Township economy plan needs to tackle skills deficit
The government reported last month that the official unemployment rate had jumped to 26.5% — a staggering figure which excludes those no longer looking for jobs. When taking defeated work seekers into account, the unemployment figure rises to 35.6%.
The effect of these grim statistics is felt by all South Africans through price hikes, crime, disease, rising taxes, decaying infrastructure and a host of other social ills.
While big businesses and large corporations remain a significant source of employment, the largest job creators across the world have always been small, medium and micro-enterprises (SMMEs). Yet the SME Growth index reveals that, contrary to the global trend, smaller companies in SA are showing stagnation in turnover and employment growth.
Township enterprises have been particularly hard-hit, due not only to lower economic activity and purchasing power in these areas, but also to deficiencies in skills. Within some sectors, these skill deficits have hindered the growth of local SMMEs.
They may still receive a lifeline. The government has bolstered its drive towards empowerment and transformation, placing a renewed focus on building township economies and on public procurement as a lever to drive growth.
As a result, township-based entrepreneurs stand to gain unprecedented access to business opportunities. However, to reap the full benefits of the government’s Township Economy Revitalisation Strategy, SMMEs will need to be better trained, equipped and supported for service delivery.
The public sector constitutes a major source of demand for goods and services. But, as was noted in a recent research report commissioned by the Gauteng treasury, the majority of township enterprises lack the ability to supply at the scale that is often required. Consistency in the quality of their goods and services is also a challenge.
So, while public sector procurement opportunities have the capacity to stimulate the growth of township economies, training and development will be required if these opportunities are to be leveraged sufficiently.
If SA is serious about growing businesses, the quality and accessibility of education and business training must be strengthened. The knowledge base of entrepreneurs needs to be fortified, while helping to build their businesses.
Township enterprises tend to fall primarily within the category of “traditional businesses”. These are cited by the World Bank as being primarily subsistence-based , with few employees and low levels of technology.
The category of “modernising businesses” — which make better use of technology and often employ up to 11 people — is far smaller. Yet, it is these types of businesses that enjoy stronger ties to the formal economy and which are better equipped for public procurement opportunities.
As part of efforts to revitalise township economies, work needs to be done on shifting local enterprises, while supporting their growth and development, from the “traditional” to the “modernising” sphere.
Red tape must also be reduced, so that registering and linking businesses to supply chains is faster, cheaper and easier. Moreover, greater collaboration between township enterprises and the formal, private sector is essential. Emerging SMMEs require the mentorship, guidance and support of their more established counterparts.
Barloworld Siyakhula believes in the value of partnerships in promoting sustainable development and growth throughout SA — including township economies.
Among our successful partnerships are joint initiatives with Standard Bank, the Department of Trade and Industry, Empowerdex and the South African Supplier Diversity Council. Strategic collaboration with these entities has helped us to finance, mentor, incubate and certify emerging entrepreneurs.
Partnerships are pivotal to success. Entrepreneurs have a role to play in forming these relationships. They need to be proactive about seeking out partnerships that can help mould their success.
To turn opportunities into reality, entrepreneurs should strive to leverage a variety of resources. This should include not only enterprise-development agencies within the three tiers of government, but also private sector entities such as Enablis, the South African Supplier Diversity Council and Awethu.
Strategic collaboration is vital to the development of SMMEs and to the development of much-needed skills. Working in silos is an outdated methodology that is ill-suited to the demands of today’s knowledge economy.
Through effective partnerships, SMMEs can be better equipped to leverage the opportunities afforded through public procurement. This will add value not only to SMMEs, but also to government services through a much-needed bolstering of efficiencies.
Small businesses are renowned for their agility – their ability to respond quickly to the technologies and trends that are shaping and reshaping our marketplace.
An improved inclusion of SMMEs will help keep public procurement on its toes.