If any small business owners were watching and listening to President Ramaphosa’s State of the Nation Address, hoping to hear the announcement of bold measures and reforms that would foster a more enabling environment for them and their enterprises, they would have been sorely disappointed. Following the tough economic year that was 2019, many small businesses have been struggling to stay afloat. If they weren’t suffocating in a stagnant economic climate, they were being strangled by the impact of fuel price increases or being kicked in the gut by load shedding.
A 2019 study by financial services company Retail Company showed that business was good for only 10% of SMEs, while the other 90% were buckling in the challenging conditions of a low-growth economy, unreliable utilities, and rising operating costs. These figures represent a grave looming threat given that collectively SMEs keep close to 11 million people employed, accounting for approximately 65% of all formal jobs.
When they’re not being subjected to service disruptions and late payments, they are held back by red tape and compliance regulations and facing shrinking demand as households and other businesses tighten their belts. These are thousands of hardworking South Africans – tradespeople, coffee shop, and restaurant owners, local grocers, spaza shop and shisanyama outlets – who get up every day to serve their communities and support their families. They deserve our admiration and more support.
Instead of announcing SME exemption from sectoral wage determinations and the more stringent labour law requirements or introducing much-needed tax exemptions to ease their cash flow burden, the President’s SONA contained a handful of small business-related promises that lacked innovation and hardly packed a punch. Without diminishing or negating the potential value that these could bring if effectively implemented, they do not represent a hope for small businesses that things might turn a corner for the better anytime soon.
The announcement that the National Youth Development Agency and the Department of Small Business Development will provide grant funding and business support to 1 000 young entrepreneurs in the next 100 days is laudable but is it anything new? Does it represent additional money to help young small business owners or would that have happened without the President’s announcement anyway? Hopefully, the President will provide clarity in his reply to this SONA debate.
The President also announced that the government plans to designate 1 000 locally produced products that must be procured from SMMEs, presumably by government departments and state-owned enterprises. While this is a noble sentiment, the implementation is likely to run into major obstacles for at least two reasons.
Firstly, it risks undermining the imperative for an objective and unbiased approach that should underlie procurement processes to ensure cost-effectiveness and valuefor-money. Lest we forget, it was the manipulation of state procurement processes for pre-determined ends that created the state capture monster that has ravaged our public finances and crippled state-owned enterprises and municipalities alike.
Which brings us to the second risk factor to these small business-boosting measures: the legacy of state capture means that the government will be hugely constrained to meet these commitments when budgets are increasingly going to shrink. Against the backdrop of declining economic growth, an increasing public debt-to-GDP ratio and tax revenue targets repeatedly being missed, the government is still struggling with a bloated public sector wage bill, deteriorating public infrastructure and the bottomless black holes that have been some of our bailoutguzzling state-owned enterprises.
Since 2014, Eskom has benefited from over R150 billion in bailouts and has had a government guarantee of R350 billion since 2012. SAA has had over R18 billion in bailouts since 2014 and a government guarantee of over R19 billion. And what do we have to show for all these billions? A power utility that can’t meet the country’s energy demand, hobbling an already strained economy, and an airline that is canceling flights and will soon have to start selling its routes. There isn’t even time to get into the SABC, Post Office and other SOEs.
These figures are not only a devastating indictment of mismanagement and maladministration under ANC misgovernance but also represent a tragic opportunity loss of what could have been achieved if those monies were used effectively, especially in aid of small business. Unless this government fundamentally shifts gear to position small business as the spearhead of growth and development, our future, Mr. President, will be one of doubt and despair.