Programme Director, Mr Andile Khumalo;
Minister of Small Business Development, Ms Lindiwe Zulu; Our host from the IDC, Ms Khumo Morolo;
Our veteran and doyen of Black Business, Dr Richard Maponya; President of the Black Business Council, Mr Sandile Zungu;
CEO of the Small Business Development Institute, Mr Xolani Qubeka; CEOs and Representatives of Small Business Organisations; Distinguished Guests
I would like to thank the Small Business Development Institute for inviting me to this important dinner.
I am glad that you have been having exciting discussions at this historic colloquium to frame challenges and develop a strategy for small business development in our country.
The significance of the new Ministry of Small Business Development
One of the important milestones of this 5th Administration is the establishment of the new Ministry for Small Business Development.
The setting up of the Ministry by President Jacob Zuma signifies a strategic change of emphasis and consolidates progress made over the 20 years, particularly in the 5 years on the transformation of the South African economy. In small and co-operative enterprises there is a sleeping giant that is sure to become the power engine of the future growth of this economy.
Under the capable leadership of Minister Lindiwe Zulu, the champion of small business, I am confident that this giant will now be awakened and its presence will be felt everywhere.
We now have an opportunity through this new Ministry which has yet to shape its own fully-fledged structure (but surely getting there), to ensure that there is a single focal point for coordination and support (both financial and non-financial) for small enterprises and co-ops. We have opportunity to bring ever greater coherence within the sector.
Small, medium and micro enterprises have become the key drivers of growth in most economies, established and emerging alike. There is recognition everywhere in the world that conglomerates and big monopoly companies are not the most desirable structure of an inclusive economy.
One of the main structural problems of SA economy is the dominance of big monopolies in key sectors of the economy, together with the exclusion of the overwhelming majority of black people from meaningful economic participation. These are the twin problems of our economy: suppression of blacks to a continuing white economic domination and subordination of the SMME sector to monopoly domination.
I strongly believe that our country has entered a new era wherein the SMME sector will become the key driver of sustainable economic growth and inclusion of the majority of blacks, women and youth.
Township economy and small business
In the context of our province, an important part of the SMME sector is what we refer to as the township economy.
The notion of township economy is counter-intuitive. To some of you who have studied economics at university, this may sound like a conceptual misnomer. What is the township economy? Is there such a thing?
The World Bank and the University of Johannesburg have recently been paying close attention to the notion that townships are centres of economic activity - production and distribution of goods and services and generation of wealth.
According to the World Bank research, Diepsloot is a R2 billion economy. Other studies suggests that Soweto is R12 billion economy. We estimate that Gauteng townships contribute about R100 billion to the province's R1 trilion economy. Townships generate significant wealth.
Historically, Townships where established as dormitories and reserves where cheap black labour resided to service the white economy. They were located on the periphery of the white towns and cities, far from economic opportunities.
Over the years, black people turned townships into thriving cultural, intellectual and economic centres of black excellence. It is in the townships where a critical mass of black entrepreneurs emerged over decades. They did so under difficult conditions of suppression and victimisation by the apartheid state.
It is in the townships where South Africa's greatest black entrepreneurs such as Ntate Richard Maponya emerged.
It is for this reason that we in Gauteng have added a new dimension to small enterprise development. We say it is not just about small, micro and medium enterprises in general, but about the spatial dimension of these enterprises – the township enterprises.
As part of our strategy for radical economic transformation, we are focusing on the revitalisation and mainstreaming of the township enterprises. We want to provide necessary support to township entrepreneurs so that they can grow. This will help to change the structure of our economy - more black people and larger number of SMMEs will assume centre stage.
There are several reasons why we are placing more emphasis than ever before on the township economy.
First, the radical economic transformation we have called for means confronting the persisting reality of poverty, unemployment and inequality and economic exclusion of the majority of Gauteng population from the mainstream economy.
It is in the townships that massive poverty, high unemployment and the impact of deep inequality of the provincial economy are deeply felt and from which 80 percent of Gauteng population (African, coloured and indian) live.
Secondly, the townships, from the point of view of apartheid planners, were designed to be dormitories in the same way as ‘homelands’ were to be ‘labour reserves’. They were sources of cheap labour supply for the apartheid economy. They were also located far away from economic opportunities such that to work and make business is to travel long hours to and from the township. This apartheid spatial reality remains so today in many respects – whether we talk about old townships, or new ones, formal or informal. We want spatial transformation in order to alter the apartheid space economy and geography.
Thirdly, dormitory and labour reserves legacies are only one side of the township a side reminding us of the essence of apartheid. There is another side, in which people have refused to be reduced to mere suppliers of cheap labour and have for many decades turned the township into vibrant economies from minibus taxis that commutes millions daily in Gauteng, to mechanics, vendors, burial societies, stokvels, hair salons, shebeens and so on.
This is story of resilience and courage of many township entrepreneurs who in the midst of poverty, have sought ways to survive and for many years before the dawn of democracy survived state suppression, marginalisation and even criminalisation by apartheid regime.
