SmallBusiness.jpgThe Absa small and medium enterprises (SME) index rose to its highest level in four years in Q2 2013, with employer numbers increasing 6% year-on-year, or 1.5% over the quarter.

The index rose to 96.1 points during the quarter, up 7.3% from its low-point in April 2010, but still lagging the high of 101.4 points in Q1 2009.

The index provides a snap-shot of the state of SME business in South Africa and currently indicates a growth in small business development.

Importantly, the index has shown two consecutive quarters of growth in the number of employers, which is a positive sign of continuing entrepreneurial activity in SA’s economy, says Sisa Ntshona, Absa’s Head of Enterprise Development for Business Banking.

MikeSchussler.jpgHowever, this positive trend is somewhat unexpected, given the low annualised GDP growth of 3%, says Economists.co.za chief economist Mike Schüssler, who compiles the index in partnership with Absa.

“It does seem that entrepreneurial activity is continuing and small firms are at least still being formed, despite a sluggish growth environment. Much of the growth seems to be driven by smaller companies, as the average number of employees remained steady at 11.5 people per firm (excluding self-employed).”

The Absa SME index showed there were 737 000 employers in South Africa during Q2 2013. “The weaker rand could be a contributing factor, leading to the establishment of more firms who are now in a better position to produce goods more cheaply.”

Self-employment declined slightly from the four-year high of Q1 2013, with an estimated 1.25-million self-employed business people in the country in Q2 2013. “Micro businesses are benefitting from the growth that the economy is slowly generating,” says Schüssler. However self-employment has risen by 4.5% since its lowest point in Q2 2010, showing that most of the negative effects of the recession have abated.

The Absa SME index reviewed the number of women entrepreneurs and examined the latest trends in female employment. Women account for 45% of all people in employment in South Africa, while 36% of all entrepreneurs are women.

“In South Africa women show more resilience when it comes to entrepreneurship as many start from a very small base without much in the form of capital,” says Ntshona, adding that 46% of all the self-employed entrepreneurs in South Africa are women.

Ntshona adds that poverty and unemployment are the leading challenges facing youth today, who make up half of the 25% of unemployed people in the country, and the development of women as entrepreneurs can help to tackle this challenge.

For more on the SME Index click here.