“If it's tough out there, you are not alone. A lot of other guys are going through a tough period.”
GUGULETHU MFUPHI: Absa launched a new SME Index today, aimed at measuring the current state of small businesses in the country. On the line now we are joined by economist Mike Schüssler who’s done a lot of research into the sector. Mike, there’s a perception out there that small businesses are struggling in the current economy. Would you say that the index shows this?
MIKE SCHÜSSLER: Yes. We are down from last year and the index at the moment is just the number of employers and the number of self-employed and it gives a ratio to each of them. That shows you that times are tough. But even if you take the real figures, the figures that are available from Statistics South Africa, the amount of employers out there is down below 700 000 – 695 000 the second quarter of this year, although we are still talking about 700 000 or so for the whole first half of this year. But that puts it into perspective. At one time, just before the recession hit us in 2008, we had over 800 000 employers.
And if you take the self-employed a few years ago, I one day wrote something for Moneyweb on that, looking back ten years or so you were looking at 2.2m people self-employed, and now you are looking at 1.2m self-employed. So yes, times are tough. It's not easy out there.
I think people have this idea that all businesses are rich or that they easily make it, and the current data, the study we did for Absa, shows it isn't that easy out there. It's very, very tough.
RYK VAN NIEKERK: Mike, the 700 000 businesses – are they in the formal economy?
MIKE SCHÜSSLER: Most employers are in the formal economy, I would say. It's very difficult to distinguish, but I’d say 10 000 or 20 000 may not be in the formal economy. But certainly the majority of them are. Ryk, you know I told you a few years ago about the 301 000 people that were employers of more than five people. At the moment I can tell you that that’s down to 270 000 people that are employers, and that you can say are all in the formal economy. And that gives you an idea how tough it is out there.
And the other thing that gives you an idea of how tough it is out there – business not being that rich – is one very, very simple fact: the average business at the moment has got 11.5 employees. According to Stats SA, according to the UIF it's just on 10. That compares to the 1980s when it was just over 34 people in a business that were employed there. And right now that says to me that businesses are much, much smaller than we think and they need a lot more help than we think at this moment in time.
RYK VAN NIEKERK: Mike, if a business owner or a business manager listens to you or looks at the index, what should they take out? It gives you an index number, but what is the meaning for the individual business owner?
MIKE SCHÜSSLER: It's just a growth rate and the amount of businesses. We are going to add from Absa the number of transactions on the business side, which would give us a more up-to-date current type of thing. But I think if there’s one thing it says to me that I want business owners to take: if it's tough out there, you are not alone. A lot of other guys are going through a tough period.
The average business is only 7.5 years old. The typical business is less than five years old. And if you can just stick it out a little longer, your life expectancy increases tremendously as a business. And you learn a lot as a business. For policymakers it also says to me the one way we can grow a heck of a lot of jobs, if we can get the typical business to stay between four and five years, and go to six to seven years, we automatically will create a million or so jobs. And that is the big, big issue. Can we get businesses to stick around longer to have a better chance of success – I think that is the critical, critical issue.
GUGULETHU MFUPHI: But how would you do that, Mike?
MIKE SCHÜSSLER: Well, I think there’s a few things that I can think off the top of my head. Rules and regulations, red tape – and government has got to change its thinking. Government’s got to say how can I get that airline to fly to the next country, how can I make it easier for business to get that export? How can I make it much, much easier for a mine to stay open? How can I make it that a business that’s in manufacturing can get new markets? How can I help? And that’s where the big question is today – not about the next rule and set of rules that you’ve got to do. Every civil servant out there has got to start thinking differently and has got to say how can I help – not how much money and how many rules can I put in place.
RYK VAN NIEKERK: It doesn’t seem like the labour situation in the country would allow that, especially labour laws are sometimes identified as one of the core reasons why businesses are not growing.
MIKE SCHÜSSLER: Well, certainly labour laws aren’t helpful in South Africa – that’s the first thing. I don’t think it's the end of the world, Ryk. But I would like to say this much: I think the current situation where people are not even adhering to the labour laws at Marikana and at Amplats and Gold Fields and so on. I think we really need to rethink, because this figure shows that a lot of businesses are very, very vulnerable because, remember, it's not just the mine but the guy who is delivering the garden services at the mine, the guy who’s delivering structural steel at the mine or woodwork, the guy that’s serving as a retailer to the miners out there. All those guys are under pressure – and girls too. I would say to people, listen, in today's world you are rich in international standards. Get over it, that’s the way it is.
And I think political parties also have to start saying that and I think we've got to realise that the only rich people who are left are probably politicians and we've now got to go on and get business going. I think that’s what it boils down to. We may have a rich list in one of the newspapers over the weekend, but that’s 1 000 people or 2 000 people. The majority of businesses take 10 years from being a one-man person just running his thing and, if they make it, if they are lucky, to employ another person. That is a huge, huge challenge that we have to take. And if we don’t take that challenge, then we can forget it.