One in six own small businesses

One in six adults in SA is a small business owner, according to FinScope SA's Small Business Survey for 2010.

The survey also indicated that two-thirds of these businesses did not employ anyone other than the business owners, and 79 percent were involved in product sales.

"Woman are more likely to be small business owners, although small businesses owned by men are more likely to render services and to employ other people," the survey found.

For 67 percent, the small businesses that they owned were their sole source of income.

The survey showed that one in two small business owners had started the business either because they could not find jobs, or because they had lost their jobs.

Start-up funds needed

Two-thirds of small business owners needed start-up money. Most of these funds came from own sources, with 37 percent claiming to have borrowed from other sources.

Only five percent of small business owners claimed to have current borrowing or loans for the business, and 39 percent claimed to save for business purposes.

The survey found a "significant opportunity" for innovation in the banking sector to meet the needs of the small business owner.

"Another area is basic business banking similar to the Mzansi type account which allows for multiple deposits."

Affordability was a key barrier to the take up of insurance, with over 50 percent of small business owners saying they could not afford it.

Only 45 percent of respondents agreed insurance was important for their businesses, suggesting business owners did not really see a need for such products.

What support?

Awareness of support for small business was extremely low, with 74 percent of owners unable to name any organisation that gave help and advice to small businesses, while 94 percent claimed never to have used any support.

The survey however showed 11 percent of business owners who had asked for help from an organisation had not received any.

"Small business owners claim that they go to friends and family for business advice (50 percent) while 11 percent use external professionals and 31 percent rely on themselves."

As many as 41.8 percent of small business owners did not use formal or informal products for business purposes, but relied solely on family and friends for borrowing and saved money at home.

Difficult to quantify

Asked at a briefing following the launch of the survey what small businesses contributed to the country's gross domestic product, Finmark Trust's director for innovation Neil Higgs said this was difficult to quantify.

"A lot of these businesses are one man bands and they don't have any clear idea of their profit."

Researcher at FinMark Trevor Kaseke said the social importance of small businesses should not be underestimated.

"Small business keeps people out of poverty and crime and makes them part of the social fabric."

Higgs said one of the reasons why so many small business owners remained unbanked was because the country's commercial banks did not offer "the right products."

"Accessibility to banking has been given as a reason, but it should be said that the banks must go to the people -- the people shouldn't have to go to the banks."

However, many small business owners appeared able to manage their money without the help of banks.

"It's often said that poor people don't know how to manage their funds, but this isn't true," Higgs said.

Kaseke said it was worth noting that eight percent of small business owners received government grants.

"So there is a potential that they develop their businesses and this would get about 500,000 people off social grants."