Trade and Industry, Mr Mandisi Mpahlwa
28 June 2006
Programme Director,
CEOs of trade and industry institutions,
Senior government officials,
Members of the media,
Ladies and gentlemen,
We launch Entrepreneurship Month at a time when the South African economy is
experiencing a boom. We must, therefore, ensure that at this positive juncture
opportunities are created for real increases in public and private sector
expenditure to build the foundation for sustainable investment and growth. We
must not take lightly the current confluence of positive factors and one way of
doing so is to take full advantage of emerging enterprise opportunities. But if
we are to effectively exploit these opportunities we must create the climate
for new entrepreneurs to enter the economy and for established entrepreneurs to
further develop their businesses.
Already the small business sector is economically significant with
approximately two million small businesses in South Africa representing 98
percent of the total number of firms. Collectively, small enterprises employ 55
percent of the countryâs labour force and contribute approximately 42 percent
to the total country wage bill. However, 87 percent of small enterprises are
survivalist the great majority black owned of which 41 percent are owned by
women. These trends are very significant, as they starkly illustrate both the
potential and challenges for small business growth.
In respect of potential the small business sector is certainly growing as
evidenced by the company registration index which shows a rising small firm
share of business activity. In this calendar year alone, Companies and
Intellectual Property Registration office (CIPRO) has recorded 19 050 company
and 88 086 close corporation registrations up to the end of May. This
represents an impressive annual increase of 2,7 percent and 13,7 percent growth
respectively. Co-operative registrations also increased totalling 4 843, an
annual increase of 207 percent. Overall the majority of new registrations are
in the business services, trade and financial sectors, followed by
community/social services and the construction industry.
Ladies and gentlemen, our big challenge is that to fully realise the
potential of this burgeoning sector we must further develop the skills and
numbers of our entrepreneurs. We must especially provide an enabling
environment which will allow the 86 percent of survivalist business, I spoke of
earlier to graduate to stable businesses. Entrepreneurship combines persistence
and imagination, driving the innovation that often leads to new knowledge and
discovery of opportunities. Currently too many of our emerging entrepreneurs
are not able to further develop and use these skills. Emerging entrepreneurs
all too often remain marginal to accessing opportunities and finance.
This is the context for our emphasis on enterprise development, focusing on
the small and medium sector, the micro-enterprise sector as well as
co-operatives. Cross cutting all of these is our focus on women empowerment.
All of this work we will continue to approach in a balanced, systematic and
co-ordinated fashion.
Illustrative of this approach is that firstly we have noted that despite the
overall increase in small enterprise development, rural small and micro
enterprise (SME) company registration numbers are lagging.
In response we have completed the regulations as required by the new
co-operative legislation recently adopted by parliament. This will simplify and
make registration for co-operative enterprises accessible to the poor.
Other initiatives include a capacity building programme, a Technical
Assistance Fund (TAF) and the Co-operatives Incentive Scheme (CIS)
operationalised in March 2006 with initial funding of R20 million. About 10
co-operatives will receive funds in the near future and a further 10
applications are under consideration.
Support will also be provided to the African Co-operative for Hawkers and
Informal Businesses (ACHIB), which has 137 000 members. The project with the
assistance of the small enterprise development agency seeks to mobilise the
collective buying power of between R1 billion and R3 billion a month to elicit
discounts to the benefits of co-operative enterprise members nationally.
The second broad area of focus is non-financial support for small business.
As many here will be aware, we undertook a thorough assessment of our
programmes and subsequently embarked on a new strategy which sought to
consolidate our non-financial support initiatives in a single channel. Progress
since then include the launch of the single Small Enterprise Development Agency
(SEDA) which has to date developed a national network of six provincial
offices, 28 branch offices and 87 partnerships for the functioning of
enterprise information centres. In establishing this national footprint,
partnerships and levels of co-operation between provincial and local government
as well as the private sector are continually being strengthened and are
stronger than ever before. And SEDA is set to remain the gateway of new and
existing programmes within the Department of Trade and Industry (the dti) group
of institutions to entrepreneurs nationally. An important initiative which we
hope will be functioning in the near future is a proposed hot line which will
allow Small, Medium and Micro Enterprises (SMMEs) to register public
procurement accounts not paid in 30 days and to request immediate corrective
measures. This will enhance the procurement access support launched by SEDA in
2005.
