By: Dumisani Bengu, Chief Commercial Officer
Supporting SMEs to reach their full potential is essential in the new economy, as it secures a better future of work for everyone.
Micro-, small and medium-sized enterprises (SMEs) are responsible for more than two thirds of all jobs worldwide. They also account for the majority of new job creation.
But despite providing a huge share of global employment, SMEs still face major challenges when it comes to working conditions, productivity and informality.
While they may be small individually, new International Labour Organisation (ILO) data show that micro- and small enterprises, together with own account workers, account for a staggering 70% of employment worldwide.
SMEs do more than create employment: they are also engines of economic growth and social development. In most OECD countries, SMEs contribute more than 50% of GDP, and some global estimates put this figure as high as 70%. This contribution varies across sectors, and is particularly high in the service industry, where SMEs account for 60% or more of GDP in nearly all OECD countries.
SMEs are also more likely to hire from groups with lower chances of finding employment such as young people, older workers and less-skilled workers.
Understanding the challenges
SMEs are crucial to the future of work, not just for employment creation and economic growth, but also to drive innovation and competition in markets. But large enterprises can invest more in training and equipment, pay higher wages and offer better working conditions, and so outmatch SMEs when it comes to productivity and quality of employment.
In addition, SMEs faces a triple threat: access to customers and markets; access to skills and access to funding and working capital.
In developing countries, this productivity gap leads to low income generation, informality and poor growth performance. To close the gap, we must first understand the problems faced by SMEs, both from the perspective of employers and employees, and in context of broader challenges facing the world of work.
The digital economy
Rapid digital development is a major disruptive factor across all sectors and industries. For SMEs, digital technologies can potentially enhance management practices, improve market intelligence and create virtual access to regional and global value chains.
However, many SMEs lack the skills and resources to capitalise on this opportunity. By supporting SMEs in the transition to digital, we can ensure that small businesses can benefit from the full potential of new technologies while simultaneously ensuring that digital adoption does not compromise decent work.
In a true collaborative ecosystem, where multiple stakeholders build the economy together, South African SMEs can look to a myriad of solutions for help including Corporate South Africa, who can play a part in supporting SMEs through relevant B2B SME propositions, as well as enabling progressive procurement policies favourable to SMEs.
They can also reach out to other organisations (i.e. grants and business incubators) and be deliberate in seeking support that will enable them to address some of their challenges and lastly, Government, who has the power to create a policy framework that supports SMEs.
Digital ecosystems such as Yep, rallied by Telkom Business, is a good example of how small businesses can best harness the power of digitilisation.
The importance of customer-centricity and the appreciation that consumers will expect a more seamless user experience is growing. And for this reason, there is no better time for small businesses to evolve and take advantage of this digital revolution.
The big picture
The world of work is in a phase of major upheaval, and many challenges both old and new are hitting SMEs particularly hard. But with the right perspective, a challenge can become an opportunity.
The South African economy needs small businesses to succeed now more than ever, which means we have a golden opportunity to build a better, more supportive and inclusive ecosystem than the one we suddenly left behind six months ago.
Leaving SMEs behind is not an option. The 2030 Agenda for Sustainable Development certainly cannot be achieved without them. Given their global prevalence, and their huge importance to social, economic and environmental development, the future of work will be bleak if we do not support SMEs to unlock their full potential.
Once we start taking big steps to support small enterprises, the future looks bright and beautiful indeed.