The Department of Small Business Development is considering creating a SME master plan, South Africa's Small Business Minister Lindiwe Zulu has revealed.
It follows Malaysia which in 2012 put in place a detailed SME Masterplan, containing a number of targets, including to increase the contribution of small businesses to jobs, gross domestic product (GDP) and exports by 2020 (see this post).
Delivering her department’s budget vote on Thursday, Zulu said a task team in her department made the proposal at the National SMME Policy Colloquium in October.
The colloquium is a partnership between the department and the Small Business Development Institute (SBDI) set up by former Black Business Council chief executive Xolani Qubeka.
In her budget vote Zulu said her department would by 2019 ensure the contribution of small businesses increased from 42% to 45% of gross domestic product (GDP).
In addition the department wants the number of small firms to increase from 2.15 million to 2.56 million and the number of jobs created by small business to grow from 7.33 million to 9.09 million.
Zulu said the contribution of small, micro and medium enterprises was still small - the sector contributed 40% of the R2.3 trillion ($174bn) generated by the private sector in the fourth quarter of 2016, according to Statistics SA's Quarterly Financial Statistics report.
She said if government departments and state entities heeded President Jacob Zuma’s directive to set aside at least 30% of government procurement budget of around R600bn towards small businesses and co-operatives, the contribution of the sector would rise.
However she said the contribution by small businesses continued to increase in terms of five tax categories between the last financial year and the year before:
In her budget vote Zulu highlighted a number of plans that the department aimed to roll out in the next financial year. These include:
In her budget vote speech Zulu also outlined a number of support initiatives that her department carried out in the last financial year (2016/17). These include:
For the 2017/18 year the department received an allocation of R1.2bn from the Treasury, of which 52% or R743m will go to Seda.
A third of its allocation or R484m, will go to four programmes: the BBSDP (R256m), CIS (R78m), Enterprise Incubation Programme (R49m) and the National Informal Business Upliftment Scheme (R99m).
Compensation of employees is allocated 9.5% or R139m, while Sefa’s total budget for the current financial year is R223.8m.
Zulu said despite teething problems experienced by her department since it was set up in May 2014, support for the small business sector remains “firmly on track”.
But DA MP Toby Chance said by the department’s account it had helped about 80,000 businesses in the last financial year – or about three percent of the about three million small businesses in the country.
He said while the department regularly complains that its fiscal allocation is too small, it under spent its budget from the last financial year by seven percent.
Declining entrepreneurial pipeline
The department will again have its work cut out. The latest Gem South Africa report – for 2015/17 - again paints a worrying picture of South Africa’s declining levels of entrepreneurship.
The percentage of adults involved in starting and running firms less than 3.5 years old fell from 9.2 in 2015, to 6.9% (about the same level it was in 2014).
The established business rate (adults running firms older than 3.5 years) remains one of the lowest in the world, at 2.5% (falling from 3.4% in 2015).
Most concerning is that the number of South Africans who intend to start their own business within the next three years has fallen by more than a third compared to 2013, and almost halved since 2010.
Just 10.1% of the adult population between the ages of 18 and 64 now intends to open a new business –down from 15.4% four years ago, and 19.6% in 2010.
The figure is less than half of the 26.0% of people in similarly structured (efficiency-driven) economies around the world who plan to open their own firms
Gem data (which Zulu refers to as "an opposing view) suggests much more needs to be done by the department.
The department must not only improve the quality and co-ordination of the state's existing support for small businesses - but it must do a lot more to get more adults interested in starting businesses and then staying in business.
A masterplan might help improve co-ordination, but more must be done to improve the quality of support as well. This will prove likely the hardest for Zulu to address.
Timm is a South African who writes on small business. Click here to sign up for the monthly Small Business Insight newsletter.
Stephen Timm is a