Small business needs support
THE idea of creating a smallbusiness ministry was given strong support on the election campaign trail by senior ANC leaders. Supporters of the idea, especially from organised black business, correctly point out that public policy on small business requires a major overhaul. Intriguingly, organised black business has argued that a small-business ministry is required to support and create “black industrialists”, which suggests a possible focus on creating smaller manufacturers.
The idea has, however, not received unanimous support as small-business advocates worry that it will create a “ghetto” into which all small business issues will be consigned, without impacting on broader economic policy.
The alternative suggestions include creating a commission or locating small business in the Presidency.
Taken together, there is agreement that improving public policy for small business requires an institutional home, but disagreements on exactly what that home should be.
Underpinning this call for a home for small business in government is the widely accepted view that public policy on small business needs to be revamped. It is on this foundation that the tensions between strategy and structure can be merged.
Traditionally, the process of developing public policy culminates in a white paper. Usually, this is based on research, available evidence and consultation. A more experimental approach to public-policy making could, however, serve small business owners better and improve quality of public policy. “Learning by doing” summarises this approach.
For example, the government could create a venture capital fund to accelerate start-up activity.
Innovations such as requiring entrepreneurs to find matching funds from other sources or from their savings could be introduced.
In addition, partnerships with existing small-business support programmes could be fostered.
Importantly, the government would begin to understand its role as a venture capitalist, and through that explore whether a shift from providing loans to venture capital would work.
As another example, the government could reduce the risk of starting a business by dramatically reducing or eliminating taxes for small business. This would be a much more ambitious programme of tax reduction for small business than the existing programmes. The government would thus learn whether eliminating taxes on small business would support businesses to move beyond the start-up phase.
In another example, the government could seek to grow the number of suppliers into value chains. It would require creating markets in which smaller firms could sell to larger companies on a fairer basis.
The small-scale agricultural sector could be a prime candidate for such an initiative, through both selling of produce and through small-scale agro-processing.
In this case, the government would play a role as an intermediary and market maker, either directly or through partnerships.
More experimentally, the government could support the creation of maker spaces — which provide tools for prototyping products and reduce the costs through digital innovations. The current work of the Department of Trade and Industry on incubators could be leveraged to support South Africa’s innovators.
These examples are all affordable, with existing resources, but require careful reprioritisation of both taxation and expenditure.
Importantly, the small business ministry in these examples would not be playing an “integrating and coordinating” role but rather as a space to test several selected ideas.
The achilles heel of adopting a more experimental approach, critics would argue, is that it does not tackle wider structural changes needed in the economy. However, the lessons learnt would be vital to understanding how to scale interventions in the small business sector especially the links to industrial policy.
In deciding on a small-business ministry President Jacob Zuma must focus on the development of strategy through experiments, rather than a staid process that leads to a white paper that emphasises “coordinating and integration”.
Hassen is a public policy analyst, who writes on small business at ZApreneur.com