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Small Business Sector Is Gradually Breathing Life Into The Economy

Small Business Sector Is Gradually improving

Our small business sector is gradually breathing life into the economy if figures mentioned by Small Business Minister Lindiwe Zulu in her budget speech in Parliament two Thursdays ago are analysed. These figures justify the creation of this ministry.

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To release the full potential of our small business sector and entrepreneurship in general, our universities must be at the epicentre of entrepreneurial support. First the numbers from Zulu.

According to her, and in terms of figures from the Small Enterprise Development Agency (Seda), the contribution of small and medium enterprises (SMEs) to gross domestic product is growing and now just under 60 percent. Seda commissioned the reputable Stellenbosch University based Bureau of Economic Research (BER) for the research.

The BER points out that, in 2010, SMEs contributed 18 percent to gross value added in 2010 and in 2015 the contribution had increased to 22 percent. There are numerous breakdowns which tell the complete story. However, it is figures from Sars, though they look modest, that tell the exhilarating story of a small business sector coming to life. Collections for pay as you earn increased from 57 percent to 59 percent of the total; contribution by small, medium and micro enterprises to the skills development levy increased from 51 percent to 54 percent. Corporate Income Tax from 65 percent to 67 percent and Value Added Tax from 57 percent to 58 percent.

The contribution of Small Businesses to the Unemployment Insurance Fund increased from 62 percent to 64 percent. Zulu’s flagship programme, the National Gazelles, is also showing positive results. None of the 40 Gazelles selected in 2015 collapsed and, instead, turnovers are growing and they collectively employed 32 people.

There was growth in the small business sector despite a depressed economic environment and, in block letters, the black small business community still trapped in a colonial economy. Thus, we can only unleash the full capacity of black entrepreneurial zeal if our universities play a greater role. We must avoid the usual simplistic and consistent blame on the regulatory environment. Indeed, regulations and policies are a problem, but this is but part of the story.

Firstly, entrepreneurship is a tripod involving the entrepreneur, his/her community, and the institutional environment.

The institutions environment includes formal and informal rules. The formal institutions are the rules, regulations and policies by the government and the business sector itself; and the informal institutions are the norms and values that guide specific societies.

Strangely, talk of the regulatory environment never includes rules by business and social norms. Yet, these make or break businesses. Secondly, the economic history of a region or community influences the levels of sophistication, entrepreneurial activity and finesse.

Because of apartheid, the emergence of entrepreneurship in black communities was an exception rather than the norm. Thus, new black entities competed with mature entities in developed markets and the odds were heavily loaded against them. This is where universities come in handy as a better and objective understanding of environments is required to guide interventions.

The “holus bolus” removal of regulations will see a wholescale decimation in our small business sector. Rather than knee-jerk calls to remove regulations, our universities can better placed to guide on programmes that must assist black entrepreneurs. This does not mean other efforts must be excluded.

A study of the small business in the US sees every university has a small business centre which works closely with local government. Interventions are based on the realities of the local environment and not on what Brazil, India or China are doing. It is only South Africa that plays emphasis on overseas programmes, as if there are no brains in the country.

True, multilateral organisation bring in valuable experiences on what has failed or succeeded elsewhere. It might help if we learnt from South Korea how they used links with overseas companies and multilaterals to develop their economy.

Overseas know-how must be filtered through domestic universities who know local dynamics better and can best tell if imported experiences can assist. In short, local universities unlock the value in our communities.

Regrettably, the Treasury still has to be convinced that local must drive development but, unfortunately, it is just love with solutions from overseas. At one stage the Treasury boasted of a link it had with Harvard. As pointed out above, small business activity is generated within communities, in a local context, and these overseas organisations know zilch about our environment.

One sincerely hopes new minister, Malusi Gigaba, will help free some of his staff from this colonial mindset; or is it capture? We have 23 universities with many, like the University of Pretoria (UP), doing fantastic work on local entrepreneurship. UP even enjoys international prestige for its work in local entrepreneurship. Yet they are not recognised at home.

Once more, our small business sector is showing signs of life and for it to blossom let the realities in the environment, as interpreted by our universities, dictate interventions.

This not only generates life in the sector, but it also creates knowledge that builds a vibrant and growing economy. Fortuitously, Zulu and director-general Edith Vries are sold on this route and talking partnerships. These partnerships with local universities will take us to the promised land.

Dr Mazwai is special adviser to the Minister of Small Business Development, but writes in his personal capacity.


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