Job creation versus job shedding and the role of SMEs in economic development

Abstract

SMEs have historically played an important role in contributing to economic development of many countries
around the world. Naturally all businesses start as small businesses or even start out of small businesses
initiated by individuals. Evidence from this study shows that SMEs represent vast portion of businesses in
developing countries including South Africa. In South Africa, SMEs account for about 91% of the formal
business entities, contributing to about 51 and 57% of GDP, providing almost 60% of employment. The main
challenges affecting SMEs in South Africa include lack of management skills, finance, access to bank credit,
access to markets, appropriate technology, low production capacity, recognition by big companies, lack of
interest, long bureaucracy processes, and support for the roles that small businesses can play in economic
development. This study re-assesses the role of SMEs in creating jobs, boost, enhance and support economic
development in South Africa.