Manufacturing Sector by Enterprise Size and Employment Contribution

Manufacturing Sector by Enterprise Size and Employment Contribution

Table 9: Percentage contribution of small and medium enterprises in the SA economy (2010) ²

Table 10 shows the income in rand millions, according to enterprise size in the manufacturing industry. According to this data, the total manufacturing industry income in 2008 was R1.526 trillion. The micro enterprises contributed R36.6 billion (2.4%), the small enterprises R46 billion (3%), medium enterprises R129.6 billion (8.5%) and large enterprises R1.314 trillion (86.1%). This is in comparison to the employment creation potential, especially by the SMMEs shown in Table 11

It is important to see in what sectors SMMEs currently play a more active role. Future research can be done to understand what the reasons are why SMMEs are more involved in some sectors and if this can be supported further.

The sector that show the biggest income generation for SMMEs in rand terms (biggest involvement of SMMEs) are ‘metals, metal products, machinery and equipment’ (R75 billion in 2008) of which micro enterprises contributed R14.9 billion. According to Figure 14, micro enterprises consist of 6.1% of metals sector’s turnover while small enterprises consist of 8.2%. Medium enterprises consist of 23.6%.

Micro enterprises made up only 0.5%, for example the turnover of the ‘coke, petroleum, chemical products, rubber and plastics’ sub-sector (Figure 14or R2.1 billion in Table 10) while large enterprises made-up 94.7% in 2008. This shows the dominant impact of large refineries and petro chemical companies that need a critical size and large investments to operate effectively.

Table 10: Income by enterprise size in the manufacturing industry, 2008³

Figure 14 shows the share of income by enterprise size in the manufacturing industry for 2008. The industries that show the largest share of SMME contribution are ‘textile, clothing, leather and footwear’ (37.9%), telecommunication, medical and optical equipment and watches and clocks’ (32.8%) and ‘furniture, tobacco, other manufacturing and recycling’ (26.4%).

Source: Stats SA, Manufacturing survey, 2008 and own calculations

Table 11 presents the employment by enterprise size in the manufacturing industry for 2008. The SMME industries that show the largest employment number are the ‘metals, metal products, machinery and equipment’ (60 167 employed in micro enterprises, 48 771 in small enterprises and 66 367 in medium enterprises), ‘textiles, clothing, leather and footwear’ (31 828 employed in micro enterprises, 23 1010 in small enterprises and 35 346 in medium enterprises) and ‘furniture, other manufacturing and recycling’ (20 539 employed in micro enterprises, 13 882 in small enterprises and 22 425 in medium enterprises). This data needs to be interpreted with the information in Table 10 to generate the employment potential per R1 million output. This is shown in Table 12.

Table 11: Employment by enterprise size in the manufacturing industry, 2008

The SMME employment share is shown in Figure 15. ‘Furniture, tobacco, other manufacturing and recycling’ shows a micro enterprises employment share of 23.9%, a small enterprise share of 16.2% and a medium enterprise share of 26.1%. ‘Metals, metal products, machinery and equipment’ shows an employment share of 19.4% for micro enterprises, 15.7% for small enterprises and 21.3% for medium enterprises. ‘Textiles, clothing, leather and footwear’ industries’ show the largest share of SMME employment - a total of 53.4% (18.8% employment in micro enterprises, 13.7% in small enterprises and 20.9% in medium enterprises).

Source: Stats SA, Manufacturing survey, 2008 and own calculations

Table 12 shows the employment ratio per R1 million income for each of the industries per enterprise size. Micro enterprises show on average a ratio of 4.84 employees per R1 million income, small enterprises a ratio of 3.14 and medium enterprises a ratio of 2.03. This is in comparison to large enterprises with a ratio of 0.58. The data can be interpreted that the manufacturing sector for SMMEs shows an employment ratio where 4.26 more employment opportunities on average can be generated for every R1 million income in the micro sector compared to the large enterprises and 2.56 more for small enterprises.

Micro and small enterprises in ‘Textile, clothing, leather and footwear’ show for example an employment intensity of 12.08 and 6.47 employers respectively per R1 million of income. This also explains why these sectors are the first to close down when there are demands for above inflationary salary increases.

The Manufacturing Sector and Government Support

Table 13 indicates the subsidies received by the manufacturing sector according the data from the Annual financial statistics from Stats SA and Table 14 shows the percentage subsidy received as a percentage of total turnover per year. According to this data, large manufacturing companies received larger subsidies between 2007 and 2009 compared to previous year and also compared to small and medium enterprises. These three years increased the average subsidy received by large enterprises to 0.25% of turnover for the period 2006 to 2010, compared to the 0.13% and 0.18% for small and medium enterprises respectively.

Medium manufacturing enterprises received the largest subsidy share of turnover during 2010 of 0.43% (R853 million) compared to 0.12% for small manufacturing enterprises (R211 million) and 0.09% for large manufacturing enterprises (R1.115 billion).

Table 13: Subsidies and incentives received by different enterprise sizes from government in the manufacturing sector between 2006 and 2010 (in rand millions)

	Small	Medium	Large	Total
2010 AFS	211	853	1 115	2 179
2009 AFS	58	494	3 221	3 773
2008 AFS	142	210	3 512	3 864
2007 AFS	36	26	3 453	3 515
2006 AFS	272	101	2 212	2 585

Source: Stats SA, Annual Financial Statistics (various years)

These subsidies, potentially doesn’t show all the ‘hidden cost’ of government supporting SMMEs, but the case can be made, that given the potential of SMMEs to create employment additional resources can be invested to support SMME development. The subsidy as a percentage of total turnover is shown in Table 14. The subsidy of small sized manufacturing companies as a percentage of total turnover is on average only 0.13% for small sized companies compared to 0.18% for medium sized manufacturing companies and 0.25% for large manufacturing companies.

Table 14: Subsidies received by different enterprise sizes as a percentage of total turnover per year in the manufacturing sector between 2006 and 2010

	Small	Medium	Large	Total
2010 AFS	0.12%	0.43%	0.09%	0.13%
2009 AFS	0.06%	0.20%	0.22%	0.21%
2008 AFS	0.18%	0.16%	0.28%	0.27%
2007 AFS	0.03%	0.03%	0.37%	0.30%
2006 AFS	0.28%	0.11%	0.27%	0.26%
Average	0.13%	0.18%	0.25%	0.23%

Source: Stats SA, Annual Financial Statistics (various years)

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