SMMES in South Africa: Understanding the Constraints on Growth and Performance

Small, Medium and Micro Enterprises (SMMEs) have been identified as a key component to advancing inclusive growth and development in South Africa. This paper serves to present a snapshot of the current profile of SMMEs in South Africa as well as the key inhibitors of growth for SMMEs. We provide a comparative perspective of the role of SMMEs and entrepreneurship in South Africa, then profile the current landscape of SMMEs in South Africa, evaluating the characteristics of SMMEs across three dimensions: firm, owner and employee characteristics. Following this, we distinguish between formal and informal SMMEs in order to highlight the unique nature of informality in South Africa. This paper also evaluates the endogenous and exogenous impediments to growth faced by South African SMMEs. Endogenous challenges are internal to the firm while exogenous challenges are external to the firm. In summarising these findings, we present the major challenges inhibiting the growth of SMMEs in South Africa, taking into account firm heterogeneity in terms of both firm size and informality status.