A more robust support for small businesses is required
The SMME sector is critical to SA’S economy
IN SOUTH Africa, it is estimated that Small, Medium and Micro-sized Enterprises (SMMES) make up 90 percent of formally registered businesses, employing about 60 percent of the labour force. In spite of this, SMMES contribute only roughly 34 percent of gross domestic product. This statistic is revealing when compared to more developed countries, where small businesses represent 70 to 90 percent of the business landscape, employing up to 80 percent of the total workforce and contributing more significantly to economic growth.
If we are to address the multiple challenges of sluggish economic growth, widespread and high unemployment as well as lack of socio-economic inclusion and sustainability, then SMMES need to be supported and cultivated more robustly than they currently are.
The best way to illustrate the challenges faced by SMMES is to reference the three-year enterprise and supplier development programme for Transnet Pipelines that the Durban Chamber concluded in 2019. The key objective of the programme was to develop 60 selected SMMES into trusted suppliers that could have meaningful participation in procurement opportunities presented by both the public and private sectors.
Through this programme and other engagements, the Durban Chamber has identified the critical challenges faced by SMMES, which are that there are alarmingly few policies that are geared towards enabling SMMES, improvement to crucial infrastructure areas, access to funding, access to markets and business networks and non-financial support such as practical business management training and mentorship. Here, I will focus on two for now – namely, policy and infrastructure.
SMMES require the government to create and introduce policies and strategies that are enabling for SMMES, a conducive business environment that allows them to flourish. However, currently, SMMES are forced to operate under the same regime that governs larger corporates and enterprises, even though their businesses have fundamentally different operational requirements and strategies.
There needs to be a mindset shift at the policy level to recognise that over-regulation of SMMES is stifling and not encouraging growth. For instance, there is a need to simplify and reduce lead times for registration and licensing as well as taxation of SMMES. Another imperative is forming industrial and developmental policies that are geared towards creating sustainable SMMES that are enabled for growth through product and service diversification or producing the kinds of products our country needs but does not have. There is a clear need to ensure policy coherence through partnerships between key stakeholders, namely, business (SMMES and corporates) and government.
South Africa suffers from ageing and inadequate infrastructure and must urgently establish empowering and supportive policies and programmes for SMMES with regard to service delivery. This includes, inter alia, access to reliable energy, water, sanitation, waste management, transport and logistics networks, technology and data as well as quality information to enable decision making for operations. Investing in bridging the gap between the formal and “informal” economies through rural and township rejuvenation projects is critical.
This is an area where public-private partnerships can play a crucial role, with organised business supporting the government’s policies and initiatives to achieve tangible and quantifiable results. These projects and programmes then need to be implemented through effective planning, managing and maintaining infrastructure assets over their entire life span through informed and efficient project control.
The Durban Chamber is committed to fully supporting all stakeholders in working together to create a future where informed policy and well-managed infrastructure form an environment where SMMES are empowered to thrive and achieve their true potential. SMMES are critical to the inclusive and sustainable socio-economic development plans of South Africa, and policy needs to reflect that SMMES are recognised as an opportunity and not just a problem to be solved.
Palesa Phili is the chief executive of the Durban Chamber of Commerce and Industry.