Government Role in supporting small business in South Africa
Ebrahim-Khalil Hassen http://zapreneur.com Economic Development Department Panel onGovernment’s Role in Supporting Small Business 29 May 2012 Centurion
FREEDOM CHARTER THE PEOPLE SHALL SHARE IN THE COUNTRY`S WEALTH! THE NATIONAL WEALTH OF OUR COUNTRY, THE HERITAGE OF SOUTH AFRICANS, SHALL BE RESTORED TO THE PEOPLE; THE MINERAL WEALTH BENEATH THE SOIL, THE BANKS AND MONOPOLY INDUSTRY SHALL BE TRANSFERRED TO THE OWNERSHIP OF THE PEOPLE AS A WHOLE; ALL OTHER INDUSTRY AND TRADE SHALL BE CONTROLLED TO ASSIST THE WELLBEING OF THE PEOPLE; ALL PEOPLE SHALL HAVE EQUAL RIGHTS TO TRADE WHERE THEY CHOOSE, TO MANUFACTURE AND TO ENTER ALL TRADES, CRAFTS AND PROFESSIONS.
The Small Business DebateAgency Structural• Less Red Tape, More • Monopoly Capital – squash Deregulation little guys like bugs BOTH APPROACHES FIND RESONANCE IN POLICY IMPLEMENTATION ? Issue One – Understanding SMME Sector Issue Two – Economic Deconcentration
Motivations to Start Business 40Work with the small 35.8 34.2 35businesses we have 30• Large numbers of 25 25.1 own account 20 16.6 workers 15 14 8.9• But, 10 7.3 5 2.9 1.9 1.8 understanding 0 differentiation very important FINSCOPE 2010, Authors Calculations
Number of Jobs by owners motivation100%90% 22.480% 43.070%60%50%40% 77.630% 57.020%10% 0% Opportunity Lost Job/ Unemployed Own Account Worker More than one Job FINSCOPE 2010, Authors Calculations
Jobs in Small Business By Activity 0 1 2 3 4 5 6 or more100%90%80%70%60%50%40%30%20%10% 0%
Registration Status By Net Profit Less than 25K 25k to 100 K 100K to 1 Million More than 1 Million 98.9100.0 90.0 80.0 76.5 70.0 60.0 50.0 40.0 30.0 20.0 11.9 10.2 10.0 1.5 0.7 0.4 0.0 0.0 Registered Not Registered
Lesson One WORK WITH THE SMALL BUSINESSES WE HAVE. UNDERSTAND THEM AND FIND WAYS TO SUPPORT OPPORTUNITY BASED AND EMPLOYMENT CREATING INITIATIVES. WHAT ABOUT NECESSITY DRIVEN BUSINESSES?
We must have a different kind ofmarket economy — one basedon a decentralised alliancebetween the little guy and thegovernment.Roberto MangabeiraUnger, 2001
The Number One Problem Facing Small Business DEMAND FOR PRODUCT Across all surveys that were reviewed WHY IS THIS? LACK OF UNCOMPETITIVEENTREPRENEURIAL ECONOMY EDUCATION
ECONOMIC CONCENTRATION• The picture that emerges is of a landscape inhabited by lumbering giants – corporates, parastatals and conglomerates – that can easily squash any smaller species that do not find a way of hanging on and moving with them.• Small Business Project, 2011
Concentration Reflected in the State Budget• Less than 1% of economic budget allocated to small business (2009 paper available)• Strong focus on IPAP, New Growth Path and Industrial Development Zones• R 350 billion to R 700 billion on nuclear• State Budget reflects and supports economic concentration
Examples• Nuclear energy• Dam building linked to large scale mining• Strong SOE support for aluminium sector and iron ore sectors• Limited legislative agenda focussed on• Frontier industries (Internet) virtually ignored, yet South Africa can create 150 000 jobs in the next two decades
Responses Needed• Economic Deconcentration Act – Large oligopolistic nature of the economy is a structural fault line (#ows). They are too big too fail. – US and other countries actively reducing the largeness of firms. – Incentives for linking small and larger businesses – Introduction of stronger venture capital fund role for government – Stronger support for franchising