How do you know if you are a S (Small), M (Mediurm) , or M (Micro) Enterprise? The following definitions spell out the characteristics of the different enterprises and define sub categories within the broader category.
Survivalist Enterprise
Micro Enterprise
Very Small Enterprise
Small Enterprise
Medium Enterprise
Source: Annual Review: The State of Small Business in South Africa, ISBN 0-620-21930-0 Publication produced by Ntsika Enterprise Promotion Agency and the Centre for Small Business Promotion
The income generated is less than the minimum income standard or the poverty line. There are no paid employees. The economic activity is mainly directed at providing minimal means to keep the unemployed and their families alive. This group might be indicated as pre-entrepreneurial and is formed by hawkers, vendors, subsistence farmers, etc. In the National Small Business Act the survivalist sector is categorised as part of the micro-enterprise sector.
The major criterion is that turnover is less than the VAT registration limit, which is presently R150 000 per year. Micro enterprise usually lack formality in terms of registration for tax purposes, labour legislation, business premise and accounting procedures. It involves enterprises with informal characteristics, for example spaza shops, mini-taxis, and household industry. Therefore it is unlikely that there will be more than five paid employees which is the employment limit. There is a thin dividing line between the smallest and least capable members of this category and the survivalist sector.
This category refers to enterprises employing less than 10 paid employees, except for the mining, electricity, manufacturing and construction sectors, where it is 20 employees. The enterprises operate on the formal market and have access to modern technology. The lower limit is the self-employed with no employees, such as artisans and professions. The thresholds between micro enterprise on the lower end, and small enterprise on the higher end, can be somewhat fluid.
The upper limit of the category is less than 50 employees. The enterprises in this category are in general more established as compared with very small enterprises, and the business practices of these enterprises are more complex. Most often it has outgrown direct supervision by the entrepreneur, and has developed a secondary co-ordinating mechanism, which distinguishes it from a very small enterprise. Growth into a medium-scale enterprise requires an accumulation of resources as well as the appropriate incentives for enterprise expansion.
The maximum number of employees is 100, except for the mining, electricity, manufacturing and construction sectors, where it is 200 employees. Although still owner/manager controlled, the ownership and management structure is more complex. Often decentralisation of power to an additional management layer and division of labour is the difference between small and medium sized enterprises. On the other hand the separation of ownership and management is the natural barrier between medium and large enterprises.
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