THE IMPACT OF SMALL AND MEDIUM ENTERPRISES (SMEs) ON ECONOMIC GROWTH IN SOUTH AFRICA

Small and medium enterprises (SMEs) perform a strategic role in the economic performance of any country. This strategic role in the economy revolves around the production of products and services, innovation, the aiding of big business, and job creation. SMEs have a high labour absorption capacity, as they account for between 60 to 70 percent of employment in most developing countries. Economic development can be directly attributed to the level of entrepreneurial activity in a country, which is indexed by the number of operational SMEs. SMEs have been responsible for most of the innovation throughout the world, with statistics showing that many scientific breakthroughs originated with small organisations and not in the laboratories of large businesses. SMEs are also viewed as a mechanism to narrow the gap between rich and poor and to reduce the backlog of the previously disadvantaged. SMEs can play a significant role in the economy of a country by introducing ground-breaking products and services, thereby improving the quality of life of the people. Therefore, SMEs have become an important driver of economic growth in most countries throughout the world. Qualitative research was used in this study. An extensive literature review regarding the importance of SMEs in the South African economy was explored. This study aimed to investigate the impact of SMEs on economic growth in South Africa. This aim was achieved by an extensive literature review which revealed that SMEs have a positive impact on economic growth in South Africa. The study concludes that SMEs have a positive impact on economic growth in South Africa. SMEs are vital to the economic growth of any country. The successful establishment of SMEs leads to employment opportunities and growth in all economies. In view of the study results, it is thus recommended that the government of South Africa should establish a new support agency for SMEs. The South African government should improve the public’s view of SMEs. It is further recommended that the South African education system should reform in order to provide SMEs with the skills they need to thrive.