According to a recent survey, the South African small business sector is in dire need of expertise and finance.

Greg Gordon reports from Johannesburg:

THE preliminary results are in for the fourth annual SME Survey, which sets out to evaluate factors that influence the competitiveness of small- to medium-sized enterprises (SMEs) in South Africa.

Chief among these is the strong demand among SMEs for access to skills, expertise and finance. According to the survey results so far, however, they are having difficulty finding this.

SME Survey is undertaken annually by World Wide Worx in conjunction with Netsurit, Coolcumba Communications, Fizz Marketing and Bonngoe Capital.

Arthur Goldstuck, managing director of World Wide Worx and principal researcher for the survey, said: "We interview 6000 SMEs every year to gain a measure of what factors they feel affect their competitiveness. We found that while SMEs now have access to similar technology resources that were once the preserve of large organisations, they still have major concerns about access to skills and finance.

"The gap between expectation and what's being delivered is significant."

The survey determined that 75% of SMEs want better skills and expertise. They also require more funding from financial institutions. Around 74% of SMEs surveyed want a higher level of financial aid from banks.

Only 37% of respondents said that they were very satisfied with the availability of skills and expertise and 40% said they were very satisfied with their financial institutions.

"Clearly there is a skills shortage in South Africa's entrepreneurial circles as well as a shortage of financial resources. This presents a significant opportunity to financial institutions. It is imperative that the gap between expectation and what is actually being delivered is reduced," said Goldstuck.

The survey indicates that for the first time, SMEs are relying significantly on technology to help them to do business -- often against the big guns. High-speed broadband Internet connectivity is now a must rather than a nice-to-have, and SMEs are dumping their old dial-up Internet connections in favour of ADSL.

"But there is a problem," said Goldstuck. "There is a massive backlog of applications from SMEs for ADSL services.

"In the absence of any competition to Telkom, little is being done about this, and to add insult to injury, services are expensive.

"SMEs are completely reliant on high-speed Internet access and it underpins the sector of the economy they operate in. Last year, ADSL connections and dial-up connections accounted for about a quarter of the telecommunications needs of SMEs.

"This year, 46% of the survey's respondents said ADSL was their preferred form of connectivity while just 17% use the old slow and expensive dial-up method," he said.

Black economic empowerment (BEE) is also becoming important for SMEs. About half of the SMEs surveyed said that they were under pressure from their customers to increase their BEE involvement. About 10% of respondents said they faced high pressure for better BEE profiles and that this pressure typically came from larger companies.

Goldstuck said there was a difference between BEE and broad-based BEE, with which SMEs were generally not familiar.

BEE tends to focus on companies that are black-owned, -managed and -controlled. Broad-based BEE encompasses skills development, corporate social investment and BEE procurement, for example.

"Our research shows that 66% of respondents so far allocate some of their procurement to black-owned companies. Some of this is as a matter of policy but a large amount was not planned for or premeditated," said Goldstuck.

The final results of SME Survey 2006, backed by Standard Bank and Oracle Corporation South Africa, will be out in September.


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