The Key Triggers for the Transitioning of Informal SMMEs to Formal SMMEs: A Baseline Survey of the Gauteng Province—South Africa

Abstract

This paper presents the views of 623 informal and formal small, medium, and micro enterprises (SMMEs) operating in the Gauteng Province of South Africa. The objective of the study was to identify challenges and benefits that are experienced by SMMEs during and after the registration process leading to the transition from informal to formal business, the level of awareness by the SMMEs of the registration information, and the procedures in addition to the potential factors that inspire or discourage informal and prospective business registration. The reason for including both informal and formal SMMEs in the survey was to compare the perceptions of these groups of businesses regarding the triggers and/or barriers to register as a formal business. The results show that for both informal and formal businesses, the liability of paying taxes was a major challenge while improved workers' health and safety accrued as a major benefit. Own research emerged as the main source of access to business registration information and procedure. The costs involved in registration were highlighted as one of the major factors discouraging registration but the prospects of expanding the customer base and the ability to achieve a higher turnover as some of the main inspiring factors. The study recommends the development of policies that provide an enabling environment for sustainable enterprises but also to implement measures that improve productivity through access to finance, skills, infrastructure, markets, and technology transfers.