Let us build a nation of entrepreneurs

Written by Vernon Cheung

May 31, 2017

By Lindiwe Zulu – Minister of Small Business Development

The key responsibility of the Department of Small Business Development is to enhance support to small businesses, informal businesses and cooperatives, with an emphasis on programmes that advance entrepreneurship amongst women, people with disabilities and youth, to effectively contribute to job creation, economic growth and economic inclusion.

The National Development Plan seeks to encourage all South Africans to become active citizens. It is expected that by 2030, 90% of the 11 million jobs will be created through small to medium enterprises. We are setting bold targets in this regard. We want to increase the number of jobs that are created by the small business sector from the current 7.1 million to 9.2 million.

However, we cannot do this in isolation. The truth is that government, acting alone, will not be able to achieve its goals. The National Development Plan and the Ten Point Plan will remain an elusive mirage if we do not join hands with the private sector and other stakeholders.

Financial and non-financial support for small businesses is critical to growth and sustainability. The Small Enterprise Development Agency (Seda) was allocated R634-million to drive non-financial support to small businesses and cooperatives, while Sefa was allocated a budget of R1-billion (of which R213-million comes directly from the fiscus and the balance comes through the IDC).

In the last financial year we allocated:
• R245-million to Black Business Supplier Development
• R75-million to the Cooperatives Incentive Scheme
• R96-million to the National Informal Business Upliftment Scheme
• R46-million to the Enterprise Incubation Programme
• R10-million to the craft sector

Our Shared Economic Infrastructure Facility programme covers the funding of common infrastructure that is either new, requires upgrading or maintenance and is shared by a number of businesses. It is a 50/50 share contribution with the recipient municipality and the value is up to R5-million. Together with local authorities we are able to provide the requisite infrastructure for our SMMEs interested in beneficiating.

We are doing our best within the context of resource constraints, and believe that through our interventions, the tide is turning. We proceed from the premise that public procurement is a powerful lever in the hands of the state. Public procurement alone accounts for as much as 10–15% of gross domestic product
(GDP) in developed countries and over 30% in developing countries.

Government is therefore determined to use its procurement lever to help grow and sustain small businesses. In this regard, we are signing transversal agreements with all government departments to ensure that small
businesses benefit from procurement opportunities in government departments.

Access to markets is a serious constraint to the growth of small businesses and accounts for the majority of business failures – we are therefore facilitating market access for products (locally and internationally) and establishing and building long-term, effective supplier partnerships – linking small businesses with potential markets.

Our approach to supplier development is partnering with the private sector to enable SMMEs and cooperatives to have a ready-made market for their quality products. For example, our partnership with the South African Breweries-Miller is bearing fruit.

The department, South African Breweries (SAB) and the Agricultural Research Council (ARC) have partnered in a multi-million rand investment initiative to fast track the inclusion of black emerging women farmers into the formal economy.

Women-in-Maize programme seeks to empower 5 000 women maize farming cooperatives over the next five years and will increase the inclusion of black women-owned cooperatives in SAB’s supply chain; develop skills of women farmers; improve food security; and stimulate local economies by increasing procurement from local suppliers.

Consistent with the action plan for radical economic transformation, we are also focusing on providing effective support to small businesses, easing the regulatory and compliance burden and expanding access to economic opportunities for historically excluded and vulnerable groups.

The department is also confronting the challenge of red tape. We recognise the fact that compliance with policies, laws and regulations are necessary and are keenly aware that in some instances, policies and compliance processes may have the unintended consequences of constraining the growth and development of businesses. Our ultimate goal is to reduce obstacles to doing business wherever possible, particularly in areas such as compliance and regulation.

Therefore we are reviewing the policy and legislative environment governing the small business sector in order to remove constraints and open the way for coordinated and integrated support to small businesses. We have concluded our provincial and national consultations on the review of the National Small Business Act. It is anticipated that public participation processes will take place this year – 2017.

The lack of adequate investments in infrastructure and appropriate policies to protect informal entrepreneurs result in small businesses and co-operatives finding it difficult to flourish in underdeveloped areas such as townships and rural communities. The strategy of developing township and rural enterprises is aimed at ensuring their sustainability and competitiveness. At the heart of our strategy of revitalising township economies is investing in effective partnerships between provincial as well as local governments.

