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Sitting at a small coffee shop the other day, we wondered what contribution these smaller companies are making to the overall economy. Well we set out to find out. And for this blog post we take a look at the Quarterly Financial Statistics (QFS) as published by Statistics South Africa.
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The graphic above shows the contribution to total turnover by all companies in South Africa, based on their size (sizes are determined by DTI cut offs and adjusted for Stats SA sampling purposes).
What we found very interesting from the graph is how small the contribution of medium sized enterprises is when compared to the large and small companies.
What we found very interesting from the graph is how small the contribution of medium sized enterprises is when compared to the large and small companies.
The graphic above shows the contribution to total net profit after taxes by all companies in South Africa, based on their size (sizes are determined by DTI cut offs and adjusted for Stats SA sampling purposes).
What is clear is the large drop in the overall contribution of large companies to net profits when compared to their contribution to total turnover. Lower margins due to increased costs, higher average tax rates etc all adds up. So much so that smaller companies contribute almost as much to overall net profits in South Africa as large companies.
Average tax rates are: (Tax as % of net profit before taxes):
Large : 35%
Medium: 18%
Small: 13%
Net profit Margin After Taxes:
Large : 2.99%
Medium: 6.11%
Small: 6.98%
What is clear is the large drop in the overall contribution of large companies to net profits when compared to their contribution to total turnover. Lower margins due to increased costs, higher average tax rates etc all adds up. So much so that smaller companies contribute almost as much to overall net profits in South Africa as large companies.
Average tax rates are: (Tax as % of net profit before taxes):
Large : 35%
Medium: 18%
Small: 13%
Net profit Margin After Taxes:
Large : 2.99%
Medium: 6.11%
Small: 6.98%
Based on the above one clearly wants to be a small company. As a Large company you are taxed a lot more and your overall net profit margins after taxes coming in well below small and medium companies. As a medium company you trapped in limbo, you taxed more than a small company, and policies are less geared towards assisting you or aiding your growth.
As a small company, all kinds of policies and initiatives are in place in order to assist and aid in your growth, your tax burden is far less too. The question is once your small company graduates to a medium sized company, what policies and measures are in place to take your business to the next level? Perhaps government should look into this, to ensure that medium sized companies are not stuck in limbo and they do move forward once they are passed their infancy.
As a small company, all kinds of policies and initiatives are in place in order to assist and aid in your growth, your tax burden is far less too. The question is once your small company graduates to a medium sized company, what policies and measures are in place to take your business to the next level? Perhaps government should look into this, to ensure that medium sized companies are not stuck in limbo and they do move forward once they are passed their infancy.