European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.12, No.20, 2020 73 The Impact of SMEs on Socio-Economic Development in South Africa: A theoretical Survey Bongani Mwale Da Vinci Institute of Technologies, 16 Park Ave, Modderfontein, Johannesburg, 1609 Abstract This theoretical survey seeks to critically investigate the impact that Small and Medium Enterprises (SMEs) have had on socio-economic development in the South African (SA) context. A global perspective of the impact of SMEs is incorporated in order to have a feel of how other economies have benefited from this venture. The survey followed a desktop literature review research design in order to gather data regarding other economies in Europe, Asia, America, Latin America and select countries in Africa. Regarding challenges currently experienced by SMEs, the survey established constrained government support and lack of universally accepted standard unit measurement of SMEs. The survey discovered several varying socioeconomic roles played by SMEs in SA and other regions alike namely, job creation, reduction in rural and urban poverty, narrowing income inequality disparity and contributing towards the nation’s Gross Domestic Product (GDP). Given the undisputable significant roles played by SMEs particularly in SA, the following recommendations have been advanced in order to strengthen SME’s roles; firstly, streamlining stringent rules and regulations which inhibit SMEs in venturing into more rewarding business opportunities. Secondly, reviewing the prohibitive terms and conditions of accessing financial aid from the government and financial institutions. Thirdly, continuously empowering prospective entrepreneurs through tailor made capacity building initiatives. Keywords: Entrepreneurship, SMEs, socioeconomic development, South Africa. DOI: 10.7176/EJBM/12-20-08 Publication date:July 31 st 2020 1. Introduction and research background Primarily, it is of paramount importance to note that a standard international definition of small and medium-sized enterprise (SME) does not exist since they are defined differently in the legislation across various nations and this is simply because the dimension “small” and “medium” of a firm varies depending on the size of the domestic economy. However, for statistical purposes, the OECD (2016a) defines SMEs as those firms employing up to 249 persons, with the following breakdown: micro (1 to 9), small (10 to 49) and medium (50-249). This research survey provides a synthesis of the contemporary state of affairs about small and medium sized enterprises (SMEs) and their contributions towards economic and social well-being. However, these contributions vary widely across firms and across countries and sectors. The survey also touches on the various characteristics of SMEs, the opportunities and challenges they face. Areas where knowledge or data gaps exist and where more analysis is needed shall also be explored. Since the dawn of the democratic era in 1994, the South African government has been putting concerted efforts in supporting SMEs in local government spheres in order to promote empowerment, job creation, economic growth and community development. Alert (2015), points out that like many other third world or developing nations, South Africa’s socio-economic development strategy hinges on harnessing the entrepreneurial potential and supporting small to medium enterprises (SMEs). Chinweuba & Sunday (2015), asserts that entrepreneurship and SMEs contribute to the growth of the economy as well as the creation of jobs. He further argues that their growth and development could be a viable strategy that would ensure sustainable development that comes through a reduction in unemployment rate, poverty and inequality in developing countries. Therefore, given the benefits that accrue with the development of SMEs, since the promulgation of the 1995 White Paper on SME development, prioritization of this sector by the South African government has been on the increase such that a separate Ministry of SMEs. Other support functionaries such as the Small Enterprises Development Agency (SEDA) were created in order support and revamp this sector into a robust and significant contributor to the economic growth of the country (Bureau for Economic Research, 2016). As alluded to, the campaign to empower SMEs comes with its challenges and the proceeding sections shall explore such both at global and national level. 2. Literature Review 2.1 SMEs are essential for delivering more inclusive socio-economic growth In The Organization for Economic Cooperation and Development (OECD) countries, SMEs are the dominant form of enterprise, constituting approximately 99% of all firms. It thus apparent that they provide the main source of employment, accounting for about 70% of jobs on average, and are the main contributors to value creation, generating between 50% and 60% of value added on average (OECD, 2016b). In emerging economies, SMEs