Lindiwe Zulu. Picture: GCIS
Lindiwe Zulu. Picture: GCIS

The government remains confident of boosting the performance and success rates of small- to medium-sized enterprises (SMEs) despite slow economic growth, Small Business Development Minister Lindiwe Zulu said on Thursday.

Zulu was speaking in Parliament where she delivered her budget vote speech. She said her department would ensure growth in the contribution from SMEs to GDP from 42% to 45% by 2019. Her plan is to also grow the number of SMEs and start-ups from 2.15-million to 2.56-million, as well as increase the total number of jobs created by the sector from about 7-million to 9-million by 2019.

However, while the National Development Plan — the government’s blueprint for eliminating poverty and reducing inequality — has set ambitious goals for the SME sector, entrepreneurs continue to face challenges such as red tape, a lack of access to finance, and the high cost of doing business.

Zulu said the government is addressing these issues, conceding that, presently, the contribution from SMEs to the economy is far below its potential. According to the Quarterly Financial Statistics Report, the private sector earned a total of R2.3-trillion in turnover in the last quarter of 2016.

Large businesses, dominant in the manufacturing and trade industries, contributed 60% to this total, followed by small and medium businesses at 40%.

"We need to do better and match the global average, which shows small businesses sharing higher levels of participation in various economies. This is possible if we heed the president’s directive to set aside at least 30% of the government procurement budgets of about R600bn towards SMEs and co-operatives."

National Treasury recently gazetted the revised Preferential Procurement Regulations, which encourage the government and its entities to procure at least 30% of its goods and services from SMEs and co-operatives. Zulu said National Treasury was working on the Procurement Bill to streamline this process.

The "red tape reduction programme" has been enhanced to cover further analysis and research areas to minimise challenges faced by small businesses, Zulu said, and that her department is doing all it can to address the financing needs of the sector.

Through the Black Business Supplier Development Programme, the department has supported 611 small businesses and disbursed grants amounting to R268m during the 2016-17 financial year. During the same period, the Co-operative Incentive Scheme supported 237 co-operatives and disbursed grants to the value of R64.85m. More money will be allocated to these programmes that aim to stimulate the sector.

"I can now boldly assert that we have successfully placed small businesses and co-operatives firmly on the national agenda so that we bridge this divide between too big and too small. As a result of our efforts, we now have this high level of awareness [of SMEs] within government, which is encouraging," Zulu said.

However, DA MP and small business development spokesman Toby Chance said it is now abundantly clear, three years after the department’s formation, that its presence is invisible to most businesses in SA. "According to varying estimates, including Stats SA, the Department of Trade and Industry and SARS, there are up to 3-million businesses operating in SA. Of these, 95% are small-, medium- and micro-sized enterprises, the department’s target market," Chance said.

"What positive impact is the invisible Minister Zulu and her department having on these businesses? By the department’s own reckoning, it supported about 80,000 businesses in the last financial year. That’s 3% of all the businesses in SA. Yes, just 3%. Now you see what I mean when I say, invisible," said Chance.

Only a credible growth strategy will stave off a further ratings downgrade for SA, Chance said: "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 the government or her department will deliver on its crucial mandate."

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