Will promoting more typical SME start-ups increase job creation in South Africa?

Abstract

Unemployment is one of the pressing issues that attract more attention in South Africa at the moment, with over 25% of the population jobless and the number increases to 40% when including the people who have totally given up the search for work. The South African government has continuously highlighted that the SME sector will be the key to increasing job creation in the country. However, there is evidence that the sector is characterized by high failure rates and low success, growth and survival rates. It is therefore vital to develop a new and fresh perspective in addressing the challenges facing the sector and establish policies to foster job creation in the SME sector. Evidence from around the world show that the SME sector is always characterized by a small subset of high growth, high quality firms that account for the bulk of job creation in the sector. This paper provides a review on the literature of some key characteristics of the small subset of SMEs with high job creation potential, and further appraises the potential of fostering these actors in the South African SME sector. The paper culminates with some policy measures for enhancing high growth SMEs in South Africa as a means to address the job creation saga.