Why the dubious research saga by SBI and SBP?
IT IS ALWAYS very easy to make damning statements, find the government guilty and demand its resignation or the closure of a specific department. Of course, such emotionalism is commonplace, and, lest we forget, part of the democracy ushered into this country by the ruling ANC.
It is, however, sad that the Small Business Institute (SBI) and the Small Business Project (SBP) demand the closure of the Department of Small Business Development (DSBD) by manipulating the facts.
Firstly, the two are specific that their research is incomplete, and they also do not indicate their methodology. Nor do they specify how they aggregated global comparisons as small business definitions differ. Thus, they base their call for the DSBD to be closed on incomplete research, devoid of any assurances of validity or reliability required of any study.
Nogal, they have not provided the DSBD with this “initial research” so that it can read and assess it, and then respond. Perhaps, they reckoned, this would water down their demand that the DSBD be closed. In any case, and to crown it all, the figures that the SBI and SBP spout are not new.
Two years ago the Small Enterprise Development Agency in partnership with the Bureau of Economic Research released a report that only 30 percent in the small business sector are formal, and these are the ones providing jobs.
They state that there is no baseline data. In 2016 the Department of Trade and Industry released a study on the small business sector; and in 2017 the DSBD released an updated report. Similarly, the suggestion for a unit in the Presidency is not new.
In December 2011 a task team led by Septi Bukula and set up by Minister Rob Davies, released a full report after it investigated reasons why government policies do not have sufficient hitting power. The task team made the same recommendation for a unit in the presidency.
Worse still, and this is the rub, the organisations then asked for funds to complete this incomplete research. The question then is whether the emotive statements were really not aimed at raising money rather than, as they claim, “stop the country from flying in the dark”.
There is no doubt that our small business sector is not where it should be. but the problem is much broader than red tape, definitions and co-ordination. Let us first explain the crisis facing South Africa, which is the basis for the existence of the DSBD they want disbanded.
According to Statistics SA (StatsSA) our gross domestic product was at R3.15 trillion in 2017. Yet, given the huge economy and 24 years into democracy, unemployment, poverty and inequality abound in the black community. While unemployment is at 27.2 percent, a breakdown of the 2017 figures by US agency Quartz shows that for black South Africans it is at a staggering 31.4 percent. Figures from StatsSA have unemployment in some areas, and black ones, at a mind blowing 80 percent.
Inequality
Inequality is equally stark, and the World Bank, in its report on inequality in South Africa, states that the share of household wealth held by the top 10 percent is 71 percent, while the bottom 60 percent held 7 percent of the net wealth.
As if this is not enough, people living on less than R1 000 per person per month increased to 30.4 million in 2015, and those living in extreme poverty below R441 per person per month increased from 11 million in 2011 to 13.8 million in 2015.
Hence, the DSBD is determined to create viable entities so that, as in other environments, the people will then free themselves from economic bondage.
The SBI and SBP state: “To meet the objectives outlined in the National Development Plan, we need a vastly improved understanding of the business dynamics of small firms, which includes their diversity, characteristics, needs and constraints.”
They completely miss the point. The solution is a function of various elements in the environment. Small business is an integral part of society in an economy that consists of micro, small, medium and large sized business and other players, including NGOs, at the very least.
What SBI and SBP miss, avoid or ignore is that our country needs a fundamental restructure of the economy. In 1994 we inherited an economy created for the minority; to make this economy work for all needs this massive restructure as debated in the ANC Lekgotla on Monday and yesterday. The SBI and SBA hardly bother to refer to this restructure, ostensibly because they do not want to spoil their chances of getting financial support.
The Competition Commission has released numerous reports on collusion and uncompetitive behaviour. Apart from the impact on the poor, this collusion and uncompetitive behaviour meant that new entrants and other small businesses were crowded out.
In any case, and to respond to SBI and SBP on large companies creating jobs, it is logical that most employment comes from the 1 000 largest companies, as small business creation has been crowded out since some of these large companies dominate value chains.
Finally, while the levels of concentration are a huge obstacle we cannot, like the SBI and SBP, indulge in reductionism and suggest that if these levels are diluted; then happy small business days are here. No, we also need to look at the regulations, co-ordination, corruption, policies and many other issues in the environment, as small business development needs a holistic approach in which all stakeholders in the ecosystem play a role. Hence Minister Lindiwe Zulu hosts regular stakeholder consultations which include tertiary institutions, small business chambers, organised business formations and other role players. At the latest one, in which the same SBI participated, the department gave a progress report on common definitions for the small business sector.
A subsequent DSBD, SA Revenue Service (Sars) and StatsSA partnership hosted a round table on the same issue. The DSBD then contracted the SBP, which attended the round table and was a panellist, to deal with the challenges that were identified in finding an acceptable definition. Thus, in the light of their role in the stakeholder consultation and the Sars-DSBD-StatsSA round table, the conduct of the SBI and SBP and their research saga is simply questionable. The DSBD will be taking appropriate action in this regard.
Dr Thami Mazwai is special adviser to the Minister of Small Business Development.