NOBUNTU HLAZO-WEBSTER: The ANC’s neglect of SMMEs is holding SA’s economy back

Small and medium-sized enterprises (SMMEs) form the backbone of our economy, contributing 34% of the GDP and providing jobs for roughly 60% of the labour force. Yet despite their essential role they face chronic neglect from the very government structures that should support them. The department of small business development, led by minister Stella Ndabeni-Abrahams, has become emblematic of this neglect. 

Ndabeni-Abrahams’ history of underperformance is not new. Her prior tenure as communications minister was marred by delays to crucial digital migration projects and the mismanagement of spectrum allocation. These failures have followed her into her new portfolio. She has attended only one portfolio committee meeting this term, ignoring critical discussions that affect thousands of struggling businesses. 

Despite this, the minister continues to trumpet “clean audits” as a measure of success, diverting attention from real indicators such as SMME growth or job creation. She paints a rosy picture of departmental success even as SMMEs around the country struggle, and in many cases shut down entirely, due to a lack of effective government support. This discrepancy between glossy reports and the grim realities faced by SMMEs has gone unchecked for far too long. 

The numbers do not lie. Though the department claims to have achieved 85% of its targets, spending 98% of its budget, these are surface-level statistics. One of its critical agencies, the Small Enterprise Finance Agency (Sefa), achieved a dismal 30% of its targets for the 2023/24 financial year despite spending 88% of its allocated budget. Financial support is a primary need for SMMEs, yet Sefa continues to fall far short.

The department appears more focused on box-ticking than achieving actual growth for SMMEs. For instance, it meets its key performance indicators by counting the number of “businesses supported”, yet fails to measure the real outcomes of this support such as increased revenue or job creation.

The Small Enterprise Development Agency (Seda) incubation programme, intended to nurture emerging businesses, appears more like a vehicle for cronyism than real enterprise support. The auditor-general has flagged these incubators for their poor performance and evidence suggests they often exist to award contracts to service providers with connections in the department rather than to help entrepreneurs. Recently, Seda officials were even appointed to the boards of incubators, creating a concerning conflict of interest and limiting accountability further. 

‘Fiscal dumping’

Equally troubling is the “fiscal dumping” seen in programmes such as the Informal Micro Enterprise Development Programme. Just before elections beneficiaries receive equipment that often goes unused, creating the illusion of support while leaving small business owners no better off. Such stunts may create impressive statistics but provide little long-term value to the recipients. 

A recent oversight visit to the Northern Cape exposed this issue clearly. Many SMMEs had ostensibly received training but had little to show for it in terms of tangible benefits. It became glaringly evident that government-funded business incubators often serve as smokescreens for channelling taxpayer money into pet projects benefiting well-connected individuals.

Take, for example, the agricultural “incubator” funded by Seda in the Northern Cape. Branded as a programme to support small business development in the province, it receives millions each year to provide “training” to local beneficiaries. Yet, on closer inspection the facility resembles anything but an incubator.

With its conference rooms and poetry spaces it seemed more like an event venue than a centre for fostering agricultural innovation. Despite its generous funding it fails to meet key performance indicators or accountability standards, revealing a trend of fiscal dumping and electioneering under the guise of development support. This model, replicated across provinces, highlights the need for more transparent allocation of small business development funds, free from politically driven motives.

This façade of support is not accidental. The department’s reporting methods seem tailored to obscure, rather than clarify, the department’s performance. The portfolio committee has frequently criticised its failure to distinguish between types of SMME support, particularly financial and nonfinancial assistance, making it impossible to assess the true impact of its programmes. This lack of transparency conceals the limited support reaching intended beneficiaries and keeps consultants and service providers well paid while entrepreneurs languish. 

The time has come to demand accountability. We must consider whether this department requires a complete overhaul, perhaps moving it back under the department of trade, industry & competition, or if the minister herself should step aside. SA’s SMMEs deserve more than box-ticking and fiscal dumping — they deserve a department truly committed to their growth. 

For a country where small businesses are critical to economic stability, the current state of affairs is untenable. Real change is needed to ensure SMMEs not only survive but thrive, securing a better future for all South Africans.

• Hlazo-Webster is an MP and Build One SA’s deputy leader.