It gives me great honour to be here tonight on this very prestigious occasion, when we make our concerted efforts in evaluating how small micro and medium enterprises (SMMEs) can be assisted to continue to further play a crucial role in our economy.
As government, we are fully aware and supportive of the view that the private sector must be supported towards playing a critical role in economic growth and job creation.
South Africa is part of the global community wherein the market economy, through which we conduct trade and exchange of innovative ideas on investment, technology and development, is dominant. Consequently, we too are compelled to promote a similar environment as our economic growth model.
A mushrooming business environment also help increase the tax base, from which we derive revenue to further meet the increasing needs of our people.
This is even more important, as our history of high levels of inequality implies that for some time, despite positive economic growth and development, many of our people are still depended on the social services provided by government on health, education and food security.|
In order to address these social security concerns, government needs more revenue, which in turn means a greater need of businesses that contribute to the fiscus.
As government, our policy is that we must strengthen the capacity of our State to lead on the various areas of our development, hence the whole concept of a Developmental State. Already we know that South Africa's SMMEs are playing a critical role as a share of the gross domestic product (GDP).
The sum total of the estimated 2.8 million SMMEs contribute between 52 percent and 57 percent to our gross domestic product. It is also estimated that SMMEs contribute nearly 61 percent of employment.
These indicators nonetheless falls short of our targets, because other developed countries shows that the SMMEs can play an even greater role in the economy and consequently address greater share of the concerns of growth and employment.
In my capacity as Chair of the Justice, Crime Prevention and Security cluster (JCPS), we commit ourselves to ensuring full support by government departments of the role of SMMEs, more so where our respective departments procure work to the private sector.
It is our policy that as one of the biggest consumers of goods and services from the private sector, government must utilise this as opportunity to empower those who were historically disempowered.
Amongst the key benefits that may be accrued as a consequence of increased public procurement from SMME’s are the following:
- Stability, investment and expansion as the public sector are the largest single consumer of goods and services in our country. In this way, government can utilise its consumption capacity to pull the economy in the right direction in times of recession, as it has been the case when we faced a global US induced recession recently. It was because of our procurement of infrastructure development that helped cushion the negative impacts that this recession had on many economies, sending many of their growth trends spiralling down.
- Government has also taken the responsibility to help SMMEs to develop and increase their capacities to operate in the competitive economy, amongst others through business management training, tendering and procurement advice and financial management advice. Various organisations such as Khula, the National Youth Development Agency (NYDA), the Public Investment Corporation and many more, have been created for such purposes.
- Government also helps with market diversification and sustainability; since the experiences gained through government procurement to SMMEs can help in other business areas. We do therefore encourage SMME’s to outgrow mere dependence on government tenders, amongst others to partner with large international role players, which also helps to bring more foreign direct investment and new technology into our country.
- As government we uphold a holistic approach to development, hence even where development is not viable such as in rural areas, we do give support for growth and sustainability. For instance, the agricultural sector may find that government is the only consumer large enough to ensure expansion of their activities because of the parse population in rural areas.
- Another of the criteria by government is to address the historic racial imbalances in our economy. Recent statistics suggests that of the top 100 companies in the country, black companies only account for about 18 percent. Clearly we must correct this historic injustice. As government we will continue to apply preferential procurement informed by the BBBEE policy.
Of the R773 billion government expenditure for the year 2008/09 across the three spheres of government, 20 percent expenditure was on goods and services and payment of capital assets was nearly 6.5 percent of the total expenditure. This demonstrates the large scale of government role as a consumer of goods and services provided by the private sector.
Of these expenditures in 2008/09, the national sphere expended R380 billion, the provincial sphere R270 billion and the local sphere expended R100 billion.
Of these various levels of government expenditures, national government expended 11 percent on goods and services, the provincial sphere expended 21 percent while the local sphere expended 18 percent.
From this one can get a guide on how to strategise in approaching government through its procurement as partner to the development of SMMEs.
Just to give further guide on how government expenditure on goods and services compare across the various national votes as allocated by Treasury, let me indicate on the various votes within the JCPS cluster of which I am chair as of the year 2009/10:
- Police: 10,9 billion
- Defence and Military Veterans: R8,5 billion
- Correctional Services: R 3, 3bn
- Justice and Constitutional Development: R3,1 billion
- Home Affairs R2 billion.
Ladies and gentlemen, there are various areas where government spend on goods and services, such as repairs and maintenance, contracted services, fuel and oil, consultancy fees, telecommunications services, accommodation, etcetera.
For such services alone, provincial governments' expenditure in 2008 was R 10,2 billion while local governments' expenditure for the same year in 2008 was R 18,2 billion with a combined expenditure between the two spheres of government standing at R 28,3 billion.
Of these expenditures between local governments and provincial governments, the majority is around repairs, maintenance and contracted services.
Again this serves as a guide of where one can focus more attention in planning to do business with government. Where payment of capital assets is concerned, the breakdown amongst the departments belonging to the Security cluster that I chair is the following for the year 2009/10:
- Police is R2,5 billion
- Correctional Services is R ,1 billion
- Defence and Military Veterans is R743 million
- Justice and Constitutional Development is R581 million
- And for Home Affairs is R129 million
Across all State organs' expenditure on assets, new construction accounts for 43 percent, furniture for 31 percent, land for 18 percent, transport for five percent and other fixed assets account for 3percent.
Available research further indicates opportunities in government as a consequence of procurement by government to the SMME sector through the Government Preferential Procurement for Small Enterprise Products and
Services initiative. These include:
- advertising, media and communication
- interior and exterior cleaning services and cleaning products supplies
- clothing and textiles
- computer equipment and consumable supplies
- interior and exterior furniture and décor
- events coordination and management
- maintenance and repairs, construction, office space, furniture and vehicle body works
- travel coordination and shuttle services
- food perishables supplies
- stationer and printing.
All these are areas for further opportunities as identified through the coordination of the Department of Trade and Industry of which amongst its primary duties is to ensure SMME development.
Moreover, state owned enterprises (SOE) are in the process of identifying more opportunities within the infrastructure development supply chain, which opportunities would accrue mainly to medium enterprises.
It is for this reason that starting small is the way to go, but planning big is the way forward for all SMME’s and in this government's efforts is to give support.
Ladies and gentlemen, much of this information that I am giving here tonight, is merely to demonstrate why we say government is in fact at the centre of SMME development and support.
Of course the SMME sector will continue to play important role in the development of our country. While government will continue to provide basic needs to the poor, we believe that in the long run it is important that each and every person must plays a role in the economy, if the values of our constitutional democracy are to be realised.
Our emphasis for growth is not divorced from our emphasis for decent jobs and a better life for all. We note that the provision of many of the goods and services that I have alluded to must be part and parcel of the solutions to some of the challenges we continue to face.
Allow me to take this opportunity to thank the organisers of this Gala Dinner once more, and even more all those who are behind the vision and implementation of the SMME Fair which has assumed the format of a Small Business Week.
I hope that your objectives of enabling sharing of information will contribute to a more vibrant SMME sector which as I have said we expect it to grow and play an even greater role in our economy.
As government we commit ourselves to helping this sector to grow bigger and bigger, informed by our approach of a developmental state, whose capacity must be used to intervene in favour of our developmental objectives.
Allow me to take this opportunity to wish you well and hope you all enjoy your evening.
I thank you!
Source: Department of Justice and Constitutional Development
