A small business ministry might seem like the ideal way for South Africa to boost support to small businesses but experts, business owners and business representatives have all questioned whether setting up a ministry is the best solution to improving support to small firms.
Small business groups have long been calling for a ministry for small businesses – with Black Business Council (BBC) being the latest to do so, when it made an appeal in October to President Jacob Zuma.
In November the chief executive of the SA Institute of Professional Accountants (Saipa) Shahied Daniels told Finweek that the setting up of a ministry, or another office or function is necessary to help drive small business growth and ensure that support to the sector is more co-ordinated.
BBC vice-president Lawrence Mavundla said the black business body had held a meeting with Zuma in October in which the proposal was raised. Zuma’s spokesperson Mac Maharaj was unable to confirm whether the meeting took place.
Mavundla said Zuma had told the BBC that in principle he is in support of the idea of setting up a small business ministry.
“The president can see our view, but he wishes for us to assist him for others to see like us,” said Mavundla.
Since October BBC had been canvassing support from a number of parties and had met with the National Assembly’s trade and industry portfolio committee as well as with the ANC’s economic policy head Enoch Godongwana.
Mavundla said the BBC planned to call mass meetings in the run up to the opening of Parliament in February next year, in a hope that Zuma will make an announcement on the ministry in his State of the Nation Address.
Mavundla argued that a small business ministry is necessary because small enterprises have for long not received the necessary support it deserves.
He claims those countries that have ministries – which include among others India, Indonesia, the UK, Australia and Zimbabwe – have more successful small business support policies.
He also did not believe that the designation of deputy trade and industry minister Elizabeth Thabethe to represent small business, had made helped raise the standing of small business, adding that he “didn’t think she is dedicated to small business”.
He said the housing of the Small Enterprise Finance Agency (Sefa) under the Department of Economic Development, while the Small Enterprise Development Agency (Seda) falls under the Trade and Industry, had created “serious confusion” among business owners as to which department to turn to for help.
But many question whether setting up a ministry dedicated to small firms will help.
Some like Black Like Me founder Herman Mashaba, who is also chairman of the Freemarket Foundation, say that the country already has too many ministries and that another one will only be an unnecessary expense for the taxpayer.
Mashaba believes there should be less government interference in business and that some of the country’s labour laws should be done away with.
Carl Lotter of the South African Small and Medium Enterprises Federation (Sasmef) – a small business advocacy group – said setting up a small business ministry would be a “waste of money”.
Lotter believes what is needed is not a ministry for small businesses, but a small business support organisation modeled on Brazil’s Sebrae – namely one that is a non-governmental organisation, that is funded by a state levy paid by businesses, has three ministers on its board and relies on good regulators and legislators and private business people.
Sasmef together with the University of the Western Cape have been running a series of roundtables to discuss ways to improve small business support and Lotter said a roundtable in the new year would address the question of whether a small business ministry should be set up.
Wolfgang Thomas, who helped draft the 1995 White Paper on Small Business said at the time of drafting the White Paper he had advised against setting up a separate ministry for small business as it risked deepening the division between large and small firms.
However 17 years on Thomas, who is also a member of the governance committee of Stellenbosch University’s Centre for Corporate Governance in Africa, believes that the Department of Trade and Industry lacks capacity and isn’t sufficiently staffed to build insight into diverse areas such as rural support, the informal sector and various sub-sectors.
However he argued that what the country needed isn’t a ministry but a body based in the Presidency which could offer more overarching support than a ministry could.
Brazil’s congress of deputies (lower house) last month approved the setting up of a small business secretariat in its presidency and Thomas suggested this is a better way to go than setting up an entire new ministry.
He said the body could fall under office of Deputy President Kgalema Motlanthe, in something similar to the Office on the Status of Disabled Persons which was later closed when the Ministry of Women, Children and People with Disabilities was set up.
He said such a body should allow for regular meetings to take place between business and the government and for regular progress reports to be made to the cabinet on small business challenges.
Regular report backs could help such a council become more effective than the present National Small Business Advisory Council, which is made up of eight experts reports and was set up in 2006 to advise the minister.
Thomas was once a member of the council which has long been criticised by small business bodies as having done little to improve the impact of small business support, while being labeled as untransparent, because it does not publish minutes.
Small business policy analyst Septi Bukula, of Osiba Research, also backs the choice of a co-ordinating council in the Presidency over a new ministry.
Bukula, who was one of four experts that carried out a Small Business Review for the Department of Trade and Industry presented in December 2011, cautioned that the formation of a small business ministry risked “ghettoising” small businesses.
He said when the review was carried out the issue of a small business ministry did come up and that unlike his four other colleagues who include an academic and a former boss of a development finance institution, he was “probably the lone wolf” that was not in favour of setting up a ministry.
Bukula said South Africa instead needed something similar to what Malaysia’s National SME Development Council, which is headed by Prime Minister Najib Razak and includes various institutions and departments involved with small business support. It even includes the Reserve Bank.
He said such a co-ordinating council could be held in the Presidency and could include representatives from the departments of trade and industry, economic development and science and technology, as well as the various agencies that support small business, including Seda and Sefa.
His idea for a co-ordinating council was contained in the SME Review presented to the Minister of Trade and Industry Rob Davies last year.
However the department’s chief director of enterprise development Mojalefa Mohoto said the Small Business Review committee’s idea to have a co-ordinating council on small business set up in the Presidency remained a proposal at this moment.
This article originally appeared in the Mail & Guardian on 21 December 2012.
Stephen Timm is a