SOUTH AFRICA has a long way to go before its support for business owners and entrepreneurs can come anywhere near to that of fellow emerging economy Brazil.
In many ways the two countries are similar in that they have large undeveloped informal sectors alongside relatively sizeable manufacturing and service sectors.
The model for Brazil’s successful small business agency Sebrae has appealed to South Africa and the two countries along with India, have shared best practices on the small business sector through an annual summit started in 2006, which is expected to be hosted in South Africa this year.
Sebrae’s technical director Luiz Carlos Barbosa also has a seat on South Africa’s National Small Business Advisory Council, which advises the minister on the small business sector.
Brazil has about 14.8 million small and micro businesses according to the country’s statistics unit IBGE, including 4.5 million formal businesses.
South Africa has close to 2.7 million small businesses, according to a 2006 report by the Small Enterprise Development Agency (Seda). About 600 000 of these are in the formal sector.
The number could well be larger, especially as the Companies and Intellectual Property Registration Office (Cipro) experienced a significant increase in new registration in recent years. The office now lists over 3.2 million (including 1.5 million close corporations) registered entities. However it’s a known fact that a large number of these entities lie dormant.
The South African government’s Seda serviced 199 830 business owners in the last financial year, up from 186 195 the year before. Brazil’s small business support organisation Sebrae assists four million entrepreneurs a year, according to the
Barbosa. Like Seda the Brazil organisation provides non-financial assistance, but is privately owned.
Yet going on the number of businesses according to Seda’s figures, South Africa should be supporting close to a million entrepreneurs a year if it intends to match Sebrae’s performance.
A key lesson that South Africa can take from the Brazilian model is how Sebrae has managed to forge partnerships with 2 500 organisations across Brazil, according to Barbosa.
Seda has battled to work with a number of provinces which have their own support agencies, namely Limpopo’s Libsa, the Western Cape’s Red Door, KwaZulu-Natal’s one-stop shops and Gauteng’s GEP. Seda’s chief executive Hlonela Lupuwana has said that it has agreed with the provinces not to open Seda centres in the same areas as these provincial offices, to avoid duplication of services.
The government could also learn from Sebrae’s focus, which divides its support between those businesses that have been operating for less than two years and those that have been running for over two years.
As this writer discovered during a visit to Brazil in 2006, Sebrae has also assisted small businesses to survive against more competitive larger firms, through its office in the southern city of Curitiba, which has helped business owners to set up buying and collective marketing associations in business various sectors.
In a 2005 paper by Lyal White, a research associate at the South African Institute of International Affairs, said Sebrae has succeeded in creating a well-established presence in Brazil.
South Africa however has some way to go in promoting its small business support organisations, as a study two years ago by the Centre for Innovation and Entrepreneurship at the University of Cape Town’s Graduate School of Business showed. The study which surveyed 10 500 youth entrepreneurs revealed that only 1.3% of Gauteng entrepreneurs and 0.5% of Western Cape entrepreneurs had accessed a Seda centre.
But it must be remembered that Brazil has a number of advantages of South Africa. One is that the South American country is far more entrepreneurial than its southern counterpart. One in eight Brazilians are involved in early-stage entrepreneurial acitivity, compared to just one in 12 South Africans, according to the 2008 Gem Report.
Sebrae also has more experience than Seda, having been in existence for 37 years, while Seda is a relatively new organisation having been launched in 2004, out of a merge of various organisations including Ntsika.
The Brazilian organisation also has a budget over 25 times the size of the R331 million allocated to Seda for the current financial year.
Brazil may be helped by a relatively higher gross domestic product per capita, but its secret seems to be in the way that Sebrae is funded – mostly through a 0.3% tax levied on large and medium firm’s payrolls.
If Seda were allocated a budget proportional to that of Brazil’s, based on its number of entreprenuers, the South African agency should expect to get well over R1 billion.
Seda’s chief executive Hlonela Lupuwana was not available to comment at the time of going to print.
This article appeared in Business Day on 22 September 2009.
Stephen Timm is a