News release from the Small Business Institute
5 November 2018

SBI welcomes amendments by Department of Small Business Development to definitions of SMMEs

The Department of Small Business Development (DSBD) has tabled new definitions for small-micro- and medium-sized enterprises (SMMEs) as defined in the Small Business Act, replacing those last issued 15 years ago. Public comment must be submitted by 9 November 2018.

“At last!” said SBI Chairman Bernard Swanepoel. “We welcome the minister’s maiden regulation. Simplicity and clarity should go a long way to creating more harmony across departments responsible for supporting SMMEs and less confusion for business. The new definitions will also assist with better statistical collection and analysis, important for evidence-based policy.”

Dropping the ‘total gross asset value’ as a proxy for defining SMMs is a good move, according to Swanepoel, leaving only turnover and employee headcount to measure size. One of the recommendations SBI has suggested in its submission to the minister is to allow for an ‘either/or’ approach to both proxies since turnover fluctuates and employment is a national priority. The either/or option is widely used across all EU, OECD and other emerging market countries.

A technical recommendation SBI has suggested is to ensure that the Schedule of definitions uses the “≤” (less than or equal to) symbol prior to all threshold numbers to create more certainty in respect of statistical consistency. A small business would therefore be classified from 11 employees and a medium enterprise classified from 51 employees.

The SBI urged the DSBD to work closely with other departments, especially DPME and COGTA, to ensure that these new definitions are applied across the board. “Our SME Baseline Study revealed that government has failed to apply a common definition of SMMEs across its laws, regulations and key strategies,” said Swanepoel. “Coordinating all departments to apply the new classifications should be a high priority if government wants to simplify red tape.”

And while better alignment to the BBBEE Codes is a step closer to a cohesive transformation policy, SBI noted that the dti will need to review and adjust the codes more frequently to account for turnover fluctuations.

“Finally,” said Swanepoel, “we urge the minister as a matter of urgency to keep this regulatory ball rolling and table the necessary guidelines to ensure that the provisions in Section 18 of the Small Business Act are in force, requiring government departments to consider the impact of their legal and policy activities on SMMEs.