South Africa: Service SMMEs can fuel economic growth

It is widely acknowledged that SMMEs are crucial to the African economy. Eight out of every ten Africans, according to the Centre for Strategic and International Studies, work for a micro, small, or medium-sized business of some form.

In the past, economists have downplayed the role that services play in fostering economic growth and employment creation. Despite the fact that this industry employs a fair amount of labour, the World Bank has emphasised that there are little opportunities for economies of scale because many services tend to be low-tech and locally focused.

The accepted wisdom favours manufacturing-led development, which depends on capital investment and international trade to generate economic growth and jobs.

The economic output of the services sector in sub-Saharan Africa, however, has expanded quickly in recent years, exceeding the expansion of the global services industry by a wide margin. Services account for 58% of the continent’s GDP and an estimated 41% of employment, according to Statista.com. According to estimates, this industry in South Africa accounts for up to 70% of all jobs.

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Technology advancement is a key factor in this trend, as it is reshaping the growth and job-creation potential of service SMMEs in Africa. This holds true even for locally focused, lower-skilled services like beauty or house upkeep and repair.

According to Sayo Folawiyo, CEO of Kandua.com, “the company management software for small service firms and the top online marketplace for home services in South Africa, Finding new consumers is their number one concern for 43% of our service providers.”

“As a result, our main goal is to use our web platform to match vetted service providers with clients who require their expertise. Digital platforms have freed SMEs from the need to rely on word-of-mouth or geographical closeness to expand their customer base, even while the service delivery is still confined to a certain region.”