Ups and downs for small businesses

25 January 2011

Almost half of small business owners in South Africa reported an increase in turnover in 2010, while an equal proportion reported stagnated or decreased revenue, according to a new survey.

Forty-nine percent reported an increase in turnover, while the remainder reported a stagnation or decrease, accounting software provider Pastel Accounting said in a statement on Thursday.

“Despite the seemingly good news, profit margins were squeezed, with just more than a third (32 percent) of small and medium enterprises (SMEs) reporting an increase, and an almost equal amount (29 percent) facing a decrease in profitability,” managing director Steven Cohen said.

Participants blamed market uncertainty, due to the current economic condition, for the slump in profitability.

The Pastel SME Survey, which will become an annual review, was conducted online among small businesses nationally in December 2010.

Of the 2 000 respondents, 63 percent reported an annual turnover of less than R5-million. Only five percent had turnover of more than R50-million, and the other 32 percent were evenly spread between these values, Cohen said.

When it came to employee size, 52 percent of survey participants currently employed a maximum of 10 people, 17 percent employed 10-20 people, and 14 percent up to 100 people.

“The survey provides us with empirical data that the financial success of SMEs is based on a delicate balance of factors, not all within the control of the business owner,” Cohen said.

“And the marked increase in 2010 in the price of electricity, rates and taxes, labour and inflation has put many small businesses under severe pressure as they have had to keep their own prices low to remain competitive.”

In contrast, JSE trading statistics for the first half of 2010 were up year-on-year by 22 percent in volume and by 17 percent in value to R1.5-billion.

Cohen said these numbers often masked the struggle small businesses faced.

Sapa