Programme Director, small business is not just retail business. In fact
individual entrepreneurs can bring about enormous changes in an economy through
new ideas and competitive offerings which are technology intensive. We will
therefore continue our technology support measures for SMMEs. A strategic
review of support in this regard highlighted, however, the need for better
co-ordination and we have therefore established the SEDA technology programme,
which supports technology incubation and technology transfer to SMMEs by
providing incentives to promote innovation, technology transfer and diffusion
of technology.
Through the incubator technology support programme we have established 15
centres across the country and have supported 165 small enterprises. In
addition to this, the technology transfer centre has supported 32 projects in
rural and peri-urban areas. In total R41,2 million has been spent on these
projects as at the end of March 2006.
In the majority of cases even though the entrepreneur may have a very solid
product, this is no guarantee for a successful business especially if you are
competing in the global market. For this reason, the workplace challenge
programme focuses on productivity improvement and the competitiveness of South
African firms and sectors. It does so by providing companies with access to
best operating practices and world class competitiveness measures. The
development of a workplace transformation toolkit has been prioritised to
foster increased SMME participation. The toolkit focuses on quality
improvement, cost reduction, productivity improvement and improving delivery
performance. Our research has shown that these are all measures that are
fundamental to the survival of SMMEs.
The South African Quality Institute (SAQI) further supports these measures
as a quality promotion body and are especially important in establishing the
global competitiveness of our enterprises.
To date, SAQI has conducted annual quality awareness workshops in all nine
provinces covering 50 000 SMMEs and also providing training and capacity
building for1000 SMMEs on quality awareness, the ISO 9001:2000 standard,
customer service improvement and good manufacturing programmes
The third broad area of dti support to address the challenge of growing the
number and skills of our entrepreneurs is access to finance.
In this regard, a major advance has been the response by Khula in
collaboration with business partners to address the key market failure of
providing loans below R250 000 to small enterprises. This the start-up fund
with a capitalisation of R150 million was launched in February this year has
already approved investments totalling R12,5 million as at the end of June
2006. This will assist in solving the perennial problem experienced by many new
small enterprises that experience cash flow problems in the early stages of
their development.
In addition the Credit Indemnity Scheme has been successfully revised and
new agreements with commercial banks have taken effect from April 2006. Key
features of the new scheme are increased indemnity levels, reduced indemnity
fees from three percent to two percent and significantly reduced own
contribution requirements from 10 percent to a nominal 2,5 percent.
A range of target group specific products will also be given priority. We
have also been convinced of the need for Khula to establish a national
footprint and by the end of this financial year, Khula will be represented in
each province and will consolidate partnerships to strengthen its product
disbursement strategies. The operational gain will off course be the
establishment of a national grid of financial support services for small
business across the country.
I am glad to note that Khulaâs partnerships strategy has begun to attract
public and private sector as well as donor financial support programmes. These
partnerships have already drawn additional funding of R16 million through
partnerships with provincial departments and will start disbursing by July 2006
in four provinces. If this pilot is successful the model will be replicated in
all provinces.
Ladies and gentlemen, the National Empowerment Fund was established to
develop and implement innovative investment and transformation solutions to
advance sustainable black economic participation.
Given the various institutional challenges it has faced since its inception,
I am glad that we can now report that transactions to the value of R491 million
have been approved for the period up until the end of March 2006. Whilst the
bulk of the transactions are still concentrated in Gauteng and Western Cape,
transactions to the value of R298 million were approved for enterprises based
in the Eastern Cape, Free State and Limpopo provinces.
The Industrial Development Corporation (IDC) is the largest non-private
sector financer in the country and during 2004/05, approved finance to the
value of R3,8 billion in more than 140 transactions. Some 100 of these
transactions were for the funding of SMEs. 800 percent of the value of
approvals involved companies with more than 25 percent black shareholding. It
is expected that this financing will create more than 16 700 direct new job
opportunities.
