City sees small guy as key to growth and jobs
IN THE years when I was growing up in Alexandra and later in Venda, small businesses in the form of tuckshops, spaza shops and supermarkets were always the fabric of the society in townships and rural areas.
These are the small businesses that contributed towards growing the local economy and the education of the doctors, lawyers, nurses, teachers and professors that we have today. Some of us, including our peers, would often take up part-time jobs at these businesses during school holidays where we would learn invaluable skills of entrepreneurship.
Today, the contribution of small businesses is perhaps needed more urgently than ever, particularly with our youth languishing in a quagmire of unemployment.
During t he apartheid years, these small businesses had no prospects of growing to become medium and big establishments. And after the change, these small businesses, especially in disadvantaged areas, continued to face many hurdles with no funding.
By providing funding and increasing the number of the small businesses, you can unlock the potential to create jobs on a massive scale.
These are some of the findings made by the World Trade Organisation (WTO), which recently published its insightful 2016 World Trade Report, Levelling the trading field for SMEs.
Coincidentally, the City of Joburg plans to increase the participation of small and mediumsized enterprises in the tender system, and it has already set up the funding mechanism to assist small businesses.
Small and medium-sized enterprises are said to be the bloodline to the economic performance of nearly every country in the world. They are responsible for the largest share of employment opportunities in developed and also developing countries.
In South Africa, micro, small and medium-sized enterprises are estimated to have created 90 percent of jobs between 1998 and 2005, and generated about 42 percent of economic output by early last year.
The report states that SMEs are also at a distinct disadvantage when it comes to accessing trade finance. Globally, banks reject more than 50 percent of all requests for trade financing placed by smaller firms compared with 7 percent of multinationals. SMEs cite this as a major barrier to their capacity to trade.
Given the bleak prospects faced by small businesses and entrepreneurs, the city had to undergo a total paradigm shift in the manner in which it nurtures the small guy. The city in collaboration with its banker, Standard Bank, have approved one of the country’s biggest and innovative fund to bridge the economic divide in Joburg. A staggering multimillion-rand working capital fund has been made available to bolster entrepreneurship.
The ambitious move will support the city’s economic transformation. The city realises that small businesses and entrepreneurs contribute to the creation of many jobs and indeed an important pillar to the local economy.
The strategic objective of the working capital fund is to contribute to the socio-economic development within the city.
Entrepreneurship has been increasingly touted as the key to Africa’s economic growth, a tool to eradicate poverty and improve youth unemployment. Africa’s representative to the World Bank’s global co-ordination body and Ford Foundation fellow, Raphael Obonyo, argues that entrepreneurship is a critical tool which is able to drive the African continent into its next phase of development.
Obonyo goes on to make a case for the need for governments to devise concrete policies that would support entrepreneurs to revive the economy, because when unemployment is high and the economy is weaker, people are forced to start small businesses to provide for themselves and their families.
“Today, entre preneurship is seen as one of the most sustainable job-generation tools in Africa,” says Obonyo. He says for entrepreneurship to lift Africa’s economy, governments must tackle some of the greatest challenges that impede progress, including lack of funds, mentorship and poor government policies.
Undoubtedly, Joburg has taken on this monumental agenda of closing the economic divide. It is doing this by having a proper framework focusing on the small guy, increasing funding and working together with the private sector to ensure that entrepreneurship thrives and creates more jobs.
Our plans aimed at increasing the number of small businesses to participate in the city’s tender system are being put to action. As we continue with investor road shows, we are making our intentions known that we are ready to do business with them.
We are working hard to ensure that our plans and policies are aligned to achieve our target of 5 precent economic growth as part of the city’s 10-point plan.
We can attain this growth by making sure that we have full participation of SMMEs in every sphere of our tender system.
Dr Rabelani Dagada is a member of the City of Joburg’s mayoral committee for finance.