Absa bank launches SME index

Financial service group Absa has launched the Absa SME (small and medium enterprise) index aimed at providing valuable information on the current state of SMEs in the country and the level and challenges of employment.

Data for the index is extrapolated from Statistics SA’s information on various economic indicators that are issued regularly.

Absa group’s chief executive for retail and business banking (RBB) Bobby Malabie said with the data collected to measure the number of people that have been employed by companies versus the unemployment figures in the country over the last two decades‚ it was quite evident that unemployment remained one of the country’s key challenges into the foreseeable future.

“This is especially rife in the youth category where unemployment is as high as 50% and it’s clearly unsustainable taking into consideration that we have 15 million people on social welfare‚ but only seven million are taxpayers‚” said Malabie.

The Absa SME index also showed that while only about 270‚000 out of the more than 1.9 million businesses employed five or more employees other than the owner‚ only 10% of those businesses employed more than 50 employees and that was less than 4% of all employees.

Malabie said that while it might be easy to say there were more businesses needed to employ more people‚ there had been a consolidation of businesses (mergers‚ and partnerships) while others had been forced to close down due to high operating costs and other economic pressures.

“The Absa SME index will provide valuable information that allows SMEs to make better and informed decisions with access to solid and reliable information that will help them to grow their businesses. The index will also allow policy makers to make relevant policy decisions on SME development‚ high unemployment and job creation‚” he added.

Economist Mike Schussler who worked on the Absa SME index in partnership with Absa said the idea of the index was that one would get a quick overview from just one index on how SMEs were fairing.

Schussler noted that with the latest data‚ the Absa SME index had dropped to its lowest level in 18 months as businesses felt the uncertainty that the cold winds of the world economy were bringing into SA.

“This probably also has to do with sluggish growth outside of the mining sector in the second quarter while most firms are in other sectors such as retail‚ manufacturing and construction‚” Schussler said.

The latest employer figures showed a decline by 5‚000 employers in the second quarter compared to the first quarter where it stood at 700‚000 employers.

The number of self employed declined to 1.243 million in the second quarter from 1.281 million in the beginning of 2008. Self employed numbers were however slightly up on a year ago when the number was 1.231 million.

“It is through entrepreneurship that this country will create the much needed five million jobs by 2020 - in every growing economy around the world‚ SMEs are the engine room of job creation‚” Malabie said.