SMMEs are in for yet another year with little to no real commitment from government and treasury. After the SONA by Pres. JG Zuma, and the budget speech by P Gordan, it is unclear as to the priority treasury and government has placed on SMMEs.
The current statistics as per the budget speech 2017 and which relate directly to the ‘possible’ impact small business can have on our economy are that:
- at least 35% of the labour force are unemployed or have given up hope of finding work
- our towns and cities remain divided and poverty is concentrated in townships and rural South Africa
- our growth has been too slow – just 1% a year in real per capita terms
This indicates a real challenge and a gaping hole in our economy and forces us as citizens to wonder exactly WHOSE BUSINESS IS IT ANYWAY? Over the last couple of years, the treasury has committed just over R 3 billion per fiscal year to SMMEs. And according to a report written by the Department of Small Business Development titled Vote 31, at least 51% of this commitment goes to SEDA, an agency which provides non-financial support to SMMEs. And the rest is distributed in incentives, grants, and small loans.
This commitment by treasury then begs the question why is the SME failure rate still so high. According to a report by SEDA in 2007, the failure rate was at a staggering 75% of all small businesses in their first two years. The Minister of Trade and industry Rob Davies in 2013 cited a statistic done by Adcorp Analytics which showed that the failure rate only decreased by 4% between 2007 and 2013 and still a further 4.5% drop in 2015 since 2013. Which is still very high.
In 2010 in an ABSA hosted small business roundtable, Pres. JG Zuma highlighted the importance of small businesses by saying “Small business have moved from employing 18% in 1998 to more than 60% in 2010.” Which shows that government understands the possible impact and yet lacks the initiative to implement policies that speak to this importance. In 2016 alone the mining and manufacturing sectors decreased their labour force by at least 140 000 jobs, further pressure on our economy.
In 1989 Germany’s berlin wall fell and with it the rise of the importance of small business was seen. Today at least 68% of Germany’s working population are employed by small businesses. And the economy’s strength is on the backs of these small entities of which most make less than EUR 1 million.
South African small businesses need a more radical procurement reform which speaks to preferred procurement favouring them, where they can be given access to markets within core industries and sectors. The KING REPORT ON CORPORATE GOVERNANCE requires a more stricter monitoring system that sees to it private sector is complying with ESD regulations and requisites.
The success story, the verbatim; the glory of our country is now the business of government, treasury, private sector and the entrepreneurs themselves. To simply leave the likelihood of any small business succeeding solely in the hands of an uncommitted government is both irresponsible and a self inflicted brutality to the ambitions of small start-ups. The answer ergo, to the question, WHOSE BUSINESS IS IT ANYWAY; it is all our business.
The great debate on start ups in our country is a contentious one. Where finance houses, both private and public have some of the most impossible requisites which for the most part, entrepreneurs from South Africa’s poverty hubs are not able to meet very often. There exists an economic divide which needs to be addressed if small business and start-ups are to have a chance. In his book The State of Nation Building In South Africa by Neville Alexander, he shows South Africans’ ambivalence in desiring a rainbow nation and “desperately clinging to a non-racial future vision of the future” while using racially historic ideology to build it.
He says “unless, therefore, we can invent a new discourse involving a new set of concepts that is more appropriate to the peculiarities of South African history, we will remain stagnant.” This is to say, the government’s goal for a truly inclusive economy in which the scales of wealth are addressed and balanced, a new disposition is a prerequisite.
Small business is in fact big business where our economy is involved. Unemployment is a problem that industrialisation alone can no longer solve. Innovative start-ups and small businesses are the way of the future.