We believe that it is from the township economy that the collective energies and potentialities for driving an inclusive, labour absorbing and growing provincial economy can be unleashed.
The challenges township economy faces today
One of the main problems of the township economy is that only 25 % of money generated in the townships is spent there. Township people spend most of their money in towns and cities. So, this deprives the township economy of its potential to grow and improve the quality of life of township residents. There are many reasons for this.
Twenty years into our democracy township enterprises faces challenges common to all SMMEs and co-ops such as such access funding, markets, skills development and monopoly domination etc. etc. But for the township enterprises these challenges are even more profound.
This includes specific township economy challenges.These challenges came out strongly in the interactions we had with more than 65 townships involving more than 50,000 existing and aspirant township entrepreneurs. They relate to:
- Lack of entrepreneurial and productive activity.
- The latest study by the World Bank (2014) on South African township economies (with special reference to Diepsloot) indicates that When compared with non-township micro, small and medium enterprises, the sector distribution of township enterprises is preponderant with retail than non-township urban enterprises. - indicating lack of productive activity. The same applies to entrepreneurial activity, with township enterprises having lower rates than non-township urban enterprises. Hence it has become central to our plans for township revitalisation to position townships as important sites of production rather than merely trading things they do not produce.
- Poor understanding of the abilities and value of township enterprises.
- Township enterprises are not properly understood outside the networks of those within the township economy. Limited understanding has meant that many in policy making have not considered township enterprises as a potential (but not only) solution to a wide range of social and economic problems affecting township communities. We have enterprise support providers targeting township enterprises have often not been able to offer appropriate advice. Finance providers have been able to insure risk and provide appropriate lending to the township enterprises. Mainstream businesses have not seen the potential for new partnerships or supply linkages.
- Little hard evidence to demonstrate the impact and added value of township enterprises.
- At present, there is limited information on the size and growth of the township enterprises; there are only few and isolated cases of such information. Township enterprises, therefore, are largely ‘invisible’ and informal. This can make it difficult to plan and provide appropriate Government support. I expect that the Small Business Development Institute (SBDI) and other research institutions to pay special attention for research on the township economy, so that we better understand it size, spread and strength.
- Limited account taken of the particular characteristics and needs of township economy enterprises within an enabling and supportive environment.
- The particular characteristics of township enterprises – such as the co-operative and solidarity practices and principles are not always taken into account by existing financial, legal, and regulatory frameworks, or in procurement activities.
Addressing the needs of the township economy which does not fit neatly into mainstream private or public sector models, also poses challenges for Government. This can mean that many townships enterprises like spaza shops, burial societies and so on, do not benefit from Government initiatives because they are largely un- recognised or supported to grow.
Key interventions
We want to contend that the critical drivers of growth in this province will include township enterprises. In support of the NDP, we are saying at least 30 percent of the Gauteng GDP (that is R700-billion at today’s prices) in the next 15 years will be accounted by township enterprises.
To succeed in overcoming the above challenges, we believe a range of measures and interventions are necessary. Some of these will be quickly visible – there are a number of small-scale, low-key interventions that could be helpful. Large-scale changes are also required but will obviously take longer to deliver. The strategy therefore encompasses both practical, pragmatic and low- key interventions as well as ambitious game changing interventions.
Key partners in the delivery of the strategy will include national government and its agencies, the provincial departments, local government, range of players representing the township economy, the corporate sector and other stakeholders
In respond to the challenges we want to focus on seven strategic focus areas in which are our interventions will be directed. They are:
- Ensuring appropriate legal and regulatory framework – especially with regard to byelaws, licensing and permits, most of which we designed with mainstream economy in mind.
- Promoting productive activities – through emphasis on manufacturing of consumer items and promoting production of everything that can be produced in and around a township space.
- Infrastructure support and clustered enterprise development – through establishment of industrial parks , business parks and economic hubs as well as street-level enterprise nodes ( of vilakazi type), and promote of community-owned shops at retail and wholesale levels involving spaza shops.
- Financing and investing in the township economy - through recapitalization of our provincial funding agency (GEP), consideration of the state-owned bank and promotion of co-op banking and co-op insurance and a solidarity fund. We will also look at possibility of the Township Economy Bond.
- Access to markets and procurement – through effective use of the state buying power to procure goods and services from township enterprises.
- Entrepreneurship development - through among others, promoting all forms of entrepreneurship, including social entrepreneurship. It is includes deliberate selection and identification of entrepreneurs in Township Economy Revitalisation Projects.
- Indigenous knowledge systems – reclaiming our traditional methods of production of food and medicine, supported by quality standards authorities and others.
Conclusion
I want conclude by saying that small business and cooperative enterprises are not looking for handouts but they need a helping hand from a government that cares. They need support from a government that is responsive.
Only the ANC-led government knows and understands where black small businesses come from. Only the ANC has a plan to address the needs of township enterprises and cooperatives.
It is only when we take care of small business that we can transform the structure of our economy and mainstream black entrepreneurs.
We are looking forward to work closely with Minister Lindiwe Sulu and organised small business to move SA and Gauteng forward.
I thank you.
