As ‘rockstars’ of SA’s economy, SMEs need to be freed from red tape

Small businesses are the key to SA's economic development and yet many are struggling to survive, let alone grow and create employment. 

A recent Frank Dialogue on small business leadership, in partnership with Business Day Dialogues and the Unisa Graduate School of Business Leadership (SBL), asked a team of panellists about the impediments to small business leadership and entrepreneurship in SA and how these could be overcome.

The main obstacles to the success of SMEs are access to markets, the necessary financial support and government red tape, said minister of small business development, Stella Ndabeni-Abrahams.

She said the legal framework is being reviewed to improve the municipal bylaws that exclude SMEs, streamline licensing requirements, and to identify certain sectors reserved for SA citizens. Though government funding is available, it has been underutilised due to the government’s stringent regulations. She said space must be given to innovative rural enterprises.

SA must free up the small business economy, agreed John Dludlu, CEO of the Small Business Institute. However, legislation on its own is not enough and the government must commit to action.

The National Development Plan predicts that by 2030, 90% of all jobs will be created by small businesses. These are the rockstars of the economy, said Dludlu, and they need support to “start and run and grow” their businesses, instead of payment delays and being strangled with red tape.

In addition, dedicated efforts are needed to create an effective venture capital industry in SA to prevent the departure of local entrepreneurs to countries with better opportunities, he said.

“The one thing that every business hopes for is a growing economy,” said Andile Khumalo, chair of skills development practice, I Am An Entrepreneur. Local small businesses have to deal with a sluggish economy, load-shedding, red tape and lack of access to finance. Entrepreneurs are people who have the will to build their businesses, who see the benefit of skills development, and who create jobs as a result. They need mentoring and support, said Khumalo. 

Saki Zamxaka, CEO of the Gauteng Enterprise Propeller, criticised the government for tying up funds available for small business in unrealistic regulations. “Do away with rules,” he said, adding that the government needs an entrepreneurial approach. Municipalities need to be able to make allowances for what works for small businesses, despite the structural and legislative framework. 

Entrepreneurship is risky: only three out of 10 small businesses succeed, he said. Development finance institutions involved in this precarious market often concentrate on the failure of a business rather than examining the whole portfolio. The government needs to support these institutions to have a more entrepreneurial spirit and go where banks won’t. “Take risks,” he urged.

The government needs to walk the talk they’ve been having since 2003, said Colene Hind, lecturer in entrepreneurship at the Unisa SBL. Start-ups in SA continue to grow but are missing the resources to scale up amid unreasonable government regulations. 

“Entrepreneurship starts with a mindset,” she said. This mindset should be developed at school level, so that at tertiary level it can be evolved and aligned to the business world. Business schools should be focusing on teaching practical technological skills and solutions rather than producing leaders, she said. 

Watch the full discussion below: 

This article was paid for by Unisa Graduate School of Business Leadership.