Nonprofit organisation the Small Business Institute (SBI) on April 14 released four additional papers in its series of six aimed at the promotion and development of small business in South Africa, during the Covid-19 pandemic and beyond.
The other two papers in the series were released previously.
The papers are a culmination of evidence including data from the ground and a mix of local and international studies.
Speaking during a virtual release of the papers, SBI chairperson Sipho Nkosi noted that small businesses were an outlier in the economy, only making up about 8% of formal employment, and therefore, efforts need to be redoubled to improve their contribution.
He indicated that the research therefore aims to assist decision-makers plan for small businesses’ recovery beyond the pandemic, by making policies that are informed by research and evidence.
Moreover, it provides guidance towards an inclusive growth path that enhances business success and job creation and directs the country to navigate its way into the digital future, he indicated.
The SBI, which commissioned the research, and researchers from the Small Business Project (SBP) conducted the studies with funding support from diversified miner Exxaro Resources.
The research identifies three important challenges traversing each topic, and then presents three general recommendations for government consideration.
Firstly, there is the recommendation to strive for transparent, evidence-based policy making, with the research finding that solutions tend to be illogical when the problem is not clearly understood.
Secondly, there is the recommendation to lighten the heavy hand of regulation that shifts from necessary rules to red tape.
Lastly, there is the recommendation to sort out infrastructure in the country. The research indicates that ranging from a stable power supply to roads and water infrastructure maintenance and development, the private sector should be allowed to help and should be incentivised for its expertise.
Moreover, there is the need to overcome the blockages that undermine South Africa’s digitalisation.
In this regard, the SBI recommends prioritising long-term investment in digital and relevant softer education and skills development for students, the teachers who teach them and the employed requiring re-training.
Secondly, there is the recommendation to seek public-private partnerships in building ‘govtech’ solutions to ensure e-governance, innovative institutions and the execution of digitalisation.
Lastly, the need for data is emphasised.
RESEARCH PAPER
The research paper titled ‘Local Champions’, outlines local champions’ can-do pragmatism, experimentation and proactive engagement which strengthens cooperation, builds trust and creates a sense of belonging.
The SBI advises that business chambers learn from them by actively fostering networking with peers to “take hands” and share experiences, learning from others who have faced similar challenges.
The SBI advises that big business should explore partnerships. The paper indicates that they should identify and connect with local champions who demonstrate leadership to help empower local communities in which they operate.
For government, the SBI notes that citizen groups at a local level are taking action to fix services and infrastructure in the towns and areas in which they live. It advises that they let them help to identify priorities, share resources and collaboratively build functioning communities with the basic services that people and small businesses require.
The second paper is titled ‘Formalisation for small businesses’.
It indicates a need to develop a compelling reason for and simplified path to formalisation for small businesses; and to move away from a compliance and enforcement regime to one in which businesses can see social and commercial benefits.
Recommendations in this regard include considering it as a continuum and a journey rather than an either or binary condition; enabling new pathways through digitalisation; and ensuing that school leavers are employable and have the skills to run businesses.
The next paper is titled ‘Enabling Environment’. The SBI indicates that this is achievable when pursued through a number of steps.
These include implementing transparent and methodical regulatory impact assessment methods to improve the quality of evidence-based policies, laws and regulations.
Moreover, Parliament should strengthen parliamentary oversight. The SBI indicates that it should invoke Joint Rule 159, a mechanism to improve parliamentary capacity to assess the impact of draft legislation presented by the executive.
The SBI says that government and business, in partnership, should support and conduct a Reduce Red Tape Challenge.
It proposes a crowd-sourced red tape reduction challenge similar to those held in Mexico and the UK.
It says that these entities should engage businesses and small firms to advise on what is costly, time consuming and does not provide adequate stakeholder protection. Moreover, it should let them inform the support they need to focus on running their businesses and not spend time developing compliance programmes.
The next paper, titled ‘Local Maybe Lekker, but is it Possible?’ examines the data available to assess the pragmatism of government’s continuing and accelerated emphasis on localisation policy.
The research focuses on three policy eras, namely Growth, Employment and Redistribution plan from 1994 to 2004; the Accelerated and Shared Growth Initiative for South Africa from 2004 to 2011; and the National Development Plan 2030 (NDP) from 2011 to 2018.
Research demonstrates that during these three eras, policies aimed at advancing the primary sectors of agriculture and mining failed throughout the two-decade period for these industries.
Records moreover show a countrywide total decline of all secondary industries, especially manufacturing, construction and energy production. The gross domestic product (GDP) contribution of the tertiary industries are muted for the period, exposing the absence of effective policies to accelerate their stimulation, the SBI notes.
The research also demonstrates that South Africa has not achieved the minimum criteria for GDP growth above population growth for the past eight to nine years, nor has it achieved any of the aims set by the NDP.
Moreover, middle income countries are on a trajectory to outperform South Africa, currently classified as an upper-middle income country, in the next two years.
The paper calls for localisation requirements to be sector- and context-specific, and cognisant of the availability of skills and demand within each sector, the potential for achieving market scale at competitive prices, and the cost of any additional government support or protection to the local industry.