The quarterly Absa Small and Medium-sized enterprises (SME) index, which measures the number of actively participating SMEs in South Africa’s economy, remained flat in the fourth quarter of 2013, increasing by only 0.1% from the third quarter to indicate the existence of 95 600 SMEs at the end of the year – little changed from September’s level of 95 500.

Tellingly, the index rose 0.6% over the last year – the lowest yearly increase recorded to date.

The overall index remained nearly 6% below its prerecession peak, indicating that many South African businesses had not yet fully recovered from the global economic crisis.

Overall, the index had increased by 7% since its low point in the second quarter of 2010.

Absa Business Banking South Africa head Happy Ralinala believed the index reflected the effects of slower gross domestic product (GDP) growth on the South African economy, partly owing to the prolonged strike season.

“The South African economy was characterised by the stalling nature of business formation during the last two quarters of 2013,” she said.

However, the number of employers in South Africa increased by 1.2% to 770 000 in the fourth quarter of the year, from 764 000 in the previous quarter.

“This increase is most encouraging, as it shows that slightly larger enterprises are steadily growing, despite the prevailing challenging economic conditions.

“The number of SME employers in South Africa grew by 2.5% for the year to end December 2013, which is both faster than GDP growth for 2013 and the growth of self-employed individuals,” Ralinala commented.

Absa added that slow growth over the past two years had affected the most vulnerable segment of South Africa’s economy – the self-employed.

The number of self-employed individuals across the country had declined in four successive quarters, reflecting the impact of economic “upheaval”, such as long strikes and slower growth, on the natural formation of smaller businesses.

Self-employment declined by 3.6% over the last year to 1.29-million adults.

The Absa SME index reflected a 2.4% decline in numbers between the third and fourth quarter, leaving the self-employment number at its lowest since the second quarter of 2010.

“The Absa SME index serves as a reminder of the vulnerability of SMEs, which play a crucial role in South Africa’s economy, post the global economic crisis. With 60% of SMEs failing in their first year and a further 22% in their second year of operation, there is a pressing need to create a supporting, access-conducive environment to nurture small enterprises,” Ralinala said.