The following speech was delivered in Parliament today by the DA’s Shadow Minister of Small Business Development, Toby Chance MP, during the Budget Vote on Small Business Development.
Before I continue, let me congratulate and welcome our new Deputy Minister, Honourable November, to her position. We wish you well in your important endeavours.
It is now abundantly clear, three years after the Department of Small Business Development was formed, that it is invisible to 97% of businesses in South Africa.
Let me repeat that. The Department of Small Business Development is invisible to 97% of businesses in South Africa.
How can I so confidently make that assertion?
Well, consider these facts.
When you run a business, you go to the Department of Trade and Industry (DTI) to register it, SARS to get a tax and VAT number, the Department of Labour to register for the Unemployment Insurance Fund (UIF) and to join a sector bargaining council. You approach your local municipality to get the required permits to operate, or any number of provincial boards to obtain further licences.
If you need some finance, chances are you will go to friends and family first, followed by your bank or a local money lender if you are operating in the informal sector.
To find customers, you will set up shop and advertise or knock on the doors of government or business to give you orders.
Where is the Department of Small Business Development in all this? It’s nowhere to be seen!
If you want a grant, a loan or advice on how to run your business, you may be lucky to stumble on an office of the Small Enterprise Development Agency (SEDA) or Small Enterprise Finance Agency (Sefa), both agencies of the Department.
But once there you have to wade through a mass of bureaucracy even to get an interview. Seda’s pre-consultation document checklist lists no fewer than 16 documents required to qualify.
As a small business, you apply to DTI to get a BEE rating, not Minister Zulu’s Department. Incredibly, neither Seda nor Sefa are BEE accredited which means businesses using their services do not get BEE points! It seems the Department is living in a different universe to the rest of us.
To further emphasise this point, the 2017 Enterprise and Supplier Handbook does not once mention the Department of Small Business Development. The new Small and Medium-sized Enterprise (SME) Fund set up by big business is by-passing the Department and dealing directly with Treasury. And the 2017 Global Entrepreneurship Monitor (GEM) Report, released this week, offers a dismal account of the Department’s role in stimulating small business.
So to continue my tradition in budget speeches, I hereby declare that hitherto, and with deference to Marvel Comics, Minister Zulu shall be re-named, the Invisible Minister!
According to varying estimates, including Stats SA, the DTI and SARS, there are up to 3 million businesses operating in South Africa. Of these, 95% are Small, Medium and Micro-sized Enterprises (SMMEs), the Department’s target market.
What positive impact is the invisible Minister Zulu and her department having on these businesses?
By the Department’s own reckoning, it supported around 80 000 businesses in the last financial year.
That’s 3% of all the businesses in South Africa. Yes, just 3%. Now you see what I mean when I say, invisible!
Through the National Gazelles Programme, the National Informal Business Support Programme, the Seda Enterprise Incubation Programme, the Cooperative Incentive Scheme, Sefa’s direct and indirect loan schemes and the Department’s other programmes, it is barely visible to the massive majority of businesses.
The department is too internally focused. It’s conducting its third strategic review in as many years. Its top management is staffed by more acting than permanent positions. This year it failed to spend 7% of its budget, and now Minister Zulu wants more money. To become more visible, Minister? Treasury flatly refused.
So what, actually, is the point of the Department of Small Business Development? What is its purpose? How should we make it visible?
The Department’s mandate is to create a conducive business environment for SMMEs, as well as cooperatives. This means all, not just the tiny handful it’s supporting directly.
To make it visible, the DA would provide leadership to the entire entrepreneurial ecosystem in South Africa, which is sorely missing. This would start by leading Cabinet along a path of regulatory and labour reform to stimulate investment, growth and job creation.
It would mean cracking the nut of local economic development and directing resources there, where it matters most.
We would equip potential entrepreneurs with the attitudes, skills and resources to start and grow new businesses, then support them through extensive mentorship and market development programmes.
As renowned entrepreneur, Vusi Thembekwayo, said in a recent eTV interview, real transformation begins in the mind, not in government handouts.
It requires a change in mind-set, from one of dependency and limited horizons to one of growth, ambition and excellence. This begins in school and early childhood and is nurtured in the first years of employment.
Research has shown that getting onto the jobs ladder and acquiring skills is the most important determinant of continuing in employment later on in life. It also increases the chances of someone starting a successful new business.
To maximise this opportunity we would channel resources and effort to cultivate a culture of entrepreneurship for the millions with little hope of finding employment.
We would radically reform the section 12J tax incentive to make it more attractive for angel investors to invest in start-up businesses, particularly in townships.
And we would embark on a skills and learnership revolution, to capacitate people with the will to start a business but without the knowhow to do so.
We would invest in infrastructure and support, such as Wi-Fi, free web hosting and places to do business, to overcome the disadvantages so many of our citizens face when starting and running a business.
Unfortunately, the ANC in the Portfolio Committee has also shown its colours and short-sightedness, by declaring the DA’s private member’s bill on Red Tape undesirable.
It has thus thrown away the first opportunity it had to make the Department visible to all businesses, not just the pathetically small 3% it reached last year.
The invisible Minister Zulu is now the champion of diverting 30% of public procurement towards SMEs. While we agree that building public and private sector supply chains around small businesses makes sense to grow the economy, government must not repeat the errors of BEE which has favoured only a small, connected elite.
Until the department unshackles itself from its misguided obsession with state-led development, South Africa’s economy will continue to stagnate.
Only a credible growth strategy will stave off a further ratings downgrade for South Africa. This growth strategy must put small business development at the heart of government policy, not at the fringes where it has minimal impact.
Under the invisible Minister Zulu’s leadership, there is precious little sign government or her department will deliver on its crucial mandate.
Only the DA has the vision, programmes and capacity to unlock the potential of our businesses and entrepreneurs to accelerate growth from its miserable 1% today to the 5% needed to defeat unemployment and provide sustainable livelihoods for millions of our desperate people.