The perceived effectiveness of the role of government in SME development

Abstract

Since the beginning of South Africa's democracy in 1994, SMEs have been identified as the untapped base to achieve economic growth through market competitiveness on the one hand, and employment generation and income redistribution as a result of this growth on the other (Berry, von Blottnitz, Cassim, Kesper, Rajaratnam & van Seventer, 2002). However, unlocking the potential base of SME's is no small feat. In 2015, the SME Growth Index, conducted by business environment specialists SBP, found that "contrary to global trends where small and medium enterprises (SMEs) constitute the largest employer in either developed or developing economies, smaller firms in South Africa were showing stagnation in both turnover and employment growth" (SME Growth Index, 2015:1). In addition to the SME Growth Index report, the Global Entrepreneurship Monitor (GEM) 2015/16 report on South Africa points out that entrepreneurial intent has dropped by almost 30% in comparison to 2013 (Herrington & Kew, 2015). The purpose of this study was to understand the role of government in SME development. In exploring this role, the study sought to understand which government institutions are specifically tasked with SME development and whether these institutions are perceived to be effective. The finding highlighted areas of concern that government institutions tasked with SME development should be mindful of. These included the mismatch between government initiatives and SME needs, lack of marketing on government institutions tasked with SME development. The study has therefore made recommendations towards addressing these concerns.