THE government has made little impact on assisting small business, despite investing in a number of initiatives in the last 15 years to support the sector. This according to a report by business consultancy SBP.
The report titled “Small business development in South Africa” released last month, said in the last 15 years government’s initiatives had “fallen disappointingly short of aspirations”.
Quoting figures in the Global Entrepreneurship Monitor (Gem) 2008 report, SBP said South Africa lags behind other developing countries in promoting the growth and sustainability of small businesses.
“On start-ups, figures show that eight in 100 adult South Africans own a business that is less than 3.5-years-old – significantly behind other low to middle income countries, where on average 13 out of 100 adults are building new businesses,” it said.
The Gem Report also reveals that only 2.3% of South Africans own businesses that have been running for over 3.5 years, indicating a high failure rate among start-ups – with South Africa ranking 41st out of 43 countries in the prevalence rate for established business owner-managers.
The SBP report said the “rejigging” of institutions and the merge of organisations, including Ntsika, to form the Small Enterprise Development Agency (Seda), has been “less successful than intended”. It argues that government’s approach has not been “sufficiently nuanced or differentiated”.
To drive growth and job creation, it suggests government concentrate more on productive private sector – more formal businesses and less on micro-enterprises.
“Opportunity-driven entrepreneurs generate new business ideas, mobilise resources and ultimately create jobs,” said the SBP report.
It points out that the 2008 Gem Report notes that the average number of jobs created by opportunity-driven firms is 4.4 per business, compared to just 1.6 for necessity or survivalist firms.
SBP also argued that government’s primary role should be that of a facilitator, by among others promoting entrepreneurship, cutting red tape, improving access to finance and information, supporting incubator facilities, improving access to markets through business linkages and improving reliable statistical data on the small business sector. Private-public partnerships should also be encouraged, it said.
Kerrin Myres, the director of the Centre for Entrepreneurship at Wits Business School said the government had focused too much on business owners’ problem of access to finance and not enough on what entrepreneurs really lack – which is business skills.
Myres said the focus on finance has led government institutions to place a high demand on business plans, which had simply created an industry of business consultants churning out business-plan templates.
Though Myres said more emphasis should be placed on job-creating small firms, she didn’t believe the country should stop supporting start-ups. However she said a clear division should be made between assisting start-ups and existing businesses, both of which have vastly different needs.
But Septi Bukula, a small business analyst of Upstarts Business Strategies, believes that government isn’t targeting enough support at start-ups. He pointed out that most of government’s grants and funds aimed at small enterprises, require that an entrepreneur be in business for “some time” and said from this anecdotal evidence he would dispute that not enough formal businesses were being reached.
He said government needed to improve awareness of its programmes, make it easier to access them by limiting the amount of paperwork and reach more regions, particularly rural areas.
It was also important for government to partner with business associations and private support organisations if it was to make progress in assisting small businesses. Said Bukula: “If they (government) think they can seek to reach business owners with their own infrastructure we will be at it for some time”.
He said international research had shown that business owners are more confident dealing with organisations such as business associations and with book keepers who they trust, than with government agencies like Seda.
Seda’s chief executive Hlonela Lupuwana was not available for comment at time of going to print.
This article appeared in Business Day on 22 September 2009.
Stephen Timm is a