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In this update we take a look at the profit margins and employee costs as percentage of total costs of small firms in South Africa. Further to this we break it down per industry.
Question is whether there are certain industries in which smaller firms are highly profitable and employee costs are relatively low? Or do all small firms suffer with the burden of high employee costs as percentage of total expenditure? The scatter plot below takes a look. |
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Scatter plot paints an interesting picture
The scatter plot below provides readers with three very interesting metrics regarding the performance of small companies per industry. It shows the following:
- Total profit by small firms in a particular industry (The size of the ball)
- Employee costs as a percentage of total costs
- Profit margin percentage
So how does one interpret the scatter plot shown above?
The table below provides a summary of what is shown in the scatter plot above:
- Thebigger the circle the bigger the total amount of profit made by small firms in a particular industry.
- The higher up the graphic, the higher the profit margin achieved by firms in a particular industry
- The further to the right the circle is located the higher the employee costs are for small firms as percentage of total costs.
The table below provides a summary of what is shown in the scatter plot above:
Industry |
Profit earned (Rand value) |
Profit Margin % |
Employee cost % |
Mining |
89 000 000 |
1.72 |
19.61 |
Manufacturing |
15 939 000 000 |
9.81 |
21.53 |
Electricity, water & gas |
620 000 000 |
31.46 |
13.55 |
Construction |
1 934 000 000 |
4.92 |
14.75 |
Trade |
19 505 000 000 |
6.18 |
8.40 |
Transport |
4 185 000 000 |
9.84 |
23.08 |
Finance, real estate and business services |
12 078 000 |
7.94 |
37.75 |
Community, social and personal services |
2 520 000 000 |
10.23 |
41.21 |
Incredible is the profit margins earned by small firms in the electricity,gas and water industry. Is this a case of small firms supporting the struggling ESKOM and basically extorting money out of ESKOM by providing services and assistance to ESKOM at excessive fees? This is very likely. However this industry is a very small contributor to overall profits earned by small firms during the first quarter of 2018. Which amounted to R56.8 billion during the first quarter of 2018.
The trade industry had the lowest percentage of employee costs as percentage of total costs. The likely cause of this is the fact that the major expenses for firms in this industry being stock, inventories and possibly rent, if rent has to be paid for operating space at malls etc. Trade is also the industry which earned the most profits for small companies in South Africa with it bringing in R19.5 billion or 34.4% of total profits earned by small companies during the first quarter of 2018. The summary below shows the relative contribution various industries made to total profits earned by small companies during first quarter of 2018:
The trade industry had the lowest percentage of employee costs as percentage of total costs. The likely cause of this is the fact that the major expenses for firms in this industry being stock, inventories and possibly rent, if rent has to be paid for operating space at malls etc. Trade is also the industry which earned the most profits for small companies in South Africa with it bringing in R19.5 billion or 34.4% of total profits earned by small companies during the first quarter of 2018. The summary below shows the relative contribution various industries made to total profits earned by small companies during first quarter of 2018:
- Trade: R19 505 000 000 (34.30%)
- Manufacturing: R15 939 000 000 (28.03%)
- Real estate and other business services: R12 078 000 000 (21.24%)
- Transport: R4 185 000 000 (7.36%)
- Community, social and personal services: R2 520 000 000 (4.43%)
- Construction: R1 934 000 000 (3.40%)
- Electricity, gas and water supply R620 000 000 (1.09%)
- Mining and quarrying R89 000 000 (0.16%)
- Total of all industries: R56 870 000 000