You cannot solve decades-old problems by trying the same thing over and over and expecting a different result. It’s time for a state of emergency on jobs. It’s time to undertake a radical economic transformation of a kind never seen in South Africa.
It’s time to shut down the Ministry of Small Business which in the three years since it was founded has done nothing of any significance to grow the sector it was supposed to serve, merge the ministries of Economic Development and Trade and Industry and get someone with a respect for the good business can do, to run it.
Business needs to be moved front and centre of the national agenda. Research this week by the Small Business Institute (SBI) shows the extent of the crisis in small and medium enterprises that are floundering under the burden of regulation and red tape and need to be freed up to do what they do best. Grow.
Businesses need to be helped, not hindered and tied up in knots. No entrepreneur I have ever spoken to has told me that they got into it for the admin. Yet the burden of compliance adds layers of cost, time and complexity, that the SBI stats show are sucking the lifeblood out of a sector that should be booming.
“The cruellest hoax that has been played on young people in South Africa,” economist Xhanti Payi told me recently, "is that they have been told to start a small business.”
There are many reasons why there are so few small businesses in South Africa. Mainly, it’s just too hard.
The Small Business Institute research shows:
• 95% of businesses in OECD countries are SMEs and employ up to 70% of all workers
• They make up 60% of GDP
• SA has fewer than 250,000 SMEs - not six million, as postulated previously
• In SA, 56% of jobs are provided by the country's 1000 biggest companies and government
• SA entrepreneurs can spend as much as nine days a month on compliance
• The sector’s contribution to job creation is falling
• The NDP target of SMEs supplying 90% of jobs in SA by 2030 is a pipe dream.
The SBI study into the state of the small business sector lays bare some deeply uncomfortable truths about what is really going on in the sector.
Radical transformation would require a courageous abandoning of red tape on an unprecedented scale. It would require the long-promised speeding up of payments to small businesses by both private and public sectors. State payments are currently hamstrung by gross incompetence and the countless measures introduced over the years to try to prevent the wholesale theft of state money.
Large corporations should be obliged by law to also pay in 30 days. Company registrations, VAT and Tax registrations should be automated and happen within hours, not days or weeks and a range of restrictive regulation should be shelved at least until South Africa develops a vibrant sector.
One entrepreneur I know loves the fact that it’s so difficult to start a business. “Running a business is hard,” he tells me and the regulation is a barrier to entry.
He loves the fact that he has grown into a significant player in his chosen field and doesn’t have tons of competition. That’s the reality of business in South Africa. It’s so hard to compete that large corporates are protected from much of the radical innovation taking the rest of the world by storm. What the South African government has chosen to do rather than help small businesses to grow has been to put additional burdens on large companies.
It turns out everything you thought you knew about small business and its pivotal role in creating jobs is wrong. If it wasn’t for the corporate sector and government, South Africa’s already shocking unemployment rate, around 40%, and considerably higher for younger people, would be far worse.
With little competition coming through to challenge their dominance, heavily regulated large corporations simply hire in the help they need to work through the mud of compliance. That creates jobs, sure, but it doesn’t expand the business sector. It doesn’t make it more vibrant and competitive. Rather it simply stifles emerging businesses while allowing large firms to cement their dominance.
It’s time for some radical, economic transformation. Otherwise all we will get is more of the same and that is good for no-one.
Bruce Whitfield is a multi-platform award winning financial journalist and broadcaster.
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