Frontline Africa Advisory

More Needs To Be Done To Facilitate The Participation Of SMMEs In Creating Jobs And Growing The Economy

More Needs To Be Done To Facilitate The Participation Of SMMEs In Creating Jobs And Growing The Economy

In the past decade Small, Micro and Medium Enterprises (SMMEs) have demonstrated their ability to stimulate economic growth and contribute to employment and the reduction of poverty. China is a great example of the contribution that can be made by SMMEs to economic growth. SMMEs in China account for at least 60% of GDP and generate as many as 82% of the employment opportunities in the country. With a 3.61 % unemployment rate and 6% growth rate, the promotion of SMMEs in China is a well-orchestrated plan meant to transform the country’s economy.  

South Africa should look to accelerating the promotion of SMMEs as catalysts for economic growth and addressing the current socio-economic issues faced by the country. The Department of Small Business Development (DSBD) was created in 2014 to facilitate the development and growth of small businesses and cooperatives to contribute to inclusive and shared economic growth and job creation. Thus far, the Department has not done enough to propel SMMEs to the next level.

For a country desperately in need of high economic growth and a decrease in unemployment and poverty, a lot more support needs to go into developing SMME to ensure their sustainability and ability to create employment opportunities. This onus should not only be placed on the door of DSBD, but government as a whole and business as well. This goes from lessening the regulatory burden on SMMEs, paying them on time and providing access to market.

Executive Director of the Small Business Institute (SBI) Bernard Swanepoel stated that late payments have been called the “assassin of small businesses” and many big businesses are treating small businesses as a line of credit. He further made the point that “Small businesses need predictable cash flow to gain traction, pay their employees, market their products and services, and invest in their businesses”. Often small businesses have no recourse and cannot afford to go the legal route to force big companies and government to pay in time and they lack bargaining power cannot afford to ruin these relationships, as it would mean the death of their business.

South Africa’s SMMEs challenge is access to market opportunities. Government has created a number of platforms and opportunities for small businesses to access funding, however, it has not addressed the challenge of helping them access procurement and supply chain opportunities in both the public and the private sectors. Enterprise Supplier Development programmes (ESD) are just one of the elements of BB-BEE and are considered vital for teach potential entrepreneurs how to create a sustainable business that will grow and increase job creation, which in turn contributes to economic growth. However, the commitment from big business in creating such programmes has been less than satisfactory, largely due to lack of buy in or enforcement and punitive measures of BBBEE codes. For ESD programmes to be meaningful and have a long-term impact, they require buy in from executive structures of South Africa’s large corporations and not be seen as merely tick-box exercises.

At the 5th National Small, Medium and Micro Enterprises (SMMEs) Policy Colloquium, former Minister of Small Business Development announced that a national strategy was being developed to address the negative impact of red tape on small businesses and cooperatives. The National Strategy on Red Tape Reduction could potentially be the well-orchestrated plan that South Africa needs to increase the ability of SMMEs to survive, to create the jobs we need and to transform the country’s economy.  

Given the South Africa’s latest growth and employment trajectories, government needs to do whatever it takes to create the most conducive environment possible for SMMEs to grow. Without it, the National Development Plan’s target of raising SMME contribution to GDP to between 60-80% by 2030 and generating 90% of the 11-million new jobs our country is be rendered a pipe dream. 

Written by Plantina Tsholofelo Mokone

Linkedin: Plantina Tsholofelo Mokone

Twitter: tmokone

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