High unemployment highlights need to invest in SMEs

The latest Quarterly Labour Force statistics put unemployment at over 26.5%, highlighting the desperate need for both government and private sector to prioritise investment into building up entrepreneurial ventures that will drive job creation.

According to Mags Ponnan, Head of Customer Value Propositions at FNB Business; SMEs need to be a greater focus area for growth, if we are to decrease the unemployment numbers.

* A number of statistics estimate that SMEs account for over 90% of formalised businesses; they also provide employment to more than half the country’s labour force with an estimated 34% contribution to South Africa’s GDP.

“We have seen the impact of low growth projections affecting many sectors resulting in many industries shedding jobs; our approach to job creation needs to be far more creative as we cannot continue to rely on established industries to absorb the unemployed. Establishing and investing into scalable startups is a worthwhile plan for lessening unemployment,” adds Ponnan.

He explains that the goal with a focus on SME’s must be far more than just providing funding and incubation, resources should be focused on actively developing SME’s that are starting to or are in the process of scaling up. Usually these SME’s are expanding their staff compliment, growing their geographical footprint or by re-inventing their product offering in order to tap into a new market, thereby increasing their customer base – in each instance, there is a direct impact on job creation.

Government has put SMEs at the heart of the country’s growth strategy as packaged in the Nine-Point Plan to help create the much needed jobs and has increased the support for black industrialists. Improvement in the implementation of these government measures, with assistance from the private sector and a balanced approach to the selection of SMEs that have potential, is where the magic lives.

“South Africa is capable of reaching well over the current growth rate; however, this will not be brought about by a focus on traditional industries as many of these have reached their maturity stage. Decreasing unemployment will take a solid partnership from the private sector and the government to create and manage acceleration programs that have a greater focus on supporting scalable small to medium enterprises with a view to create sustainable entities,” concludes Ponnan.