), (2017c). 2.4.4 Sweden Lee, Herold, and Yu (2016) assert that 90% of global firms are SMEs and they employ more than 50% of all labor in the private sector, with Swedish SMEs contributing 56% of economic wealth production

Summary

Introduction

Introduction and research backgroundPrimarily, it is of paramount importance to note that a standard international definition of small and medium-sized enterprise (SME) does not exist since they are defined differently in the legislation across various nations and this is because the dimension “small” and “medium” of a firm varies depending on the size of the domestic economy. According to OECD (2009, 2017b), the upgrading of productivity in a large population of small businesses, including in traditional segments and the informal economy, can facilitate the achievement by governments of both economic growth and social inclusion objectives, including escaping from low productivity traps and bettering quality of jobs for low-skilled workers.

Results

Conclusion