In addition the IDC has launched the competitive financing for development
products which hold great promise for many new small enterprises and has in
this regard set aside R1 billion for this purpose. Finance is provided at
interest rates of up to prime less five percent. Already, close to R400 million
has been approved and it is anticipated that the entire amount of R1 billion
will be utilised by 1 December 2006.
Finally, the dti has capitalised the Apex Fund to a sum of R80 million in
this financial year and has plans to secure an additional R60 million. Apex has
begun to build outreach capacity across all provinces and will grow from the
current network of 12 partner organisations to 50 partner organisations within
this financial year. As at the end of March 2006, the fund has through the
micro-credit outlets (MCOs) disbursed to the order of R12 million. Furthermore,
we have launched the Apex Fund in six provinces and on the 30 June 2006 an
outlet will be launched in Khayelitsha in Cape Town. I am glad to learn that
launches will then take place in KwaZulu-Natal (KZN) and Gauteng in the near
future. The Apex Fund growth plan will be strengthened following the
appointment of a CEO. A further announcement in this regard will be made
shortly.
Ladies and gentlemen, as I pointed out earlier women entrepreneurs are a
vital component of the small business sector and we are very clear that our
women entrepreneurs must be provided equal access to all these support measures
that we have outlined. In addition to this and in recognition of the fact that
women are over represented in the survivalist business category and
underrepresented in enterprises higher up in the value chain; there are a
number of specific dti programmes to support the creation of successful
businesses run by women. For instance a womenâs national directory for
procurement purposes has been finalised and will be distributed in the near
future.
In collaboration with the private sector and other stakeholders the dti is
developing a womenâs development fund, dedicated for women owned enterprises.
Details in this regard will be announced in due course.
The technology for women in business programme aims to enhance the use of
technology by women in business, promote innovation among women and encourage
young girls and women to choose careers in science and technology. South
African Women Entrepreneursâ Network (SAWEN) in turn assists aspiring and
existing businesswomen with a range of mentoring services. SAWEN has now
recruited approximately 2000 members nationally. Through SAWEN the dti has also
successfully managed to secure two strategic partners to support women
entrepreneurs. These include the Johannesburg Securities Exchange (JSE) that
will provide training to women on stock marketing and the Africa Project
Development Facility (APDF) who will provide women with business advice and
support for the successful management of their enterprises.
Ladies and gentlemen, I have spent some time detailing our programmes
because I felt that it is important from time to time to remind everyone of the
products the dti has developed to assist entrepreneurs. Too often we take these
measures for granted and fail to publicise them properly. This can have the
unfortunate effect of those who need it most, not be aware of the varied
assistance that is possible for them to access. I am therefore determined that
this entrepreneurship month initiative remain a key programme in the dti annual
event calendar. And I am glad to report that a provincial programme component
led jointly by the dti and provincial economic affairs departments and
co-ordinated by SEDA will be launched during the course of this week.
Finally, a very important aspect in this area has been the lack of a voice
for small enterprises that can begin to advocate to government areas that can
negatively affect enterprise development, such as the regulatory environment
and the cost of doing business. I am therefore happy to announce that a small
business advisory council is being established and we will table our
nominations before Cabinet by the end of the July Entrepreneurship Month.
In conclusion, from our 10-year review of small enterprise development we
have learnt various lessons which we continue to implement. These include the
streamlining of our institutional framework which has led us to the
establishment of the Apex Fund as well as the establishment of SEDA amongst
others. We continue to implement these lessons in line with our integrated
national small enterprise strategy. One of the key mandates arising from the
strategy is the âbuildingâ of an enterprising nation. The declaration of July
Entrepreneurship Month is part of our endeavours to raise levels of awareness
as well as generate interest on the potential of entrepreneurship. We will do
so by providing the necessary information about our institutions, products and
services as well as allowing stakeholders to raise pertinent issues that relate
to this area.
I therefore thank all the partners and agencies that have already embraced
this initiative and in particular those who will be accompanying us as we visit
all our provinces.
I thank you!
Issued by: Department of Trade and Industry
28 June 2006
Source: Department of Trade and Industry (http://www.thedti.gov.za/)
