The Small Business Institute (SBI) on Tuesday warned that the National Development Plan’s (NDP's) goal of having small businesses create 90% of jobs by 2030 may be unachievable unless small and medium-sized businesses (SMEs) are better understood.
Early research shows that, while 98.5% of businesses in South Africa are SMEs, these businesses deliver only about 28% of jobs across the country.
In partnership with business environment specialist SBP, the SBI on Tuesday launched the early findings of a comprehensive study to determine the size, nature, challenges and potential of SMEs in the country.
The study, which still requires about R5.5-million in funding to complete, is intended to deliver the baseline facts to underpin policy interventions and strategic planning for small business development in South Africa, SBI chairperson Bernard Swanepoel said at the launch in Johannesburg, adding that it will help to steer the country’s small business segment “in the right direction”.
Up until now, the study has cost SBP and SBI R1.5-million to get off the ground.
Calling for the immediate shutdown of the Department of Small Business Development, Swanepoel lamented that headway in tackling unemployment and inclusive economic recovery and growth cannot be based on guesswork.
“No matter how good government’s intentions are, without facts, policy to help SMEs will be based on ideology or ignorance”.
However, a matter of concern highlighted by SBP CEO Chris Darroll is that South Africa’s small business segment is an outlier internationally in respect of SMEs’ contribution to the gross domestic product, employment and the fiscus.
The research also found that government has failed to apply a common definition of a small, very small, or medium-sized business across its laws, regulations and key strategies. The definition of small enterprises was completely inconsistent across the 70 laws, regulations and key government strategies it reviewed.
“This lack of policy harmony generates a mind-boggling amount of red tape, confusion and barriers for SMEs starting, running or growing their businesses despite the advent of a Department of Small Business Development tasked with coordination, red-tape reduction and data collection.
“It has failed in its mandate – the Minister has yet to issue guidelines to enforce Section 18 of the Small Business Act which requires all Cabinet Ministers to review the impact of their actions on SMEs. The only rational course of action is to shut it down and collapse it into a nimble, strategic unit in the Presidency,” said Swanepoel.
“To meet the objectives outlined in the NDP, we need a vastly improved understanding of the business dynamics of small firms, which includes their diversity, characteristics, needs and constraints.
“Our study, whose methodology will be peer-reviewed, will do this. Without a coherent, single-minded strategy based on proper evidence we will simply fail to unleash the entrepreneurial value that drives innovation and the potential for SMEs to grow their enterprises to employ millions more South Africans,” Darroll explained.
“By the time of the Presidential Jobs Summit, in September, we will be in a position to present path-breaking information from our study that could radically transform what we think we know about small businesses,” Swanepoel highlighted.
The results of the baseline research, as well as position papers to support an advocacy campaign, will be released in early 2019.
“We need to get a debate going, and this is what we’re trying to achieve,” Swanepoel averred.