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Chapter 13 - Small Business Law
IntroductionSmall business means a separate business entity, including profit-making and non-profit making enterprises (such as a cooperative), which is managed by one or more owners and which can be classified as a micro, very small, small, or medium enterprises (also referred to as SMMEs). Micro is the smallest type of business and has no more than 5 people working for the business; a ‘very small’ business has no more than 20 people working for it, a ‘small’ business can employ up to 50 people, and a medium business can employ up to 200 people, depending on the industry.
Categories of SMMEs
The National Small Business Act divides SMMEs into the following categories:
Category of SMME |
Description |
Survivalist enterprises |
Operates in the informal sector of the economy.
Mainly undertaken by unemployed persons.
Income generated below the poverty line, providing minimum means to keep the unemployed and their families alive.
Little capital invested, not much assets.
Not much training.
Opportunities for growing the business very small. |
Micro enterprises |
Between one to five employees, usually the owner and family.
Informal - no license, formal business premises, labour legislation
Turnover below the VAT registration level of R300 000 per year.
Basic business skills and training
Potential to make the transition to a viable formal small business. |
Very small enterprise |
Part of the formal economy, use technology
Less than 10 paid employees
Include self-employed artisans (electricians, plumbers) and professionals. |
Small enterprise |
Less than 100 employees
More established than very small enterprises, formal and registered, fixed business premises.
Owner managed, but more complex management structure |
Medium enterprise |
Up to 200 employees
Still mainly owner managed, but decentralised management structure with division of labour
Operates from fixed premises with all formal requirements. |
Note: Women represent approximately 56 percent of the survivalist company category, 38 percent of micro-enterprises with no employees, and 15 percent of micro-enterprises with 1-4 employees. |
The government has passed the National Small Business Amendment Act (No 29 of 2004) which provides for the establishment of the Small Enterprise Development Agency (SEDA) and the incorporation of organisations such as Ntsika Enterprise Promotion Agency, the National Manufacturing Advisory Centre and any other designated institutions into SEDA. This will be dealt with in more detail in the chapter.
This chapter looks at the laws that promote small business development, what the laws say a person who runs his or her own business must do and the support available from the government in order to do this.
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