General Electric (GE) South Africa’s R500-million investment into a customer innovation centre (CIC) in Gauteng and another R200-million into a supplier development vehicle (SDV) to promote job creation and skills development among the country’s black small and medium-sized enterprises (SME) ripples beyond face value.

On the surface, the initiative highlights the importance of developing SMEs in line with the national objectives detailed in the National Development Plan. The CIC will house up to 100 technical employees. GE will recruit experienced engineers, university graduates and technicians to develop solutions for GE customers, suppliers and industries in South Africa. These will cross the key areas from transportation to energy, healthcare, lighting and mechanical and industrial enterprises and, in the future, these engineers will be absorbed into businesses, opening new spaces within the CIC.

The programme will bring local innovation to GE’s global product pipeline and leverage South African talent to provide dynamic solutions regionally and internationally.

More broadly, it addresses critical skills development and job creation in South Africa and underscores GE’s efforts to develop local black industrialists. Through the SDV, black SMEs will receive upskilling to supply multinational corporations and stimulate downstream job creation.

It is the anchor on which to pin high-level, highly effective partnerships between industry stakeholders from government to the private sector, educational institutions, financial bodies, scientific institutions and State-owned enterprises.

GE is already in discussions with a number of role-players, including the Department of Higher Education and Training, the Department of Science and Technology, the University of the Witwatersrand (Wits), Nelson Mandela Metropolitan University, the Industrial Development Corporation (IDC), the Council for Scientific and Industrial Research and State-owned enterprises like Eskom and Transnet, where possibilities lie for collaboration.

Government has earmarked R845-billion for public-sector infrastructure projects and indicated another R3.2-trillion is required for 43 projects under consideration to 2020.

However, South Africa is severely short of engineers. According to the latest Engineering Council of South Africa results, South Africa has a total of only 15 000 engineers and has one engineer servicing about 2 666 people, whereas, internationally, one engineer services 40 people. This dire situation affects the public and private sectors and GE believes that, with the CIC, it is doing its part to address the issue.

The qualification requirements for CIC engineers include an engineering degree or equivalent from a further education and training college. Black and rural graduates will receive priority.

International Finance Corporation senior banking specialist for he Middle East and North Africa (Mena) region Qamar Saleem says the SME sector cannot be overemphasised in terms of its gross domestic product (GDP) contribution and employment generation, particularly in emerging economies.

In his essay, ‘Overcoming the constraints to SME development in Mena countries and enhancing the access to finance’, he states that formal SMEs contribute around 45% of employment and 33% of GDP in developing economies. The figures are significantly higher when considering the estimated contributions from informal-sector SMEs.

The multiplier effect means every direct job triggers support for an average five people.

Writing in the Manufacturing Executive Leadership Journal, Keith Nosbusch and John Bernaden summed it up when stating: “The smart manufacturing ripple effect can put millions of unemployed back to work and improve the economic vitality or nations that act now to seize its promise.”

In South Africa, that means corporate South Africa has a substantial role to play in job creation by supporting black SMEs.

Stats SA revealed last month that South Africa’s GDP contracted by an annualised 0.6% in the first quarter of 2014, compared with the previous quarter – the first shrink since the 2009 recession and primarily driven by the prolonged platinum industry strike.

South Africa’s GDP growth averaged 3.16% from 1993 to 2014, reaching an all-time high of 7.6% in the fourth quarter of 1994 and a record low of –6.3% in the first quarter of 2009.

In light of these statistics, opportunities for growing SMEs and building South Africa’s skills base are imperative.

Government must then be applauded for founding the Department of Small Business Development. Minister Lindiwe Zulu recognises she has her work cut out in stating the first task is identifying the challenges facing small businesses.

She acknowledges the Department of Trade and Industry and others have made inroads, and that means “pulling out that work and seeing what has worked and what has not”.

The South African Chamber of Commerce and Industry (Sacci) has welcomed the new Ministry as being “high on [its] wish list”, with Sacci CEO Neren Rau indicating organised business will continue engaging for a department serving the development interests of SMEs and the economy.

In the red tape perspective, that means simplifying regulations, reviewing and expanding incentives and championing SME causes. For corporate South Africa, it also means providing the groundswell that enables SMEs to function effectively, efficiently and competitively, nationally and internationally.

The CIC highlights how programmes can meet the critical skills shortage challenge by pairing experienced people with nonexperienced (engineering) graduates.

In February, then Public Enterprises Minister Malusi Gigaba unveiled Godisa, a R165-million fund to enable and empower Transnet’s black-owned suppliers. It is a collaboration between Anglo American’s enterprise development arm, Zimele, Transet and the Small Enterprise Finance Agency, a wholly-owned IDC subsidiary.

Each partner committed R55-million, with the venture inspired by the Department of Economic Development’s vision to promote entrepreneurship and foster transformation through SMEs. Anglo American executive director and Zimele chairperson Khanyisile Kweyama acknowledged enterprise development as a vital source for job creation and poverty alleviation, echoing GE’s views in launching the CIC.

A similar vein was the memorandum of understanding signed between the IDC and the Russian Bank for Development & Foreign Economic Affairs (Vnesheconombank) during last year’s Brazil, Russia, India, China, South Africa (Brics) summit, in Durban. That agreement paved the way for OJSC Russian Bank for SME Support, a Vnesheconombank subsidiary, and SEFA to cooperate on SME development. Specifically, it formed the platform for exchanging information and support for SME development and provide training, delegation visits and business forums.

Globally, South Africa can look to South Korea as an example of economic transformation to benefit SME development and job creation. In a knowledge-based economy, South Korea saw its economy change into an innovation-driven structure with competitive edges coming from information technology and knowledge rather than labour and capital.

Asia Pacific Economic Cooperation Innovation Centre research showed the country’s SME sector needed to secure creative technologies through innovation that strengthened their global competitiveness. This called for realistic and concrete strategies to nurture innovative SMEs and boost support for their development by analysing the impact SMEs made on the economy.

GE recognises the challenge in ensuring the CIC develops the right talent to develop appropriate solutions for its customers and suppliers. Yet, this is balanced against the opportunity for upskilling and growing the local supply chain to ensure black SMEs can supply multinational corporations and come into their own economically and sustainably. The investment will stimulate downstream jobs and that means, by delivering on new black industrialists, there are opportunities to grow new businesses and provide the products and services currently unavailable in the region.

GE has an extensive product pipeline, but key to servicing regions is adapting the existing products to suit local conditions or developing new ones tailor-made for customers. The CIC will fulfil this function and there is little doubt the return on investment will be significant.

By working in tandem, government and corporate South Africa can develop the black industrialist sector so critical for growing the economy, upskilling the knowledge base in the process.