How changes in the pipeline will aid small businesses
Amendments to the National Small Business Act are in the pipeline to update the definition of small business, Small Business Development Minister Lindiwe Zulu said on Tuesday.
She anticipated the amendments would be finalised by the end of the 2018-19 financial year.
Director-general Edith Vries explained at a media briefing on the department’s work that the act was last amended in 2004 and the definition of a small-, medium- and micro-sized enterprises (SMMEs) — based on turnover, assets and employment — was outdated.
"The world has changed," she said. Extensive research including a comparative analysis with other countries had been undertaken to update the definition.
The amendment bill will also provide for the establishment of an ombudsman-type body to arbitrate on matters related to small businesses, particularly the late payment of invoices, which has a crippling effect on them. The body would also arbitrate on exploitative and unfair practices as they relate to small businesses. "We feel we need to put something in place to protect SMMEs," Vries said.
Furthermore, the amendments will empower the minister to establish other entities, similar to the Small Enterprise Development Agency, and provide for the professionalisation of business advisors.
Zulu told reporters that the procurement policy that sets aside 30% for small- and medium-sized enterprises (SMEs) under the amended procurement regulations had already achieved successes. The policy was introduced in amendments to the regulations under the Preferential Procurement Policy Framework Act. It requires that government departments and entities procure a minimum of 30% of their goods and services from SMMEs.
"Already, between April 1 and November 30 2017, 81 of 184 national and provincial departments procured between 60% and 100% of their goods and services from SMMEs, and only 22 departments (both national and provincial) have not yet reached the 30% target," Zulu said at a media briefing on the work of her department.
She cautioned that it would take time to implement the regulations as processes had to be followed.
Vries estimated that just more than R70bn had been spent by national and provincial departments between April and November this year. Total government procurement this year would be about R700bn.
Zulu noted that the current economic climate of sluggish growth was particularly harsh for small businesses, which were heavily reliant on cash purchases for their survival. "These conditions have led to the demise of some small businesses in the large, informal business sector in particular," the minister said.
Providing a profile of the sector, Zulu said data suggested there were about 2.175-million privately owned businesses in SA, 2.15-million of which were SMEs. Of these, 1.5-million were not registered for VAT or corporate income tax and could, therefore, be classified as informal. About 150,000 were medium-sized businesses; 450,000 small businesses; and 1.3-million micro-enterprises.
Zulu said the contribution of SMEs to GDP was currently estimated to be between 42% and 47% but could be increased significantly. "It is possible for the contribution of small businesses to the GDP to increase to between 60% and 80%, and to account for 90% of the 11-million new jobs envisaged by the national development plan by 2030."
De Vries emphasised that the failure rate of small businesses in SA was no different to that in the rest of the world. It was important for the business idea to have a reasonable prospect for success and for there to be a market for the product envisaged by it.
Small Enterprise Finance Agency CEO Thakhani Makhuvha noted that most small businesses did not reach their second year if they did not receive nurturing and mentorship support.
Small Enterprise Development Agency CEO Mandisa Tshikwatamba said that, very often, businesses that failed re-emerged in a different form later, having learnt from their mistakes.