Business Day

Half a million reasons for hope for the unemployed

- Thami Mazwai

The record-breaking rate of new company registrati­ons over the last year can either be seen as a clarion call for help or the start of a post-pandemic recovery that could truly change SA’s economic road map.

In August the Companies and Intellectu­al Property Commission (CIPC) reported that a record 510,000 companies were registered in 2020 in the midst of our first year of the Covid-19 pandemic

— a 32% leap over new company registrati­ons in 2019.

For some the leap in registrati­ons is yet another indicator of the economic desperatio­n endured by millions of South Africans in the wake of the job losses caused by the pandemic, which have resulted in a chilling record 34% unemployme­nt rate.

CIPC commission­er Rory Voller observed that the company registrar saw a similar surge in 2008/2009 as the global financial crisis unfolded, and that the new surge indicates that South Africans are having to desperatel­y make plans to support themselves.

“Many lost their jobs or found themselves working reduced hours or doing parttime work. We have noticed when this happens that people start forming their own companies in order to generate an income,” Voller said in a Moneyweb article.

But there is another way of looking at it too — as a phenomenon that speaks to the SA spirit of entreprene­urship and how ordinary people come up with solutions that could help the country dig itself out of the abyss we are in. This is the essence of what the Siyabuya! movement believes gives SA hope and confidence that we can come back stronger. These small businesses, should they take hold, could be the true engine of the economy.

A report by consultanc­y McKinsey notes that before the pandemic, 98.5% of all SA’s companies were small and medium enterprise­s (SMEs) and that they contribute­d 39% of GDP. They were also among the hardest hit by the lockdowns, so it does not seem absurd to have a “glass half-full” view on the CIPC registrati­ons — maybe they do fuel the fires of hope.

While the red tape involved in registerin­g a company has been reduced thanks to lobbying and some pragmatic policy decisions over the last 18 months, it is not a trivial exercise. The fact that so many have trodden this road indicates a desire to operate in the formal economy. We could also see this as an iceberg tip reflecting a larger submerged base of economic activity in the informal sector, which has also been decimated.

Those entreprene­urs who have started the process of formalisin­g their endeavours are ripe for nurturing. At the start of the pandemic, a serious impediment to existing small businesses tapping into statebacke­d start-up funding and other private sector initiative­s like the R1bn Sukuma Rescue Fund for small business — set up by the Rupert family and Remgro — was their inability to tick the formal requiremen­ts, which also makes the surge in CIPC registrati­ons significan­t now.

Now is the time for the government to act with agility and deftness. New finance minister Enoch Godongwana ’ s commitment to creating jobs for the youth in place of a basic income guarantee is commendabl­e in its intention but will likely fail on practicali­ty.

As we have seen repeatedly, the government is not good at creating jobs. It should be good at creating the environmen­t and the stimuli to ensure jobs are being created by entreprene­urs. In this, it has been granted a potential post-Covid gift in the mushroomin­g of new company registrati­ons.

Ensuring that even half of these get into the economy, begin trading and survive will make more inroads in reducing unemployme­nt than any government job-creation scheme could. To highlight this, in 2019 SMME Quarterly reported that 2.5-million SMEs accounted for the employment of nearly 11-million people (or nearly 66% of all who were employed at the time). That’s over four jobs per entity.

Get the small-business engine moving again and we will finally start to whittle down that nightmare unemployme­nt number. Covid-19 has taught us many lessons. Not least among them is the power of the private sector working with common purpose with the state. Look at what we are starting to achieve through such partnershi­ps with the Covid vaccine rollout.

Now imagine what we could achieve by creating similar common purpose between state and private business to breathe life back into small business, with the state enabling actions that are largely reflected in the president’s economic recovery plan, such as Business For SA’s accelerate­d economic recovery strategy.

However, as is too often the case, we are skilled at describing the problem and describing the solution. We are less effective at actually doing it. So let’s unlock opportunit­ies and incentives for big business

— and even the smaller businesses that survived the worst of the pandemic — to help bring these emerging new businesses to life, assisting them with skills, with contracts, with cash flow from prompt payments, and so on.

The state could provide material incentives to establishe­d businesses that do this, but even if it can’t, this is a case of a rising tide floating all ships if ever there was one. So, again, we are left with several decisions: is our glass half-full or half-empty? Do we continue to talk, or do we start to act?

We must decide now, because there’s sure to be no appetite for debate among the South Africans whose hopes and aspiration­s lie behind the 500,000 new businesses registered in 2020.

● Dr Mazwai is a former newspaper editor and member of the Siyabuya! expert panel. He headed a small business task team for the National Planning Commission, served on the council of the National Small Business Advisory Committee, and was special adviser to the small business developmen­t minister.



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