Declining job security makes SMME sector an attractive option

Kenneth Fisher

The release earlier this year of trade union Solidarity and ETM Analytics’ quarterly index on job and wage security in South Africa, indicated that while job and wage security weakened less during the fourth quarter of 2014 than it did during the previous quarter, it is nevertheless still declining.

It is this reality that Kenneth Fisher, CEO: Real People Business Finance SME South Africa, believes makes setting up and owning an SMME, and a franchise in particular, the way to go from both an economic and  job security perspective.

“Although Solidarity’s findings are based largely on the unskilled labour market, even in the skilled job sector, job security can largely be regarded as a fallacy. Here employees whether they be in a large corporate or a small company are continuing to find themselves a casualty in the ongoing rationalisation processes many companies are being forced to implement,” he says.

Fisher refers to Telkom’s announcement in June that it intends retrenching 7 800 employees within a two month period. “The telecoms and mining sector in particular have been hardest hit by retrenchments but in the current economic climate retrenchments are a reality across the board. It is for this reason that opting to start your own business may prove to be the best decision you ever make,” he comments.

And while there are risks involved in starting your own business, Fisher believes the benefits, to both the individual business owners and the economy as a whole, far outweigh these. 

“There’s nothing quite like being the master of your own fate in a business that you as an individual are passionate about. Not only are you able to do things on your own terms and create your own job security, but you are also able to stretch yourself and learn and grow at the same time. Most appealing for many business owners is also the opportunity to be able to write your own pay cheque,” he comments.

When it comes to the benefits to the economy Fisher says just as the ‘Tigers of the Far East’ have economies driven by small business, the same applies to African and the South African economies.

“The growth booms in the East Asian economies in the late 1990s and early 2000s were largely due to a strong SME sector, it is thus evident that that SMMEs are critical to the economy of the country, and key to creating much needed employment.

“Unemployment in South Africa in terms of a percentage of the economically active is at around 26% but in practice it is more than likely around 40%. Considering that statistically speaking 18-22 million people are economically active, 40% thus translates to millions and millions of the local population currently without jobs,” he stresses.

It is here that Fisher emphasises the importance of the role of the small business arena and franchise sector in particular as a job creator.

“On average restaurants in the franchise sector employ around 50 to 100 people. This has a multiply effect of X5 within local communities, so in essence each restaurant could potentially be supporting 500 community members,” he explains.

And besides employment and poverty reduction, Fisher says SMEs play an important role in promoting a competitive and efficient market. “Because SMME’s have completely differently strategies and ways of thinking and doing things compared to the big corporates, their agile approach to competition drives efficiency and productivity.

“In developing countries SMMEs are also important drivers of inclusive economic growth and development, driving diversification through the development of new and unsaturated sectors of the economy. 

“And of course there’s the revenue generated from these businesses in terms of the various tax payments which are instrumental in supporting economic growth. With government having established the Ministry for Small Business Development as part of its commitment to developing the sector and promoting job creation, the sector is likely to boom over the next few years. So when all is said and done, the pros far outweigh the cons when it comes to starting a small business,” he concludes.