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Can Zulu lay the foundations for a small-business-friendly South Africa?

MANUFACTURING IN SMALL BUSINESSES The DSBD has the mandate to deal with job creation and economic transformation, which will improve the business environment for SMEs

NEREN RAU The re-evaluation of the policy framework should be one of the mandates of the DSBD

SANDILE ZUNGU Fostering entrepreneurship through leadership and eminence could be done through the DSBD

22nd August 2014

By: Zandile Mavuso

Creamer Media Senior Deputy Editor: Features

  

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Various stakeholders have expressed optimism that the Small Business Development Ministry, created after the national elections in May, will add much-needed impetus to enterprise development in South Africa, where a strengthening of the entrepreneurial culture is seen as critical to stimulating improved levels of economic growth and transformation, as well as to creating jobs.

In fact, Small Business Development Minister Lindiwe Zulu has moved to position her Ministry and the embryonic Department of Small Business Development (DSBD) at the centre of efforts to address the country’s triple scourge of poverty, unemployment and inequality. However, she has also made it plain that the main role of government is to create an enabling environment in which small and medium-sized enterprises (SMEs) can flourish through the provision of targeted incentives.

Stakeholders have generally welcomed Zulu as well as the unbundling of the small business department from the larger Department of Trade and Industry (DTI). However, they are also urging the Minister to focus on proper policy planning and to pursue the enterprise- development agenda in collaboration with the private sector.

Commentators canvassed by Engineering News would also like the department to seek to extract synergies between small and large businesses, as well as government departments, so as to ensure that SME development is placed at the centre of the country’s economic growth.

SME Master Plan
The Black Business Council (BBC), for instance, states that a key function of the DSBD is to provide a national master plan for SMEs that must be in line with the National Development Plan.

“The integration of all key activities relating to structural support for entrepreneurs, enterprise development and fostering entrepreneurship through leadership and eminence is needed and could be done through the DSBD,” says business leader and BBC secretary Sandile Zungu.

He says that, with such a master plan, the DSBD would have a better handle on the instruments and interventions needed to stimulate SME development and entrepreneurship.

The South African Chamber of Commerce and Industry (Sacci), meanwhile, envisions that the DSBD’s mandate should primarily be to support and create an enabling environment for SMEs.

Sacci CEO Neren Rau says support could involve finance, international opportunities and innovation, while reducing red tape, designing and implementing appropriate business incentives, and the local business environment promoting business retention and expansion, can comprise an enabling environment.

Sacci further stresses that it would benefit the DSBD to evaluate the SME policy framework as it believes that re-evaluating key policy priorities that deal with job creation and economic transformation will improve the business environment for SMEs.

Nurturing Policy
“Currently, the policy envi- ronment provides First World legislation that does not sufficiently cater to or nurture growing enterprises,” Rau points out.

He adds that there are heavy penalties for noncompliance and rigorous start-up and bureaucratic requirements, while the mechanisms to match resources with entrepreneurial ideas, concepts and energy are insufficient.

Sacci suggests that the DSBD could derive strength and credibility through forging close cooperation with the business sector. This should include instituting bilateral discussions to advance any policy proposals prior to formulation and during the consultation phase.

The BBC, for its part, has proposed the convening of a policy conference, where public and private stakeholders could thrash out ways of improving the environment and support structures for SME development.

Rau believes research work is also required to raise the DSBD intellectual standing as its seeks to put in place the frameworks for a scaling up of the SME sector. Such evidence-based policymaking could help reduce policy incoherence and establish the groundwork for improved collaboration between those with developmental objectives and those with commercial interests.

“This will also ensure that all policy discussions are accompanied by high-quality empirical evidence to foster a culture throughout government of evidence-based policy development,” he indicates.

Sacci also believes the DSBD could become a gatekeeper for new legislative proposals, acting as a voice for appropriate regula- tion, rather than overregulation. The department could, for instance, champion appropriately defined exemptions for SMEs from general regulations as opposed to generating additional legislative burdens, regardless of the legislation type, ensuring that SMEs face fewer regulatory hurdles than larger businesses.