It is a matter of concern that, whilst our townships are a hive of economic activity, the bulk inputs needed by township businesses are not manufactured or packaged in situ – they are brought in from elsewhere. We are therefore outsourcing our buying power and have to change this dynamic by transforming the entire value chain, from identifying the opportunities, designing and manufacturing the products to setting up our own wholesalers, in townships and rural towns.

If we are to sustain the growth and development of SMMEs and cooperatives, we need to ensure a coordinated and integrated approach across all spheres within our government.

We are also prioritising the decentralisation and co-location programmes for SMMEs and cooperatives and have a number of institutions in both the public and private sectors, which offer business development services in the country. As part of bringing services closer to communities and their constituencies, the department established 29 co-location points across the country that serve as integrated complementary services offered by Seda, Sefa, provincial partners and SARS to increase business support services in townships as wellas in rural areas.

As at the end of March 2016, the 57 Seda-supported incubators housed 2 492 small enterprises, and created 2 331 permanent jobs during the 2015/2016 financial year. The sectors that contributed the most to this performance were the labour-absorbing sectors of agriculture, construction and manufacturing. In an effort to strike a balance between high-technology, innovation-focused incubators and job-creating incubators, Seda is remodelling some of its incubators in high-technology sectors such as ICT, chemicals, bioscience, and renewable energy.

The department linked many cooperatives to critical market value-chains, mostly in the agricultural sector. Two hundred and 27 cooperatives benefitted from skills development through partnerships. In addition, 247 primary cooperatives were funded to the tune of R74.9-million through the Cooperatives Incentive Scheme (CIS).

The department funded 678 enterprises for a total amount of R224.8-million through the Black Business Support Development Programme (BBSDP). A total of 40 581 SMMEs and Cooperative Enterprises have been financed through Sefa since the beginning of the financial year with 97% of financed SMMEs and
cooperatives being in the informal and micro-enterprise sector.

We want to foster a culture of entrepreneurship. We believe educational institutions have a critical role to play in driving entrepreneurship development and small business formation. In partnerships with Technical Vocational Education and Training (TVET) Colleges, the department launched five Centres of Entrepreneurship
in KZN (Durban University of Technology); Limpopo (Vhembe TVET); Northern Cape (Vaal University of Technology, Upington); North West (Rustenburg Orbit College) and Eastern Cape (Ikhala TVET).

Their purpose is to provide generic enterprise development services and incubation to Orbit TVET College graduate students as well as members of the surrounding communities.

The centres will contribute towards the promotion of entrepreneurship and assist college graduates who are not absorbed by the labour market and who want to start their own businesses.

The department has launched FinFind, a web-based solution as part of improving access to finance for small business owners. Finfind is South Africa’s one-stop solution for access to finance for SMMEs. Finfind assists SMMEs in becoming finance ready by providing expert advice and linking business owners with accountants and business advisors, as well as providing them with the easy-to-use tools of which will help with their financial recordkeeping.

The Informal Traders Upliftment Programme (ITUP) was launched by exposing 1 000 traders to a SETA accredited business management programme. The ITUP will be up-scaled to train and support 7 000 traders in 2016/17. Fifty percent of these traders will be drawn from townships and 30% will be traders from rural towns.

The National Gazelles programme is directed at ensuring greater participation of disadvantaged groups in the economy and accelerating the growth of 40 high potential small businesses each year in its 10-year cycle. Of the 200 businesses currently in the programme, 65% are black-owned and 30% owned by women.

As a department, we are concerned that small businesses doing business with government are not always paid on time – because the reality is that if they are not paid within the 30 days, small businesses run the risk of collapsing due to financial distress and constrained cash-flows.

We have established the SMME late payment hotline through Seda, to assist businesses that are not paid on time (within 30 days). The number for the hotline is 08607663729. Small businesses can call and will be assisted accordingly.

Since the proclamation of this department by the President in July 2014, we have worked tirelessly to ensure that we affirm, strengthen and give voice to the SMME sector while we grapple with the task of establishing a new department.

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