Speech by Minister of Small Business Development in the opening Session of the National Small Business Policy Colloquium, Sandton
Programme Director,
Distinguished guests
Ladies and gentlemen
I am honoured and humbled to be addressing you today. I am confident that all of us gathered here will do everything in our power to make this National SMME Policy Colloquium a resounding success.
We must not allow this Colloquium to end up as a talkshop. We carry a responsibility to emerge from this interaction with concrete and practical resolutions that will assist government to respond effectively to the challenges that confront small businesses.
Indeed, out of this gathering, we must emerge with building blocks for a robust and sustainable policy environment that places SMMEs at the centre of accelerated economic growth and development. I am confident that the calibre of people who are attending this colloquium will assist the Colloquium to develop clear policy proposals that will place SMMEs at the centre of accelerated growth and development.
Programme Director, a consistent theme that runs throughout the ANC Manifesto, the State of the Nation Address and the National Development Plan is the urgent need to focus on decisive action to grow
the economy and create employment. Our collective responsibility is to mobilise the whole of government and the nation’s resources in pursuit of this goal as we enter our Second Phase of our Transition.
The President established the Ministry for Small Business Development as part of government’s commitment to place the economy and job creation at the centre stage. Government is convinced that through this intervention, we will be able to unlock economic opportunities and thus achieve inclusive economic growth and sustainable employment, particularly for women, youth and people with people with disabilities.
Government is aware that to address the current problems confronting our economy and to reverse the unemployment rate will require a radical policy shift that recognises the urgent need to invest in small and medium businesses because they are key drivers of economic growth and job creation. We are convinced that if we are to make an impact on the job creation front, the common problems faced by SMMEs must be addressed. Indeed, the much-needed economic growth and employment opportunities will come from a practical policy that enables small businesses to thrive and grow into profitable enterprises.
SMMEs can be the backbones of any economy and the main driver of economic growth. Research by Global Entrepreneurship Monitor shows that small businesses are significant contributors to job creation, creating more than 50% of all employment opportunities in South Africa. Currently, the SMME sector contributes more than 45% of the country’s GDP. SMMEs have the potential to create and expand employment opportunities, develop entrepreneurial skills and enhance market opportunities.
Compared to the rest of Africa and the world, South Africa is said to have the lowest enterpreneurship activity. This means our country is yet to see the true value and benefits of SMMEs.
Programme Director, it is important to note that because of the different needs of the small business sector, government’s policy intervention will have to take into account this diversity. It is for this reason that government has designed a policy that addresses the specific challenges faced by informal businesses, through the National Informal Business Upliftment Strategy (NIBUS).
Over the last 20 years, the South African government has provided many forms of support to SMMEs ranging from policies, strategies and programmes. I have consistently argued that there is no need for new policies. As we reflect back and assess these interventions, I can assert without any fear of contradiction that what we need is effective and practical implementation of existing policies and strategies. After twenty years, we are now able to identify what is possible for SMMEs’ development.
Statistics tell us that small businesses have only 37% chance of surviving four years and only a 9% chance of surviving ten years. 70% to 80% of small businesses fail in their first year, and only about half of those who survive remain in business for the next five years.
As a department, we recognise the need for enhanced support to small businesses and co-operatives. Since 1994 a wide range of policies – including broad-based black economic empowerment (B-BBEE) and employment equity – have allowed black South Africans to participate
meaningfully in the economy – but more still needs to be done to accelerate black enterprises into the main economy.
We have also noted the importance of providing training, mentoring, counseling and advice to micro, small and medium enterprises. Apart from having professional and business-minded mentors, we also want to see retired astute business owners providing assistance to new business owners.
Sustainable small business development can only be achieved if the three spheres of government, the private sector and civil society work together. I would like to commend the leadership of the Gauteng provincial government, under the leadership of Premier David Makhura, for prioritising township economic development as part of a call for radical economic transformation. In tandem with our national efforts which include the upliftment of the informal township businesses, we think these initiatives will go a long way towards realizing the economic potential of our townships and peri-urban areas.
Ladies and gentlemen, innovation, entrepreneurship and small business development are areas where we need to focus with every ounce of our collective energy.
The mandate of the department recognises enhanced support to micro, small and medium-sized enterprises and co-operatives, which are critical in job creation and economic growth. Indeed, growing the small business sector will give our nation the necessary ammunition to defeat the triple challenges of poverty, unemployment and inequality.
