SMEs have what it takes to hold their own: Findings from SME Survey 2005
When it comes to being competitive in the South African economy, most small and medium enterprises (SMEs) feel they have what it takes to hold their own, according to the final results of SME Survey 2005 backed by Standard Bank, MWEB Business and Microsoft.
Although there was no surprise in the fact that Johannesburg leads the way with more than half its SMEs considering themselves to be extremely competitive, the city and area with the next highest confidences was Port Elizabeth (49%) and the Eastern Cape (48%), respectively.
“This was a real turn up for books, particularly considering that it was a region that, until recently, was considered to be in economic disarray,” says Arthur Goldstuck, principal researcher for the survey.
“It is obviously an indication of the amount of energy and attention that has been focused on the area recently, and of course the development of the Coega project has also been a major economic driver.”
Goldstuck points out that not only would there be a trickle down effect in terms of business opportunities for SMEs in the region, but that because the Eastern Cape is not really part of the economic heartland, a project the size of Coega would inevitably have much bigger impact than a similar sized development in Gauteng, for example.
“The other issue that will have impacted this region is the recent boom in vehicle sales, as this is an area that practically lives and dies on its motor car industry,” he says.
“These findings indicate that there needs to be some kind of special treatment for economically disadvantaged areas from government’s side. Of course the SME sector as a whole needs this type of support, so government must not be doing this at the expense of another region, but perhaps pay a little more attention to these disadvantaged areas.”
In terms of the impact of services on the competitiveness of SMEs, business owners surprisingly consider banking services as having the highest impact. 75% of SMEs say that banking services have a positive impact on the competitiveness of their business. Online banking received a similar positive rating, with 73% of business owners claiming it has a positive impact on their competitiveness. “This indicates that we are starting to meet the needs of SMEs both offline and online,” says Roy Ross, Director Business Banking of Standard Bank. “The high level of online banking usage by SMEs has enabled us to better meet the need of SMEs”.
The survey results also suggest that SMEs view Internet connectivity and the form this takes – whether dial-up or ADSL – as impacting greatly on perceptions of competitiveness.
Some 53% of players using ADSL regarded themselves as being highly competitive, while only 43% of those using dial-up held the same views.
“ADSL is particularly useful for the SME that has a large phone bill, as it can help to cut the bill extensively. Between this and the fact that Telkom has substantially reduced the cost of ADSL recently, using this becomes a no-brainer,” states Goldstuck.
The commonly held perception that e-mail is the killer application of the Internet has been confirmed. In fact, as many as 69% of small or medium sized businesses regard the impact of e-mail on competitiveness as positive, while only 18% say it has a negative effect and 13% are neutral.
According to Goldstuck, such perceptions are very much sector-dependent.
“Certain sectors of the market view e-mail as very important and these were way above the average, while others were well-below. It is obviously a sector-based issue – after all, if the SME is in the agriculture sector, e-mail would be almost irrelevant, while in the IT arena, for example, it would be critical.”
Gender once again made a significant difference in the perception of being highly competitive, with a far higher percentage of female respondents (51%) against just 44% of male respondents regarding their companies as highly competitive.
The survey results also show a direct correlation between the size of company and the perception by decision-makers in those companies as to levels of competitiveness, with the rating increasing steadily from a very low 33% for one-person businesses and 39% for other micro-enterprises (up to five staff members), and going as high as 58% for companies with 40-50 staff.
However, once the companies get beyond a staff complement of about 50, the perception of being highly competitive declines slightly.
“It is basically an efficiency issue, as once a company reaches a certain size, but without attaining the level of a corporate that will have a strong human resources department; it can become a bit unwieldy.”
“Nonetheless, it is still only a small decline overall, whereas the perception of competitiveness from the one-man operation up to the larger (50+) organisations showed a massive increase,” says Goldstuck. “Size does count in feeling competitive.”