A since defunct five-year long incentive to encourage private sector organisations to roll out incubators helped develop almost 4,000 small businesses, the Department of Trade and Industry revealed in a recently published report.
Since 2012/13 the department’s Incubation Support Programme (ISP), which was suspended in November last year, covered between 40% and 60% of the costs for private organisations and companies to set up an incubator.
In this time the ISP supported 53 incubation projects with R911 million in grants, to develop 3,908 small businesses.
The department has previously claimed that in the first year of the programme it supported 30 incubators to launch with funding of R817m, helping to create 19,546 jobs. This suggests that each firm created at least five jobs.
This is markedly more than the number of jobs the average firm supported by Small Enterprise Development Agency (Seda’s) incubators created in the same time period.
Over this time Seda incubators assisted about 2,500 entrepreneurs or businesses a year, creating about one job per business assisted (data is drawn from Seda annual reports). The Seda programme currently has 62 incubators.
However in November last year the Minister of Trade and Industry Rob Davies (pictured above) suspended the programme and replaced it with new the Strategic Partnership Programme.
The new incentive’s main focus is to strengthen supplier development and inclusion of black suppliers in the value chain.
The change comes after the department in 2015 said it had to reject a large number of applications because many applicants had failed to understand the criteria needed to qualify for the incentive. In some cases people had failed to bring on board an industry partner or wanted funding for things that were not deemed as incubators.
The department at the time launched an incubation handbook to offer applicants clearer guidance on what constituted an incubator.
The figures from the department suggest that it's incentive programme -- which helped big companies and organisations to support small businesses -- has been arguably way more successful in creating jobs than Seda's incubation programme.
The private sector then may be far more successful in incubating small firms than the government. This should leave the state with something to think about.
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