The country’s high rate of unemployment and extreme inequality call for bold and far-sighted interventions. The National Development Plan is the vehicle which will address poverty, unemployment and inequality. It sets an ambitious aim to treble the size of the economy by 2030, a daunting challenge that will require our collective contribution. Meeting the NDP’s growth target of 5.4 % for the next 16 years would not only guarantee South Africa’s material prosperity, but would be an elevating and inspiring narrative for the country – ‘an optimistic new story’, as the NDP phrases it.
As the NDP makes clear, getting South Africa onto a high-growth trajectory demands that we fundamentally change our game plan and place small businesses and co-operatives at the centre of our war against poverty, inequality and unemployment. Developing a strong and growing SME community is a cornerstone of the NDP’s vision. SMEs are expected to be central to South Africa’s job creation efforts, in line with international trends.
We are of the firm view that supporting the development of micro, small and medium-sized enterprises offers an important vehicle for sustainable social development. This is largely because these enterprises:
- Require limited financing to get started, since they cater mainly for the needs of poor households,
- Can be important incubators for emerging businesses and seedbeds for indigenous entrepreneurship,
- Are typically labour intensive and use domestically engineered/re- engineered technologies, implying that they can adapt easily to customer requirements, and
- Could, in the value chain, act as intermediaries between customers and larger corporations.
The government, with its regulatory and economic policies, including provision of infrastructure, notably energy, is going to be the greatest role player and facilitator for innovation and entrepreneurship in South Africa. Easing the regulatory burden is going to be key if we truly want to unlock the economic and job creation potential of SMMEs.
Although developing and supporting the private sector is a key policy imperative, there has been limited progress in the areas of innovation, entrepreneurship and small business development. Part of the reason has been red tape and the regulatory environment. The slow business registration process, licensing procedures and small business taxation are some of the issues.
With regard to access to credit and finance, I am of the view that much can be done to ameliorate the situation for entrepreneurs, including support to microfinance institutions, saving clubs, and formulating policy instruments to regulate credit access to avoid small business being trapped in a vicious cycle.
To promote a robust credit culture we will also require the well-crafted financing instruments targeting the lowest segments of the credit market. Poor access to credit has been identified as among the most important obstacles towards the small eneterprise’ ability to graduate into medium and large companies.
Poor infrastructure—notably transport, energy and ICT— are key impediments to business growth. These add enormously to the cost of doing business. The 2014-2015 budget commits R847-billion over the next three years for infrastructure investment as part of the National Infrastructure Plan, the bulk of which will be for power generation and freight logistics. This will have an enormous impact on small business development with regard to market access and ease of doing business in the country and abroad. Our strategic intervention in this regard must be accelerate market access for small businesses and cooperatives.
While advanced countries invest significantly in research and development functions, South Africa, by contrast contribute relatively small sums to research and development in the field of small business development. We need to aggressively invest in this area and address the paucity of relevant information on SMMEs. I am positive that such investments can yield enormous benefits in the long term.
Programme Director, our role as government will focus on the following areas:
We believe that building adequate infrastructure will be very important. At the lower end of the market, assistance could be provided to entrepreneurs in marketing, understanding new legislation, and preparing bankable business proposals.
We want to enhance awareness of entrepreneurship as a viable career path and build a nation of entrepreneurs. Enterprise education curricular reform at various levels of training, including Further Education and
Training (FET) and university is needed to inculcate the spirit of entrepreneurship within the education system.
We have already begun a strong relationship with FET colleges through. We want to accelerate this effort because we believe the reforms should have strong industry linkages.
We are rethinking the small business development practice by increasing non-financial support by establishing programmes for rolling out more incubators; and incentivize involvement of other actors in incubation programmes.
We will be working hard to increase financial support through tax incentives, informal sector funding tools, and other funding networks in partnership with other financial institutions and private sector partners. We believe that small enterprises can only thrive in a context where there is market access for their products and services. We want to increase products and services demand and create market access opportunities for small businesses.
We will continue to reduce regulatory constraints through red-tapes reduction roll-out programmes. We will continue to do the regulatory impact assessment and regulatory simplification, targeting relevant government personnel and departments, in all three spheres of government.
As government we believe that partnerships should be created with the private sector to encourage apprenticeships, B-BBEE-based procurement opportunities and business support services. The private
sector could voluntarily support the nurturing of young and emerging businesses and share professional expertise through already existing company-level enterprise development programs.
Synergy will be needed across several different areas in order for small businesses to be able to thrive, grow, and create jobs in the South African economy. We want to improve institutional framework for SMME development by ensuring a cohesive and integrated approach across all three spheres of government and stakeholders and role players across various institutions.
I look forward to the deliberations and the final recommendations that will come out of this colloquium. I am confident that government will benefit from the collective wisdom of men and women who are attending this important gathering.
I thank you!
