The SMME sector is waiting with bated breath to see how the request for comments on what defines an SMME will shape government policy.
This is after Minister of Small Business Lindiwe Zulu announced in October that her department had commissioned the analysis and amendments to Schedule 1 of the National Small Enterprises Act, which defines what SMMEs are.
“Adopting the new definitions and the updated schedule will establish a platform for a ‘single version of the truth’ when reporting and measuring the impact of investment in SMMEs on economic growth and job creation. This review of the definition will provide for a single definition and application of what SMMEs are,” Zulu explained.
The schedule was gazetted for public comment on 12 October 2018. The closing date for comment was 30 days after the publication of the notice.
The minister had announced her intentions at the 5th National Small, Medium and Micro Enterprises (SMMEs) Policy Colloquium in Boksburg, Gauteng. The colloquium placed emphasis on the development and support for SMMEs and cooperatives in townships and rural communities, and locates local economic development as central to the development of these underserved areas.
The two-day meeting was hosted by the Department of Small Business Development, in partnership with the Small Business Development Institute (SBDI) and the City of Ekurhuleni. It is held under the theme ‘THUMA-MINA: Creating and supporting economically active and viable township and rural economies’.
The colloquium also sought to find sustainable solutions to the challenges that confront small businesses and cooperatives and to identify policy interventions that will contribute to the growth and sustainability of small businesses,” the department said.
The current definitions classify small enterprises into four size classes:
“Micro- enterprise “; “Small Enterprise “; “Very Small Enterprise “; and “Medium Enterprise “.
These size classes will cover all forms of ownership and enterprise structures, including sole proprietors, partnerships, companies and cooperative enterprises; they also apply to formal and informal enterprises.
In defining these class sizes, three proxies were used: number of people employed, that is, full time equivalents, value of annual turnover and value of assets.
The review into the use of the definitions and proxies found that many public and private agencies found it difficult to apply all these proxies and that the threshold value of turnover and assets were often inappropriate and difficult to measure.
Furthermore, consultations during the review found that the size class of “Very Small Enterprise” is not consistent with international practice and many agencies in South Africa found it to be unhelpful. Thus, it is recommended that the term “Very Small Enterprise” be abolished and subsumed into the size class of “Small Enterprise “.
THE REVISED DEFINITION
Purpose of a national definition of small enterprise
The revised definition is expected to come up with a national definition of small enterprise to officially identify small enterprises in order to inform the design, management and assessment of business support measures nationally and provincially.
Another reason for the revision is to promote consistency in the use of terms in order to align government policy and legislation. The new definition introduces three different categories of enterprises: Small, medium and micro enterprises; and two proxies of total full time employment and total annual turnover.