WITH the elections just months away many will be hoping to see government up its support to small business in a bid to boost job creation. But despite a pledge to promote and assist the sector, government, say entrepreneurship experts and business bodies, has still far to go when it comes to assisting business owners.
While the taxman in recent years granted tax breaks such as Graduated Tax and a tax amnesty in 2007, and is expected to grant more tax breaks and incentives in this year’s budget, the Department of Trade and Industry, many say, has failed business owners.
Jerry Moloi, the chairman of the Soweto Business Executive Chamber (Soboc) which represents 432 members says his members are often taken from “pillar to post” when they try to access government support services.
Lesley Africa, CEO of the Western Cape Business Opportunities Forum (Wecbof) which has some 400 members, said the lack of competent individuals in government was a problem. He pointed to drawn-out process of applying for funding from the department’s Black Business Supplier Development Programme. “They (government) want to do enough, but it doesn’t filter down.”
Adding credence to his statements, a 2007 SMME study by World Wide Worx, which surveyed over 5 000 business owners, only 34% of respondents registered some level of satisfaction with government support programmes.
Much of the criticism has been levelled at government’s Small Enterprise Development Agency (Seda), intended as a first port of call for business owners looking for business assistance. But since it was set up in 2004 many have questioned its performance.
Last year Seda hit the spotlight with the departure of Seda CEO, Wawa Damane, who many slammed for her dismal performance at the helm of the agency. Damane has been replaced by acting CEO Hlonela Lupuwana, the former Chief Operating Officer for Enterprise and Industry Development in the Department of Trade and Industry, who has promised to clean up the organisation’s problems.
Mike Herrington, director of the Centre for Innovation and Entrepreneurship at the University of Cape Town’s Graduate School of Business, said much of the agency’s problems were down to poor management at many of its branches. Added to this he said many of the agency’s advisors lacked business experience and confessed that his experience in training advisors was like “hitting your head against a brick wall”.
Herrington said a study in 2007 by the Centre of Entrepreneurship in which 10 500 entrepreneurs between the ages of 18 and 35 were interviewed, revealed for example that just 0,2% of KwaZulu-Natal respondents had accessed Seda.
The agency is not the only organisation to come under fire. Those organisations tasked with financing small business – Khula, the Industrial Development Corporation and the National Empowerment Fund (NEF) – have also recently been heavily criticised for not increasing lending to business owners.
At the centre is Khula, which since its inception in 1996 as the government’s finance agency, has failed to hand out more than 1 000 guarantees to business owners in any single year.
The agency does not lend direct to business owners, but rather through banks and intermediaries. Last year Cabinet approved in principle the decision to turn Khula into a bank to up lending.
Wolfgang Thomas, Professor in Economics at the University of Stellenbosch Business School, cautioned against the decision by government to start a bank for small businesses and believed it wouldn’t prove viable against those banks in the private sector.
Thomas, who wrote 1995’s White Paper on the national strategy for the development and promotion of small business, said the central challenge facing government was a “lack of imagination” among those overseeing small business policy and a failure to retain competent personnel. He believed the answer lay in government fostering more private-public partnerships.
“They (government) have to realise that improvement in the environment won’t be helped by one dramatic legal change, there will have to be an attitude change,” he said.
The move to turn Khula into a bank has already been endorsed by the National Small Business Advisory Council, launched in 2006 by government to advise the Minister of Trade and Industry, Mandisi Mpahlwa on issues effecting small business. Yet the council has been criticised by business chambers as being out of touch with business owners.
In response the Thami Mazwai, the council’s deputy chairperson said the council had last year hosted various stakeholder meetings with business owners and local business support organisations. He said the council was currently meeting to discuss what interventions it could put in place to assist business owners in the current economic downturn.
Herrington said the consensus of entrepreneurship experts in countries across the world was that governments should busy themselves with creating an environment that is conducive to business growth, leaving the dispensing of finance and support to the private sector. But to date he said government had done “nothing” to cut red tape.
Even the setting up of a task team in 2005 by former president Thabo Mbeki to look into granting small business exemptions from labour and other regulations had yielded little change for businesses, after the team reported that various exemptions were already in place for small businesses.
While no legislative changes have been effected, a regulatory impact assessment unit in the Presidency to review all new legislation affecting small business, has been set up.
Defending government’s support for small business, Mandisa Manjezi the chief director of small business development at the Department of Trade and Industry, said “big strides” had been made in supporting the sector in a “challenging and dynamic environment”.
Manjezi said despite challenges Seda had set up a national network with 51 branches and 90 enterprise information centres across the country. An estimated 90 000 individuals visited its branch offices across the country annually she said.
She conceded that many of the current challenges Seda was faced with had come about as a result of a lack of resources necessary to build additional capacity.
Manjezi also defended the performance of the government finance institutions and said while Khula had handed out R298m in finance in 2007 up on R63m the year before, the NEF had overcome serious challenges to become “one of the most innovative agencies in government”.
“Currently, we have identified as key issues going forward, the capacity building of Samaf (SA Micro Finance Apex Fund) and its intermediaries, to provide support for the financing gap between R10 000 to R250 000, the review of the Khula delivery model as well as enhanced programmes for co-operatives, and coordination and co-funding of Seda-related activities across government, amongst others,” she said.
This feature appeared in Finweek magazine on 5 February 2009.
Stephen Timm is a