Sacci also argues that, in a small, interconnected economy, the SME environment and challenges cannot be dealt with without considering their relationship with larger enterprises.

Rau highlights that an industry cluster approach comprising small, medium-sized and large firms might yield desirable results by facilitating access to markets and creating relevant, industry- based development and support initiatives for SMEs.

Zungu adds that if SMEs form a catalyst for economic development, the private sector could contribute greatly by devolving their conglomerate structures and monopoly behaviour by outsourcing a significant chunk of their noncore business to SMEs.

“For instance, the automotive sector should focus on building engines and vehicle designs, and on outsourcing the bulk of their components and parts manufacturing to SMEs through a symbiotic relationship, where the large companies contribute towards bridging the capability gaps of small businesses,” he explains.

Zungu also mentions that the private sector could genuinely support government’s efforts to transform the economy and partner with government in driving enterprise and supplier development using existing legislation and related regulations.

Work in Progress
During her Budget Speech in June, Zulu stressed that while the DSBD was a new department, it was not starting from scratch. It was working to take over existing DTI programmes and Zulu promised that no “vacuum” would be allowed to develop during the transition.

The DSBD will continue to support the Incubation Support Programme, the Centres for Entrepreneurship, the Support Programme for Industrial Innovation, the Cooperatives Act and the National Cooperatives Strategy, the Small Enterprise Development Agency Technology Programme, the National Informal Business Upliftment Strategy, the Integrated Small, Medium and Microenterprises and Cooperatives Support Programme, the promotion of secondary marketing cooperatives, the Red Tape Reduction programme and the Youth Enterprise Development Strategy.

The Incubation Support Programme focuses on agri- culture and the manufacturing sector and supports 39 incubations amounting to R590-million.

Through the Small Enterprise Development Agency Technology Programme, the DTI has created 291 new SME entrants, supported 1 227 existing SMEs and created 1 258 employment opportunities.

Having established Centres of Entrepreneurship such as the King Hintsa FET College, in the Eastern Cape, which focuses on agroprocessing, and the Ekurhuleni West FET College, in Gauteng, which focuses on welding and waste management, the DSBD aims to establish two additional institutions to upscale its efforts on entrepreneurship.

Through the Support Programme for Industrial Innovation, 28 projects, amounting to R76-million, have been approved, while Gauteng, the Western Cape and KwaZulu-Natal have benefited from this innovation regarding the green economy, energy, manufacturing, as well as information and communication technology.

Having completed the amendment of the Cooperatives Act and the National Cooperatives Strategy, the DTI has allowed for new institutional agreements, such as the Cooperatives Development Agency and Cooperatives Tribunal, to be established.

Zulu also noted during her speech that the DSBD would continue to collaborate with provincial entities to advance Cabinet’s decision in 2007 of 85% local procurement of ten specified products and services.

She further indicated that the Secondary Marketing Cooperatives, with incentives amounting to R10-million for each cooperative, enhanced value-add for goods and services and technology, as well as for improved logistics and infrastructure.

The National Informal Business Upliftment Support aims to enhance enterprise development support and coordinate inter- governmental and stakeholder relations for the broader participation of South Africa’s informal sector in the economy. While the implementation of the Integrated Small, Medium, Micro Enterprise and Cooperatives Development will harmonise and collocate opportunities in the informal sector.

The launch of the Red Tape Reduction Measures for all municipalities will accelerate processes for the establishment of SMEs at local government level, simultaneously serving as a monitoring mechanism for the local business environment.

In the 2013/14 financial year, the DTI approved a Youth Enterprise Development Strategy to increase the contribution of youth-owned enterprises to South Africa’s growth development product economy.


“In advancing the initiatives of developing small businesses, we will look at upscaling the identified interventions, enhancing existing partnerships to enable a structured approach to the envisaged transversal agreements with government departments and State-owned entities,” said Zulu.

She also indicated that there will be a concerted effort in the DSBD’s engagement with the private sector and labour to sustain the gains and advance the common objective of supporting the SMEs sector. These will be considered as parallel and important processes while the DSBD configures its department.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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