Rapid growth in business activity of SME led to an increase of its share in the economy to 28.3% in 2018 from 25.6% a year earlier. The share of SME in non-oil GDP is about 4pp higher and equals to 32.4% of GDP and increased from 28.8% of GDP in 2017. At the same time, judging by the prevalence of the shadow economy, the low share of SME in the economy, the potential of SME sector is not fully realized.
According to the data as at the end of April, the number of existing individual entrepreneurs increased to 856 thousand, in 2018 there were 809 thousand, in 2017 there were 747 thousand. The number of small enterprises at the end of April 2019 reached 243 thousand and demonstrated steady growth: 231 thousand in 2018, 209 thousand in 2017. On the contrary, the number of medium-sized enterprises is unchanged – 2.6 thousand since 2017. Thus, it can be stated that small business is gaining more and more foothold, while medium-sized enterprises are virtually not growing, including due to the lack of organic growth of small enterprises.
On the back of growth in the number of entrepreneurs, the penetration rates of small and medium businesses improved in 2018, the number of individual entrepreneurs per 1,000 residents of working age increased from 69 to 74, the number of small and medium enterprises per 1,000 inhabitants (excluding individual entrepreneurs) increased by 10% to 22. Compared to other countries, SME penetration in Kazakhstan is at least two times lower than in Europe, and even lower than in Russia.
Faster development of SME is observed in Nur-Sultan and Almaty cities, where the share of SME in the gross regional product is 55% and 40%, respectively. In the regions, the similar indicators are quite modest – 22% on average only. By the share of employed in SME among the regions also leads Nur-Sultan and Almaty cities, with 68% and 62% employed in small and medium-sized businesses, respectively. With such indicators, these cities are close the level of developed countries, while in the regions the share of employed in SMEs is less than a third.
Due to the service orientation of small and medium-sized businesses, a high share of output of products and services by SME accounts for trade, which occupies almost 25% share in the total volume, followed by construction with a share of 17%, and agriculture with 8%. At the same time, the share of these industries in GDP corresponds to 16%, 5% and 4%, which indicates a high activity of SMEs in these industries.
Investments by business size in 2018 showed an increase of 9.7% for small enterprises, by 30.3% for large enterprises, and for medium-sized enterprises a 20% drop. Continuation of reduction of investment by medium-sized enterprises calls into question their future existence and may lead to the situation where this business format (100-250 employees) simply dissolves among small businesses (<100 employees). The initial stage of the development of SME sector is reflected in the fact that it mainly invests in capital construction (68%), while only 25% of its investments were directed into machinery and equipment, for comparison, in France and Italy 60% and more of all investments were spent by SMEs on machines and equipment and less than 30% on construction.
In the bank loan portfolio, the SME segment accounts for almost a third of all loans, at the same time there is a tendency for the SME loan portfolio to decline in relative terms by almost 40% from 2016 to 6.7% of GDP. It is a matter of concern that almost half of all bad bank loans come from SME loans. The combination of a shrinking SME portfolio, together with an increase in overdue loans, can lead to stricter conditions for accessing bank loans and worsening business conditions.
The number of people employed in SME in 2018 reached a new milestone of 3.3 million people and increased from 3.1 million in 2016-2017, 3.2 million in 2015. The structure of the employed is distributed by 40% between individual entrepreneurs and small enterprises, 1.3 million each, 11% fall on medium-sized enterprises (365 thousand) and the remaining 9% farms (KFH) (281 thousand).
In 2018, labor productivity in small business, according to our estimates, grew by 13.5% to $13.5 thousand per employee, repeating the high growth in output and wages. In medium-sized enterprises, labor productivity grew more significantly by 23.3% to the equivalent of $26,000 per employee. At the same time, high growth is recovery-driven after a fall in 2015–2016 and is not sustainable. In addition, the wages of those employed in small enterprises are not included in the calculation of the average monthly wage, which apparently reflects the low reliability of the data and its lower level compared to the average wage in the country, which could decrease significantly if the small enterprise’s wages were included in its calculation.
