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By Alan Shannon, Executive for Client Engagement, Private Clients and Small Business Services at Nedbank.
Small, medium and microenterprises (SMMEs) make up the majority of businesses across the world. In fact, around 90% of all businesses are small to medium enterprises, providing around 50% of all employment opportunities. Of course, to be effective in delivering on their vitally important role of contributing positively to economic growth and development, SMMEs need an enabling environment, underpinned by growth-friendly policies and strong government support.
While there has been much talk by stakeholders is the public and private sectors about creating such an entrepreneurship-focused business environment in South Africa, little of substance has materialised. However, from the most recent State of the Nation Address (SONA) by President Ramaphosa and the National Budget Speech by Finance Minister, Enoch Godongwana, it appears that the tide is finally shifting as government increasingly recognises that it has to do whatever it can to cultivate small-business growth, as it one of the few remaining available levers to pull to address pedestrian economic growth, increasing unemployment and unacceptably low levels of economic inclusion.
Evidence of this recognition, and hopefully a resulting sincere commitment to SMME development, was clearly forthcoming when the President used his SONA as a platform to stress government’s commitment to cutting red tape regarding foreign direct investments. While this is not directly aimed at enabling SMME growth, there will be a significant positive knock-on effect for smaller businesses if international business investment resumes.
However, government is also clearly intent on delivering a variety of other initiatives aimed at directly enabling the establishment, survival, and growth of small businesses across the country. Arguably, the most telling of these is the establishment of a dedicated team mandated to investigate and address business-limiting bureaucracy and regulations. The President also expressed the government’s commitment to reviewing the Business Act and other relevant frameworks to make it easier to do business in this country.
Even better news for SMMEs is government’s commitment to redesign the small-business loan scheme to make it more effective in helping small businesses bounce back from the ravages of Covid-19. While we still await the full details of this review and redesign, the hope is that the R20 billion in funding – offered via loan guarantees and equity-linked loan support – will find its way to small and medium businesses that desperately need it, particularly those that operate in the informal segment of the economy and find it impossible to meet the qualifying criteria for traditional credit opportunities.
The 50% increase in the employment tax incentive to a maximum monthly value of R1 500 is also a valuable underpin to small-business growth potential, provided those businesses are encouraged and enabled to take up this incentive. This is going to require more than the Minister encouraging SMMEs to take up the offer; it requires a significant awareness and education effort from government.
In fact, this education and awareness component of SMME development and support cannot be overlooked. While government appears committed to creating a business environment that is conducive to growth, it is only one side of the SMME enablement coin. Incentives eased regulations and financial support can be effective only if small-business owners take full advantage of them. That is why it is vital that all stakeholders in the future of small and medium businesses in South Africa commit to helping SMME owners understand the incentives available to them and help them in accessing those benefits.
From a private sector perspective, this support needs to go much further than early-stage financial assistance. If and when SMMEs begin to flourish (as we all hope they do) as a result of the initiatives put in place by government, those growing businesses then need the support of institutions that are fully committed to their success, whether that commitment takes the form of funding, mentoring, advice, the provision of business-building products and solutions, or even the meaningful integration of SMMES into large business supply chains.
Ultimately, we are all stakeholders in the SMME segment of our economy. In fact, our futures (directly or indirectly) depend on its success. We cannot afford failure, and we also cannot leave it up to government alone to secure success.
There’s no more time to talk about what government should be doing. It’s time to invest the effort and resources needed to make South Africa’s SMME sector the economic engine room of our country that it can and must be. The economic future of our country literally depends on it.
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Alan Shannon ,Executive for Client Engagement, Private Clients and Small Business Services at Nedbank
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