SMMEs and clean SOEs key to transformation
THE fragility of our economy hinges on the distorted pattern of ownership and economic exclusion created by apartheid policies.
The effect of decades of racial exclusion and the economic exclusion of the black majority is still evident in both employment levels and income differentials due to the inability of the economy to create sustainable economy for black people.
This has led to our country having one of the most unequal societies in the world with very high levels of poverty and a pandemic of unemployment as the major contributor.
This problem has reached boiling point and is totally unacceptable. Our country is sitting on a ticking time bomb.
A very stable and constructive environment that supports investment and binds constraints on growth, investment and employment creation is vital.
Economic transformation and emancipation can be lured into place through promoting SMME development as outlined in the National Development Plan.
The point that SMME is the key to job creation, poverty alleviation, reducing income inequality and a source for economic growth, has been made several times.
It is evident that our government is fully cognisant of the importance of SMME development, having created multiple business development institutions and in the process allocating huge budgets to the creation of a vibrant small business sector.
The question is that to what extent have such investments and initiatives yielded the desired results?
Judging from the growth of joblessness and inequality, there is still a lot that needs to be done.
The reality is, we have been paying lip service and one of the mistakes we have made has been to separate public procurement from SMME development.
That said, the state should do more to creating an environment that is conducive and will promote entrepreneurship and small business growth.
I personally do not think we have done enough to create platforms that will support black-owned start-ups and create access to business linkages through promoting a culture of entrepreneurship.
Too many small businesses are being destroyed by a lack of access to markets (business linkages), the failure by government to pay in time and to procure from black-owned businesses.
The Black Management Forum is very clear – in order to achieve sustainable and inclusive economic growth, a concerted effort is necessary to develop and implement policies.
The focus must be on SMME development as a strategic intervention to help diversify and grow the economy, thereby achieving higher levels of economic growth and creating much-needed job opportunities. That in turn will accelerate and advance socioeconomic transformation.
The starting point in developing thriving entrepreneurship is to recognise it’s ability to participate meaningfully in massive purchasing power, estimated at more than R500-billion for procurement per fiscal year.
The reality is that not enough black businesses are involved in the public sector. A few participate, but are at entry level.
We strongly believe that in order to accelerate and advance socioeconomic transformation a responsive public procurement system along with entrepreneurship development is the solution. This will stimulate economic growth.
Furthermore, big businesses that have been given work by government should be encouraged to develop and empower one or two emerging black companies as part of the conditions of their contracts.
We also believe new investments are needed for the economy to grow – building factories, promoting township economies and developing rural economies.
This will help our economy grow to levels never seen before and create much-needed employment opportunities and reduce poverty and inequality.
To give substance to radical transformation or economic inclusive growth, government should allocate resources for the development of township and rural economies, allocating more funding for black business development support and additional funding to the Department of Small Business Development and also funding to recapitalise the National Empowerment Fund.
Government has set aside 30% of procurement for black businesses, this is a progressive step in the right direction, however BMF does not regard this as an ideal situation.
It is progress in a stance that says at least for now, if there are tenders that small black businesses cannot access, they will be able to gain access through subcontracting.
But we also want black businesses to be the main suppliers and not the subcontracted 30% of the work. They must also be able to participate in sophisticated services like medicines and massive procurement.
The public procurement system should include a contribution towards the reduction of racial income inequality, and a contribution towards diversification and job creation as well as the development of an innovative and competitive sector.
This can only be achieved when public procurement is not only used as a means to buy goods and services but as the bargaining tool to unlock private sector procurement opportunities and break the current economic power relations.
We further propose that both the private and public sector must create a youth fund that will finance youth-owned companies and provide easy access to finance.
Once all these issues have been addressed, I strongly believe our socioeconomic transformation situation will change for the better.
The state working with the private sector has an obligation to ensure the battle to fight for economic freedom is realised through various legislation and policies such as broad-base black economic empowerment, the Preferential Procurement Policy Framework Act and the Employment Equity Act to mention a few.
But one might also have all the necessary progressive and transformation pieces of legislation in place, but if we don’t have the right people behind them to ensure they deliver the transformation we will still be back to square one.
For this reason, the BMF Queenstown will be having a conversation titled the “The State of Socioeconomic Transformation” with the Minister of Finance, Malusi Gigaba, tomorrow (July 21) at 5pm at the Queens Casino & Hotel, Queenstown. Among the speakers will be the Premier Phumulo Masualle, MEC for Economic Development Sakhumzi Somyo and the BMF president Mncane Mthunzi.
Other issues that will hopefully be addressed will be the state of SOEs which, judging from their current state and financial affairs, are troubled by weak leadership and poor governance.
This has contributed to South Africans continuing to be confronted by high levels of poverty, crime and the pandemic of unemployment with black people in particular continuing to be disproportionately affected by socioeconomic ills.
It is our hope that the Finance Minister will not only talk about these issues but table proposals with a view to addressing them so that our SOEs will be run efficiently and will be able to regain stakeholder confidence.
Mabuti Mpafa is chairman of the Chris Hani district branch of the Black Management Forum.
For more details about this Friday’s event in Queenstown e-mail or call 071-301-1145