A new review has painted a troubled picture of South Africa's Department of Small Business Development. Its recommendations may be key to fixing this.
The department (and its minister, pictured above) has faced criticism that nearly two years since its inception it has little to show for itself.
The review stems from an order made by the National Assembly’s small business development committee last year that the department carry out a review of its programmes, following concern over its failure to develop a proper strategic plan.
Auditing firm Sizwe Ntsaluba Gobodo, which undertook the review, told the committee in November that the scrapping of a number of its programmes and the relocation of some to other state entities could free up a quarter of the department’s budget (it totalled R1.1 billion or $69m in 2015/16) to scale up or restructure several more promising programmes.
The review said the department should:
The state has long fallen short on evaluating its small business programmes. When small business fell under the Department of Trade and Industry, evaluation work - if it was carried out at all - was few and far between and not easily available.
In addition Trade and industry never ran regular surveys on the sector, to track macro-level things like small business's contribution to gross domestic product (GDP), employment contribution and the start-up and failure rates of small firms.
Without consistent research and evaluation and monitoring of programmes, it is easy to understand why programmes are simply started and run without too much consideration for the impact they have on new firm creation, creating sustainable jobs and encouraging more innovation and exports.
Top committee needed
In the end the creation of a small business department may have likely compounded existing problems such as the state's poor co-ordination among other actors in the small business sector (see this earlier post).
The effect is that small struggling firms are thrown to the small business department, while the department, with a small staff and lower status, risks being marginalised in government and being turned into dumping ground for lesser able civil servants.
More effective might be a small business function in The Presidency or a high-profile committee headed by the president and staffed by heads of agencies and private-sector organisations that assist SMEs (similar to Malaysia's National SME Development Council).
The best way for any government to help small businesses is to strip away as much red tape as possible, hire better and more accountable public servants and incentivise the private sector - big firms and organisations - to ratchet up support to small businesses (this earlier post suggests where the department can start).
The obvious vehicle with which to do so are the country's BEE codes - particularly the requirement that companies spend on buying from and assisting small black firms.
The department needs to show how it has helped facilitate more support to the sector and how it has made it easier for business owners to do business. But without the figures to back these up, it might well be a wasted exercise.
Part of this article first appeared in Financial Mail on January 28 (see it here). Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a