Address by the Minister of Small Business Development Ms Lindiwe Zulu at the 4th Proudly South African buy local Summit
Programme Director
CEO of Proudly South African
Board of Directors: Proudly SA
Representatives of the Business Community
Distinguished guests
Ladies and gentlemen
Ladies and gentlemen it is a great pleasure for me to address this significant event which celebrates a transforming economy through the nation’s support for locally produced goods and services.
The National Development Plan articulates a vision of an economy that is inclusive, equitable and fast growing, with SMME contributing 90% of the jobs by 2030. There is, therefore, no doubt in my mind that we have to work smart in order create an inclusive economy where all citizens of the country enjoy the benefits of our freedom. On this note, we will continue to stress the need to foster closer working relations between big and small businesses. Through a genuine symbiotic relationship between big and small businesses, we can honestly declare that our economy is inclusive, equitable and fast growing.
Programme Director, I have been asked to speak on the importance of small business in developing the economy – using local procurement as a key driver. There is acknowledgement around the globe that small business and entrepreneurship development is a vehicle for stimulating economic growth. We have examined countries that have excelled in propelling economic growth and concluded that these countries have achieved higher growth rates, created wealth and higher earnings per capita through a mind-set of lifting one another up.
The role of SMMEs in developing the economy cannot be over-emphasised; there is wide-spread consensus that SMMEs play a crucial role in economic growth, employment creation, advancing innovation and fostering equity. A healthy SMME sector has the potential to make a massive contribution to the economy by creating more employment opportunities and generating higher production volumes. In 2007, the contribution of SMMEs to GDP was 35%. Targets for future contributions to GDP range from 60% to 80% over the next 10 to 15 years. Recognising the importance of the SMME sector in dealing with our nation’s economic challenges, which include poverty, high unemployment rates and inequality, our government made a decision to create the Department of Small Business Development (DSBD).
The purpose of this decision is to allocate resources, consolidate and further intensify government interventions in the small business sector. The vision of the department is to see a radically transformed economy through effective development and increased participation of SMMEs and cooperatives in the mainstream economy. I have often emphasised that we have a mammoth task ahead of us; hence we do not take lightly the efforts that will be required to achieve this vision.
We recognise that we cannot work in isolation to bring up the SMME sector to function at its optimal levels, hence our keen approach towards collaboration and partnering with the private sector and big businesses in particular. The mission of the Proudly South African to be drivers and the fostering of partnerships with businesses in driving the country’s economic prosperity and competitiveness is aligned with the work of the department.
One of the measures considered by the new department was to identify specific challenges that block the development, growth and sustainability of small businesses and co-operatives in the country. Out of five elements we identified, the first priority area we unpacked was public sector procurement.
Programme Director, this area is very close to our hearts and I am glad that your Summit aims at teasing out procurement as a key driver for unlocking the development and growth of small businesses.
In the State of the Nation Address, the President announced that government will procure 30% of appropriate categories of goods and services from small businesses, co-operatives, township and rural enterprises.
It is our strongest belief that as low as this percentage may sound, it is going to open up procurement opportunities for small businesses and entrepreneurs in township and rural areas who never had a chance to transact with the public sector.
Let us remember that big companies have for a long time managed to crowd out small businesses through their financial muscles, cash reserves and economies of scale. It is easier for big companies to sell products at lower prices and in the process squeeze out small businesses when competing for government procurement opportunities, especially because government considers the lowest price when procuring goods.
In order to reverse this trend, we needed to start somewhere, and this 30% procurement of appropriate categories from SMMEs and co-operatives is part the radical economic transformation process.
In due course, these categories will be made known to potential and existing small businesses so that they can respond to a call for them to provide the goods and services to the public sector.
As part of this process, we are also prioritise the provision of skills, mentoring and coaching to small businesses that would operate in the identified categories and sectors.
In some instances, we would have to incentive big companies to transfer skills to small businesses, given that barriers to entry in certain sectors might be too high for SMMEs, co-operatives, township and rural enterprises.
You must have taken note that we place emphasis to supporting township and rural enterprises including women, youth and entrepreneurs with disability, precisely because these groups of enterprises have been neglected for a long time. This has to change.
Our intention is to see that small businesses are skilled enough to participate in private sector value chains. We have noted opportunities that have been given to small businesses in the past in the areas of cleaning, security, catering and other non-core business functions of the private sector.
With the implementation of the revised codes of good practice taking effect this year, we are delighted to note that various big companies are making commitments to transfer skills, develop new enterprises and also provide opportunities to both new and existing small enterprises. We will closely work with the Department of Trade and Industry in monitoring the development of new enterprises and the implementation of the supplier development programmes.
We are excited to be associated with Proudly South African. The Proudly SA “Buy local” directly addresses the challenge of access to markets for the SMMEs. Without making the necessary in-roads in the markets any business would fail. With the country being integrated into the global economy ensuring that SMMEs get a piece of market share becomes more precarious and requires deliberate efforts. Thus creating a demand for SMME products and services is certainly a government priority. We are glad to have foot soldiers like Proudly South African to advocate for supporting local enterprises.
We hope your efforts and in particular your work on making communities aware of the Procurement Accord will result in the creation of more new enterprises.
I thank you.
