Research on the Performance of the Services Sector

Challenges/Barriers

The key challenges and barriers faced by the South African ITC sector are;

Skills shortages across the ICT Sector

Skills shortages in development, building and maintenance of IT systems

The lack of skilled personnel and individuals in the building and maintenance of IT systems affects the efficiency and functioning of ICT systems. Skilled personnel are required to ensure that systems are maintained and functioning at optimum capacity in all businesses that area related to ICT or make use of ICT systems.

Skills shortages of IT specialists in the manufacturing industry

The skills shortages in manufacturing of ICT products is a serious problem, as skilled personnel are required to keep South Africa competitive in the manufacturing industry as well as to keep the technologies up to date with global standards.

Skills shortages in IT and Communication sections of businesses in South Africa

The lack of skilled personnel affects the efficiency of businesses which in turn affects the profitability of businesses in South Africa as they do not function as efficiently as they could. This will have a negative effect on the economy in the future.

High cost of telecommunications and internet access

High costs of telecommunications, internet and broadband affect the operations of businesses as they increase the operations costs and this in turn decreases the profits of businesses. With lower costs of internet and broadband, more households and small businesses could access the internet and increase their market access.

Low numbers of South Africans with access to personal computers (4% of South Africans) and internet subscriptions (1% of South Africans)

Personal computers and high costs of internet subscriptions in South Africa mean that fewer people in the country have access to internet connections and computers. Lower costs would increase the number of subscribers and in turn generate more demand and create jobs in the industry.

Lack of financing for businesses and access to finance for capital and expansion

The lack of funding and access to finance affects mostly SMEs in South Africa, without finance many entrepreneurs are unable to start businesses or expand existing businesses.

Foreign Exchange Rates and Economic Influences

ITC businesses are affected by economic fluctuations and foreign exchange rates as the businesses rely on imports and exports to a large extent. The adverse effects of fluctuating exchange rates and the import tariffs can have a very negative effect on the growth of SMMEs.

PART II:

Fieldwork Findings

This section of the report provides the analyses of the surveys conducted on the businesses for the research on the performance of the services sector report. The questionnaire that was used to conduct the surveys was designed by FEM Research and interviews were conducted telephonically using a database of Seda clients from across the country and a list of businesses in the industry generated by FEM Research. This section is structured in the same way as the questionnaire and provides a brief analysis of the responses gathered during the surveys. There is some overlap between these sections and the key findings and recommendations section.

TOurism Sector

Demographic Profile of Businesses

The highest proportion of businesses that were interviewed in the fieldwork phase of the project were situated in the North West Province (23%), followed by Free State (21%) and Gauteng (19%). The smallest proportion of respondents were from Limpopo (2%) followed by KZN (4%) and Eastern Cape (4%).

Figure : Business Location

The main respondents to the surveys were the owners, with 58% of all tourism surveys being completed by the owners, followed by managers (16%) and directors (10%).

Table 20: Position of Respondents

Position of respondent	% of respondents
Chairperson	2%
Coordinator	2%
Director	10%
Manager	16%
Owner	58%
Secretary	2%
Shareholder	2%
Supervisor	4%
Treasurer	2%
Trustee	2%

The majority (42%) of the tourism businesses that were interviewed are established businesses that have been in operation for five years or more. A small number (8%) of businesses were less than a year old while the remainder (50%) of the respondents was businesses that have been in operation between 2 years and five years.

Figure : Age of Business

The majority (72%) of the businesses interviewed are registered as Closed Corporations followed by Sole Proprietors (10%). Furthermore 55% of businesses were located in the Accommodation sector, followed by Tour operators and Tour guides (14%). Catering businesses accounted for the smallest percentage (2%) of the respondents.

Table 21: Type of Company and Services Offered

Type of Company	%	Type of Service	%
Closed corporation	72%	Accommodation	55%
Co operative	2%	Catering	2%
Private company	8%	Curios	8%
Pty Ltd	4%	Entertainment	8%
Sole proprietor	10%	Tour operators and tour guide	14%
Trust	4%	Transportation	12%

None of the businesses that were interviewed were owned by people or companies outside of South Africa. Businesses in South Africa are classified into the following categories:

• 
  Micro- owner run and employs up to 5 people
  
• 
  Very Small- Employs between 6 to 20 People
  
• 
  Small - Employs between 21 to 50 people
  
• 
  Medium- Employs up to 200 people
  

The number of employees within the tourism businesses varied between 1 and 20; however the average number of employees was five for each business. The majority (59%) of the businesses employed between 1 and 5 employees, while 31% employed between 5 and 10 employees and only 10% of the businesses employed more than ten employees.

Figure : Employees

The highest number (76%) of permanently employed workers are found in businesses that employ between 5 and 10 employees, while the lowest number (38%) of permanently employed workers are found in businesses that employ more than 10 employees. Businesses that employ more than ten employees accounted for 40% of the temporary staff employed, and 38% of the permanent staff. The smaller businesses that employed between 1 and 5 employees had the highest number (49%) of highly skilled staff, while bigger businesses employed less skilled staff.

Table 22: Employment Type per Business Category

Number of Employees	Temporary	Contract	Permanent	Seasonal workers	Skilled employees
Micro (1 – 5)	22%	5%	46%	28%	49%
Very Small (6-20)	60%	11%	76%	16%	42%
Small (21-50)	0%	0%	0%	0%	0%

The majority (45%) of the businesses interviewed were small enterprises with an annual turnover of R150,000 or less, 27% have an annual turnover of R150,000 - R400,000 and 14% have an annual turnover of R400,000 - R1 000,000. Only 2% of the businesses interviewed had annual turnovers of more than R1 000,000, while 10% were unaware of their annual turnover as the businesses were less than a year old.

Figure : Annual Turnover

The businesses with the smaller turnovers; 0 - R150, 000 and R150, 000 - R400, 000 generally employ 1-5 employees. The majority (59%) of businesses in the 0 - R150, 000 ranges employ 1-5 employees, followed by 36% employing 5 - 10 employees and only 2% employing more than ten employees. The majority of businesses with an annual turnover of more than R400, 000 employ between 5-10 employees, and none of them employ more than ten. This is interesting to note because despite experiencing growth and expansion from small business it appears as though larger tourism businesses employ a maximum of ten people at a given time.

Table 23: Turnover Bands and Number of Employees

Turnover Category	Number of Employees
	0 – 5	6 - 20	21-50 Employees	Grand Total
0 - R150,000	59%	41%	0%	100%
R150,000 - R400,000	62%	38%	0%	100%
R400,000 - R1 000,000	29%	71%	0%	100%
R1 000,000 and above	0%	100%	0%	100%
Just started	60%	40%	0%	100%

The majority (69%) of the clients that make use of the businesses’ services are South African.

Figure : Major Source Markets

More than half (55%), of the businesses surveyed were accommodation businesses, 15% were tour operators and tour guides and 12% provided transport services.

Figure : Services

Conclusion

The majority of the businesses that were surveyed in the tourism sector fall within the accommodation sector and are registered as closed corporations. The majority of the tourism businesses are micro and small businesses that earn less than R 400, 000 per annum and employ less than ten people. The major source markets for these businesses are local government and domestic tourists within South Africa