The importance of SMME’s

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The role played by small businesses is being increasingly recognized all-over the world. The perceived potential of small businesses to create employment has caused governments in many countries to pay the small business sector more attention.

While, in some cases, results have not matched expectations, available evidence indicates that the sector contributes meaningfully to economic growth, social development, and employment provision.

In the European Union, for example, the small business sector accounts for much of total employment, and a large portion of the total gross domestic product. 

A factor of major importance, for the transformation of South African society, is job creation, wealth generation and improved standards of living for all South Africans. High unemployment rate and poor socio-economic conditions have highlighted the need for reconstruction and development.

The existing large firms and public sector have been unable to cope with solving these problems and hence the focus has been placed on the small business sector as an intricate part of solving the economic crisis.

The White Paper on a “National Strategy for the development and promotion of small business in South Africa” states that the stimulation of small, medium and micro enterprises must be seen as part of an integrated strategy to take the South African economy onto a higher road – one on which is diversified, productivity enhanced, investment is stimulated and entrepreneurship flourishes. 

As stated in the “National Strategy for the development and promotion of small business in South Africa”,the creation of an enabling environment for the development of small businesses needs to happen at both national and a local level.

On a local level, opportunities and resources need to be identified and utilized in a way that takes into account the local characteristics and resources Thus, the developmental role of local government has undergone a transformation, in terms of which local government has come to be seen as a key agent of economic development.

These development initiatives place increasing emphasis on the small, medium and micro enterprise sector and how to strengthen it; and SMME support increasingly becoming a local (rather than national or provincial) priority.

The case for employment creation and wealth distribution through small business is based on sound economic sense. Small businesses have been identified as labor-intensive, have the need for little capital and make use of the local resources available.

By channeling these resources to the small business sector, particularly in a growing and developing economy like South Africa’s, employment opportunities can be maximized and people are given the opportunity to contribute to the development of the economy.

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