South African business sizes
Business size categories in South Africa
Businesses are graded by size in different ways by different Acts of Parliament. Within each of those acts, companies may also be graded differently, based on the industry of the company. It is, therefore, important to know also, what the use-case is for the size information.
What is a small business?
There are three definistions:
- The Companies Act with its "public interest score" (PIS).
- The Department of Statistics South Africa (my personal favourite). They update their metrics every year.
- Department of Small Business Development.
The Companies Act view of business size
The Public Interest Score takes into account several characteristics of the company. They score each on a number from the company itself:
- The average number of employees in the company for the last financial year. They would round an answer of 12.3 to 13 points.
- One point for every R1M of third party debt.
- One point for every R1M of turnover during the last financial year.
- One point for every natural person who has a direct or indirect interest in any of the company's shares.
Notes to the PIS:
Directors are employees
All third party debt includes current creditors and long term creditors
Turnover includes operating and "other income"
Indirect includes beneficiaries of share-owning trusts
The public interest score drives the level of audit or accounting review.
Public interest scores and their meanings
All companies are required to calculate their public interest score every year. There is a lot of much better qualified advice to find in this regard all over the .za web space. Do a Google search on public interest score; but first get coffee.
As a small business owner you may agree that it takes some significant trading to attain a PIS of 100. And up to that level the red tape is already very low, particularly as an owner-managed company. There are no audits required, and the financial statements can be compiled in-house with no particular framework.
StatsSA is the clearest definer of business size
StatSA redefines businesses by size every year. It does so on the basis of turnover only. But they also drill down to size in different industries. After all a software consultancy turning R90 million is one thing. A wholesale trader in mining equipment is another.
StatsSA also takes notice of the Department of Trade & Industry in arriving at their limits for "The Trades". Those are retail and motor trades, wholesale trades, and hospitality trades.
The table below makes it clear that there is a wide difference between what StatsSA regards as "small" and what the Department of Small Business Development does.
Industry | Small (StatsSA) turnover | Small (DSBD) turnover |
|---|---|---|
Agriculture | ≤ R22,5 M | ≤ R17 M |
Mining & quarrying | ≤ R75 M | ≤ R50 M |
Manufacturing | ≤ R97,5 M | ≤ R50 M |
Electricity, gas & water | ≤ R97,5 M | ≤ R60 M |
Construction | ≤ R45 M | ≤ R75 M |
Wholesale | ≤ R240 M | ≤ R80 M |
Retail and motor | ≤ R142,5 M | ≤ R25 M |
Hospitality | ≤ R45 M | ≤ R15 M |
Transport, storage, & communication | ≤ R97,5 M | ≤ R45 M |
Finance & business services | ≤ R97,5 M | ≤ R35 M |
Community & social services | ≤ R45 M | ≤ R22 M |
The Department of Small Business Development is nothing, if not consistent.
The National Small Enterprise Act came into being in 1996. It defined size by assets, turnover, and the number of employees.
Seven years later they shifted the limits for the first time.
It took them 16 years to adjust the limits again! That was in 2019. There has been no change since then.
Like StatsSA, they also differentiate between industries. But shame, they struggle to keep up with the pace of change if it doesn't come with flashing blue lights and an army of selfie-bearing bodyguards.
Seriously, what is a small business then?
These different measurements make it clear that nothing is clear.
If positive changes are to occur for the small businesses in South Africa, then I guess we should hope that StatsSA and the DTI (including CIPC) have some say.
In the meantime you have some numbers on this page, upon which to base your planning.
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