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Cape Town – Contrary to global trends, South Africa’s small and medium enterprises are showing a decline in employment, turnover and a majority are struggling to survive.

According to SBP’s 2015 SME Growth Index, just over one in five firms reported a decline in turnover from the previous year and a further 20 percent reported no growth in turnover in the same period.

“The signs are crystal clear,” the report explained. “The business climate for SMEs is becoming ever more hostile. There needs to be a quantum change in government’s thinking if conditions are to become any better for SMEs to grow, employ more people and prosper.”

Only 56 percent of the panel reported an increase in turnover at an aggregate annual increase of just 11 percent, marginally better than the 9 percent recorded in 2012, but down from an average of 13 percent in the previous year.

The index is based on a survey of a panel of 500 established firms, employing less than 50 people and operating in three sectors: manufacturing, business services and tourism.

Burdensome regulations represent the top factor impeding business growth, the index revealed.

Nearly 80 percent said the business climate is becoming increasingly hostile to their firm’s growth, representing the highest number of firms reporting this since the SME Growth Index base year in 2011.

SMEs revealed that burdensome regulations (40 percent), a lack of skills (38 percent), local economic conditions (37 percent) and cost of labour at 32 percent inhibited the growth of their firms over the past year.

Over 75 percent of the panel report that the amount of red tape has increased, up two percentage points from the previous year. From a competitiveness perspective, the increasing regulatory burden is deeply concerning, the report showed.

“South African firms are operating under severe and adverse circumstances, which firms in competitor economies may not have to contend with,” it said.

“The challenges of the overall business environment appear to be driven mainly by domestic factors, rather than global conditions.” – Sapa