In radio and television interviews she comes across as eager and willing. But South Africa's new small business development minister Lindiwe Zulu, who was sworn in last week, may have underestimated just how hard her task ahead will be.
Despite the criticisms of many, like myself – who have pointed out the weaknesses of having a new ministry (see my previous blog article) – President Jacob Zuma elected to put in place the new ministry and Zulu was sworn in by Zuma last week in Pretoria (see below photo).
Yet Zuma's former advisor of international relations has little if no experience in business, let alone small business. This is worrying, as it might open her ministry up to being hijacked by lobby groups - such as the Black Business Council, which had long been calling for the new ministry.
But she remains resolute. Last week she told BusinessTech: “I don’t think this ministry would have been set up to failure. I have no space for failure. I am sure I will be able to fight for this at every level.”
She also told the business website that consultation and implementation will be her key areas of focus as she starts from scratch and that she would also be “looking at what other countries have done" (this last statement is an oft heard refrain in South Africa from those at the top).
In a recent interview she revealed that her ministry would at some time host discussions between small businesses and the unions on labour legislation. But she has cautioned against the workers’ rights being eroded. Again, an often-heard refrain from South Africa's ministers.
In the whole she seems to talk a lot about the informal sector, but next to nothing about the real job-creating firms - start-ups with innovative ideas. Her constituency rather, seems to be the thousands of struggling traders, rather than those - black or white - with the potential to create thousands of jobs. Both types of businesses have a role to play. Zulu must speak to both.
What must the minister do?
So what should Zulu do to help improve the government's small business support? Here are three main areas that the minister should focus on:
1-Improve co-ordination and monitoring
· Set up a more effective small business council (not the old National Small Business Advisory Council) where heads from the private sector and public agencies are represented and transparency is assured by publishing the minutes of meetings. This will provide a better voice for small businesses (Read my recent article detailing Malaysia's small business council).
· Set up a regular small business census to track in detail how the sector is performing. It's time South Africa had some real statistics on the sector, like India, Brazil and Malaysia do.
· Simplify the complicated definitions for small businesses that appear in the present National Small Business Amendment Act. If emerging peers like Chile and Malaysia can do it, so can we.
2-Partner with the private sector to deliver quality programmes to small businesses.
· Review the current incentives that the state offers small firms and look at more ways to partner with banks and large companies. The new Black Economic Empowerment (BEE) codes (set to come into force next year) and the Financial Sector Charter both offer an ideal way to do this. High-growth firms should have different programmes from micro firms (Read this article I wrote about the Financial Sector Charter).
· Build up the capacity of the Small Enterprise Development Agency (Seda) such that it can support both high-growth and informal traders. You can't have unemployed youths helping entrepreneurs - even if they happen to be informal-sector traders.
3-Look at more ways to reduce red tape, simplify procedures
· Consider blanket exemptions for small businesses from bargaining councils. In those sectors that have bargaining councils (they currently cover about a third of workers) small firms are expected to pay the same wages and perks as large firms. This is unfair. The current exemption system does little to remedy this as the exemptions are either for very micro firms (less than five workers) or run for often no more than a year.
· Push the National Treasury to move to procuring goods online (e-procurement) which will help reduce costs and bring more small firms into public procurement. It's a better way than putting in place set-asides which run the risk of creating serious distortions in the marketplace (Read this article I wrote in 2012 on e-procurement lessons from Chile).
· Work with the Companies and Intellectual Property Commission (CIPC) and the South African Revenue Service (Sars) which are both in process of reducing the company and tax registration burden.
· Publicise the use of regulatory impact assessments (RIAs) among government departments when new legislation is considered. RIAs are useful mechanisms in ensuring that any new legislation doesn't end up killing small businesses, but far too few government departments make use of them.
Stephen Timm writes on small business. He has written about policies and programmes in a number of emerging countries, including Brazil, India, Chile, Malaysia and South Africa. He currently resides in Sao Paulo, Brazil. Click here to read or download his reports.
Stephen Timm is a