Regulatory concessions might be required to ensure SME growth in SA

06 December 2018

Given their crucial position in the South African economy, small and medium enterprises (SMEs) in the country require a special regulatory framework that sets a relatively low benchmark for success, according to CEO at Diversiti Management Consulting Richard Andrews.

SMEs are central to South Africa’s economy, given that they constitute a staggering 90% of the total number of businesses in the country, and contribute approximately 60% of the total employment levels. As their revenues grow, SME’s are also becoming the largest contributors to the GDP, currently at 34%.

The segment is also expected to grow rapidly over the next few years. Government schemes such as the National Development Plan are relying on SMEs to drive 90% employment growth over the next decade, something that is increasingly crucial for South Africa in particular.

In addition, a growing number of SMEs are adopting the latest in digital technology, placing them in a strong position for growth in the near future. According to Richard Andrews, however, the current regulatory framework in South Africa is not conducive to growth of this nature.

Regulatory concessions might be required to ensure SME growth in SA

Despite their small size, low turnover and low asset value, SMEs in South Africa are currently subject to the same labour laws as the largest firms in the country, which acts as a major deterrent amongst SMEs to employ new people. Such a scenario is in direct contradiction with the hopes that they will drive employment growth.

One specific problem identified by Andrews revolves around probation periods. “In general, the probation period is where employers can assess whether an employee is competent and suitable for a particular job. The problem arises however, in that fair dismissal procedures apply even if the employee is on probation,” he says. 

Under this framework, “on top of providing the employee with; 'adequate' training, instruction and opportunity to improve, employers would be expected (looking at the way the provisions fair dismissal procedures are interpreted and applied in practice) to carry out a formal hearing before dismissing an employee that is on probation,” he added.

Alongside the reform of these regulations, Andrews offers a number of other recommendations for the benefit of SMEs, including a reduction of overall bureaucracy levels, tax incentives, and increase in overall funding through private channels as well as financial institutions, and increased investment in education.

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Government emphasis is making South Africa's BPS sector globally competitive

04 April 2019

South Africa’s renewed focus on generating greater foreign investment is increasingly reliant on the Business Process Services (BPS) segment, among others, according to Managing Director for Operations at Accenture Africa Kabelo Makwane. The country is emerging as a highly attractive market for BPS investments.

The President Cyril Ramaphosa has been repeatedly asserting the value of foreign investment for restoring stability in the South African economy following a sustained period of sluggish economic growth. Among his areas of focus within this goal is making South Africa a BPS centre globally.

His focus on BPS was reinforced when he mentioned it in his State of the Nation Address, which, according to Makwane, was the first time a president in South Africa had explicitly mentioned the segment in such an address. Makwane believes that the emphasis on improving local services is likely to be significantly beneficial for the economy.

Within the BPS segment, Accenture's Kabelo Makwane has observed significant efforts to generate skills that can compete with the traditional BPS centres across the globe, which include the likes of India and the Philippines. These regions have large pools of English-speaking professionals, which contributes to their popularities.

Government emphasis is making South Africa's BPS sector globally competitive

Efforts within South Africa, meanwhile, have led to the emergence of a number of substantial BPS markets in financial centres such as Gauteng and Kwazulu-Natal, which has driven a staggering annual growth rate of 22% in the South African BPS sector in the last four years.

According to Makwane, alongside the English proficiency levels across South Africa’s labour forces, the country’s attractiveness as a BPS market is contributed to by its correspondence in time zones with European markets, and the low value of the Rand in the global exchange, which makes labour in the country cost-effective. Technology is the key, according to Makwane, to realise the market’s BPS potential.

“By effectively applying technology and digitalisation in the outsourcing arrangement to automate processes, access analytics capabilities to drive decisioning through data insights, or leverage applied intelligence (AI) – the latest evolution in BPS – to effectively augment professional capabilities, the local sector will more effectively bridge the skills divide that exists between the local workforce and workers in incumbent global BPS destinations of choice,” he said.

“Large global enterprises in the automotive, logistics, courier and ICT sectors, for example, all face similar challenges when entering new geographies. They, therefore, require BPS providers that can set up critical front- and back-office functions at pace and scale. Any BPS provider that offers these capabilities will hold a distinct competitive advantage,” he added.