Western Cape Business News

Send  Share  RSS  Twitter  09 May 2011

SMALL BUSINESS: Labour Provides The Greatest Hindrance


Recent Western Cape Business News

Almost a third (28%) of local SMEs reported labour related issues as the main hindrance to business growth in the past year. While small business owners acknowledge that they need more staff in order to grow their business, they report that they either can’t find the right people or are too nervous to employ because of the country’s rigorous labour laws.

This is according to the Pastel SME Business Survey conducted by Softline Pastel, the country’s leading developer of business software for SMEs.

Of the 2000 online respondents, 17% claim that the greatest hindrance to business growth, and the major reason for not increasing employment, is the inability to find the right people.

Highly skilled people don’t want to work for small businesses,” claims one respondent. “I need somebody who can just get the job done – I don’t have time to train them,” says another.

Coupled with the lack of skilled workers, an additional 11% of survey respondents report that the country’s rigorous labour laws hold them back from employing more staff. 

There are an estimated 1.5 million SMEs in South Africa that employ around 60% of the country’s labour force.  “In a country with 25% unemployment, creating jobs is absolutely essential,” says Steven Cohen, managing director of Pastel Accounting. “The recent announcements by our President and the Minister of Finance to create a substantial job fund and other government-led initiatives to boost skills should improve employment in the country.  The Pastel SME Survey shows that employment prospects exist within the small business sector but SA’s onerous labour laws are at the heart of holding employment growth back. SMEs require less rigorous legislation and it appears that our labour laws are just getting tighter – I am not sure that government is getting to the heart of solving our employment problems.”

Posing the second greatest threat to growth in the SME sector is paperwork and compliance. Just over a quarter (26%) of respondents claim that they are more focused on filling in forms and being compliant with tax, accounting and other bureaucratic requirements than running their business. However, according to the 2010-2011 World Economic Forum Global Competitiveness Report, South Africa’s extent and effect of taxation and the number of procedures required to start a business are notable competitive advantages.

While it is certainly hard work to run a business, my experience is that many business owners just don’t have the right processes and systems in place to make their jobs that little bit easier. That’s why we get this conflicting information,” says Cohen.

The third biggest barrier to business growth for local small and medium-sized businesses is a funding one with 20% of respondents either unable to, or unaware of how to, raise capital. 

Half of the respondents who report that funding is an issue, could not raise money from their own bank,” says Cohen. “While times have been tough, we hear time and again that the most common reason for businesses not getting funding has to do with poor applications. Either the reason for funding is not specified, the business plan is not clear or the financial reports are incomplete, which goes back to having good systems in place.”

Cohen continues: “Besides the banks, both debt and equity funding is available from a range of sources but business owners must do some homework to find the appropriate channels and submit compelling documentation.”

The Pastel SME Survey, which will become an annual review, was conducted online amongst small businesses nationally during December 2010 and probed a range of factors that impact on the ability of this market segment to make a meaningful contribution to the local economy.

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