The efficiency of securing regulatory compliance and the speed at which small and medium-sized enterprises (SMEs) are paid by private companies and public organisations are some of the biggest concerns for small businesses.
Small Business Institute (SBI) chairperson Bernard Swanepoel highlights the National Development Plan’s (NDP’s) goal to ensure the small business segment supports 90% of all new jobs created and emphasises that this implies that the responsibility is shouldered by small businesses and small business organisations and chambers.
However, the small business sector is fragile and is not achieving its potential, which must change if sustainable, inclusive growth is to be achieved.
South Africa has about 262 000 registered small businesses, he adds.
According to a baseline study done by the SBI, the difficulty of starting a business and doing business, as well as regulatory hurdles, has increased, resulting in a decrease in entrepreneurial activity.
Delays in processing regulatory permits and permissions, the efficiency of bureaucratic processes and difficulty in securing payments timeously must be urgently dealt with, says Swanepoel.
Public organisations and private companies take up to 120 days to pay small businesses. The SBI intends to gather information on the small supplier payment cycles of listed large companies and publicise these to put pressure on them to pay their small business suppliers in good time.
Withholding payment for such a long time for services rendered is tantamount to exploitation of small businesses, he avers.
Government has made repeated promises to pay small businesses timeously and has implemented a minimum guideline to pay for goods and services within 30 days, and the Gauteng province has pledged to pay suppliers within 15 days.
Swanepoel calls for the guideline to stipulate that payments be processed within seven days.
A key issue for small businesses is corruption, which contributes to the exclusion of small businesses from municipal work and larger projects, as well as a reduction in the availability of funds to provide services and development. He emphasises that corruption is a public- and private-sector feature and problem.
The governing African National Congress’s treasurer-general, Paul Mashatile, says a key role government and municipalities must play, following the stimulus package and the investment pledges announced by President Cyril Ramaphosa over the past few months, is to investigate the role played by, and ensure the involvement of, small businesses in projects and the roll-out of infrastructure.
This work also includes ensuring that projects are well defined and bankable, which is partly the role of government structures such as municipalities. The President has appointed a project management unit that will be run by The Presidency to support the planning and execution of projects resulting from investment or infrastructure development funds.
Mashatile, commenting on bureaucracy and regulatory red tape, emphasises that the delays and challenges can be dealt with if there is decisive leadership in monitoring and enforcing good performance and good governance.
Highlighting Rwanda’s progress in reducing delays in government processes and improving the efficiency of government operations, Mashatile says that this is based on a simple guideline that all civil servants sign performance agreements that reward good performance, but, if they fail to meet a minimum of 50% of their expected targets, they are dismissed.
“The problem with regulations is not the pieces of legislation, but how they are applied. Faster does not mean illegal. There must be oversight and environmental control, but these do not need to take two years to fulfil and gain approval or refusal. Regulations must enhance business, not hinder it. We can achieve similar standards of efficiency to Rwanda’s if there is good leadership.”
Department of Cooperative Governance and Traditional Affairs (Cogta) director-general Dan Mashitisho highlights the importance of good relations and engagement between SMEs and municipalities as critical for the success of projects.
Project-focused relations help to ensure that all parties – municipalities, large businesses and service providers and small businesses – engage fully with one another.
The role of municipalities and government is to ensure that the environment is conducive for businesses, especially small businesses, by executing their duties effectively and efficiently. However, he also calls on small businesses to obey municipal by-laws and to abide by regulations, including formally obstructive regulations that have been relaxed.
Cogta is helping to coordinate infrastructure development activities and projects resulting from investments and development funding in 57 priority municipalities, which focus on providing integrated service delivery. The intention is to ensure that SMEs, which are crucial as engines of economic growth, are accommodated.
“Projects have been mapped out for the short, medium and long term, and we want to invite SMEs and SME organisations to determine how they can contribute to these projects,” says Mashitisho.
“To create the jobs envisaged in the NDP, we must change the way we operate. If we ignore SMEs, which make up 90% of formal businesses, employ 60% of the workforce and contribute 35% to gross domestic product, this target looks daunting,” says Mashitisho.