SA can turn SMEs into big job creators

Ron Derby’s column, “Bereft of strategies, corporate SA is still blaming woes of the past” (March 17), is an important contribution to the debate about what we need to do to make our economy grow in an inclusive and sustainable manner and to create jobs for nearly 10million, especially young South Africans.

Coming just days after two of the largest banks announced a new round of job cuts and as the government is mulling cuts in the public service, the column is also a reminder of the limits of what the government and big business can do to facilitate a job-creating and transformative economy. It is no wonder small and medium enterprises are at the heart of the National Planning Commission’s job-creation vision.

In essence, Derby’s intervention, which should be read by everyone who is committed to inclusive growth, shows corporate SA (read big, listed businesses) has built a reputation of efficiency on the back of cost management rather than revenue growth. But new earnings reports show a depressing picture.

As we approach the sixth general elections we need to seriously ask ourselves whether we are on course to achieve the aspirations of the National Development Plan (NDP), namely, that by 2030, 90% of jobs will come from small and medium enterprises. We are still far from this because of the facts on the ground.

According to the results of the first phase of SA’s first study on the SMME landscape, which we commissioned last year, 98.5% of registered businesses in SA are SMMEs, yet they create only 28% of jobs — 60% to 70% is the international norm.

The CEO Initiative’s SA SME Fund calculates that to achieve the NDP target of 6% unemployment and 11-million jobs by 2030, SA needs 49,000 SMEs growing at a rate of 20% per annum.

And yet medium-sized enterprises, which create the most jobs, are neglected by policy and private-sector initiatives in favour of start-ups and incubators. We had only 17,397 formal medium-sized firms in SA in 2016, up from 15,257 in 2011.

These statistics tell us a few things about the economy. First, ours is a country of big things and, unlike other countries, most jobs in SA are being created by big government and big business. Second, perhaps it’s about time we accept that there’s only so much the government (should) and big business can do to create jobs. Third, unless something drastic is done, the small-business segment will continue to play a marginal role in job creation, ensuring that the aspirations of the NDP remain a pipe dream. And lastly, assuming we do want to change course decisively, we need credible data to work off in formulating public policy and privatesector interventions to support the SME segment appropriately.

Let us be clear. This is not another clubbing stick against big business and the government. These are important role players.

Ours is an invitation to all role players — labour, other elements of organised business and government — to have a discourse about the real state of our economy, especially its small-business segment.

What can be done?

Plenty is the short answer. We believe that we are standing on the cusp of an amazing opportunity to reconfigure the shape, character and size of our economy. For us to reset the debate we need a common set of facts.

In the second phase of the research, we will learn about the characteristics of small, micro and medium enterprises — race, age, gender, types of enterprises, contribution to GDP and employment; their distribution — provincial, sector and industry, formal, emerging formal, selfemployed and informal; industry dynamics and constraints.

This past week our research partners, Small Business Partners, convened the first panel of leading South African minds to discuss the next phase of the SME landscape study to look deeply into issues constraining the SME segment from playing its role in enabling inclusive growth and job creation.

Additional panels will look into cross-sectional issues such as competition and competitiveness, governance and regulation, markets, finance, and more.

A handful of South Africans and corporations have pledged financial contributions to ensure this ambitious project succeeds. But more money is required to ensure that the researchers reach the length and breadth of our country. No contribution is too small.

In the era of fake news, facts and evidence-based policymaking have never been so important.

We are on the cusp of an amazing opportunity to reshape our economy