In surviving the many disruptions since 2020, South African small businesses have proven themselves to be agile, flexible, price sensitive and adaptable in their delivery capabilities. They’ve been able to compete in a difficult trading landscape, challenged by electricity cuts, rising import prices, currency fluctuations and supply chain disruptions. The local business sector is incredibly resilient. What role does it play in your local economy and the national economy – and why should you support it?

Comparing the local and global retail experience

Globally, research shows that small businesses tend to outsource services such as accounting, legal, supply and maintenance to local professionals, generating employment within their community. Those professionals are likely to spend that money locally too, multiplying the benefits.

In the USA, the world’s largest economy, small businesses are responsible for almost half of all economic activity. In South Africa, the contribution of small businesses to the economy is also significant. Pre-pandemic research showed that small businesses contributed approximately 22% of all business turnover in the country – R2.3 trillion of a total R10.5 trillion in 2019. In the same year, small businesses created more than 10 million jobs. The ability of small business to provide employment is perhaps their most important contribution to SA’s economy.

Local businesses and community development

Buying from local businesses, for example those selling artisanal or organic products that are locally sourced or produced, has a huge effect on community development. In 2022, the number of formal small businesses in SA reached 710,000, up from 680,000 in 2019. In the same year, registered small businesses held at least a quarter of total business assets. Generally, small businesses were both more labour intensive and more profitable than their larger counterparts.

There are 3 important ways that small businesses contribute to the economy:

• Job creation
  This might seem obvious, but the more than 10 million jobs created by small businesses also have a multiplier effect on local communities. That is, money that is spent on small business products tends to multiply opportunity and growth in the community. Global retail estimates are that small independent retailers return more than 3 times as much money to local economies compared to large chain-store retailers. In short, shopping at local independent retailers creates more revenue for local businesses and more local jobs. In comparison, shopping online from large retailers creates almost no local economic benefit. Except for the delivery person, there is limited additional economic activity stimulated in the community. 
  
  
• Innovation
  Small businesses and startups provide more than just jobs for community members. More local small businesses mean new ways of thinking and fresh perspectives, and a more entrepreneurial approach. This is obvious in the current boom in the South African small business economy for organic and sustainably sourced products, like fruit, vegetables and recyclable products.
  
  
• Entrepreneurial opportunities
  For South Africans in the small business and informal sectors, the pandemic meant retrenchments and income losses. Many people have taken the opportunity to start their own new business, contributing to the recovery of the local business sector. A robust network of small businesses creates opportunities for other individuals in the community, in terms of hiring local people who are known to the business owner, or sourcing products and services through word of mouth. The service mindset extends to the personal relationships that many local businesses will have with their clients.

The benefits of buying local

Consumers have a big role to play in supporting local businesses and ensuring their growth – and in return, they benefit in various ways too. Besides the knowledge that you are supporting local businesspeople and caring about your community, you are also ensuring that:

• money going into a small business contributes to the local and the national economy,
• more employment is provided as the small business grows,
• products are more likely to be unique, hand-made and often from local sources, and
• your carbon footprint is reduced, contributing to environmental sustainability.

Keeping an open mind and helping to develop local businesses means that you as a consumer can find bargains and products you weren’t previously aware of, at competitive prices. You can also take pride in knowing that your purchases are growing the local economy and helping to create jobs, better services, and a deeper sense of community.