I recently took a small team of Nafcoc executives to the Indonesian Trade Fair, which attracts thousands of business people from all over the world. From the moment we touched down at Jakarta International, a deceptively small and underdeveloped airport when compared with the state-of-the-art and massive OR Tambo International Airport, one was taken on a journey of discovery of what the country’s international marketing campaign coins “Amazing Indonesia”.
As president of the National African Federated Chamber of Commerce and Industry (Nafcoc), I had been invited by the Pretoria-based Indonesian Embassy to address the Indonesia/South African Business Seminar about business opportunities in South Africa for the Indonesian business community as part of the Indonesian Trade Fair.
As usual, we South Africans like to punch above our weight, as small as we are, in terms of population size and gross domestic product (GDP) – we want the whole world to sit up and listen to us. This is a good trait in the DNA of our nation, but at times we need to humble ourselves and learn from other nations.
From the thousands of motorbikes that buzzed the streets of Jakarta like a swarm of bees, with as many as three family members on one motorbike, to the young manufacturers and green tea farmers (in their early 20s) who showed us samples of their products ready for the export market – I literally felt the economic heartbeat of this nation which is dominated by the small, medium and micro enterprises (SMME).
In our meeting with the Ministry of Cooperatives, Small and Medium Enterprises, we were amazed by the amount of detail in its SMME strategy and the lengths to which it is prepared to go to develop small businesses. From primary school education to tertiary levels, entrepreneurship is a key subject. There are also entrepreneurship incubation programmes at university level to groom future entrepreneurs.
And the numbers speak for themselves: in a country of about 250 million people, it has 55 million registered SMMEs receiving government support, financial or otherwise. SMMEs make up 98 percent of the Indonesian economy; more than 90 percent of new jobs are generated by the SMME sector; 56 percent of the country’s GDP comes from the SMME sector and they contribute 17 percent to the country’s exports. Big business only makes up 0.8 percent of this trillion dollar economy.
It is no wonder then that the unemployment rate is sitting at 5.6 percent compared with our stubborn 25 percent. This has a lot to do with a large segment of the population preferring to be job providers in the form of SMMEs than job seekers.
In contrast, about 15 million South Africans live off some form of state social grant. Small industrial zones that provided much needed jobs and livelihoods in the townships have become “ghost” towns and a safe haven for rogue and criminal elements. The 1 million jobs shed in the aftermath of the 2008 financial crisis have not been recovered.
On the other hand, rising from the lows of 17 000 points at the beginning of 2009, the JSE’s stellar performance continues unabated despite the poor economic data - rising to a record 44 000 points at the end of last year and analysts are predicting another record level for the end of this year. The structural weaknesses in the economy are not reflected in the equity prices which continue to rise on positive investor sentiment. However, during this period, very few jobs, if any, were created and the finance minister has predicted an insignificant 2.1 percent economic growth for 2013 rather than the required 8 percent to address our socio-economic challenges.
To make matters worse, the advent of shopping malls in black townships and villages has forced traditional black retailers to shut down shop – leaving many families destitute and adding more burden to the government’s welfare programme. Even those who managed to survive are facing fierce competition from the Somali and Pakistani traders who are rapidly taking over the spaza shop retail space.
The labour market environment has also taken a turn for the worse: with unrest, demands for above-inflation wages and poor socio-economic conditions in the mining sector, our chances of increasing much-needed direct foreign investment are dented each day. One of these setbacks was the announcement by BMW that it will not manufacture one of its luxury new models in this country because of our volatile labour market.
To echo the words of former Nafcoc president Sam Motsuenyane on receiving the Luminary Award from the Free Market Foundation earlier this month: South Africa must never be dictated to by the unions. We need a new social compact with the unions to help put South Africa on a faster economic growth footing.
With about 4 million unemployed youths roaming the streets and many more millions of South Africans having given up looking for work, it’s clear to Nafcoc that the SMME sector holds some answers to our challenges; and the Indonesians have demonstrated that it can be done.
The latter has augmented our resolve as Nafcoc to continue lobbying the government and the ANC, in particular, for the establishment of an SMME ministry that will give a special focus to this sector of the economy owing to its job-creation abilities.
During one of the presentations at the seminar at the trade fair, an Indonesian government official suggested that a second “i” be added to Brics, to make it “Briics”, to truly reflect Indonesia’s status as the rising economic giant of the East, alongside China and India.
The most inspiring experience for me was interacting with young people who had been to Europe to look for export markets for their chocolate product. They reminded me of my formative years in Mamelodi where my entrepreneurship scalpel was sharpened – installing household carpets. This later grew into a butchery and wholesale – making me my first million rand in the 1980s.
It was pleasing to see women doing it for themselves. I met a group who manufacture cane furniture for boutique hotels in France. They were looking for new export markets.
I also bought a few batik shirts, made famous by Madiba, from a woman-owned stall at the trade fair. Without wasting time, the stall owner was eager to enlist Nafcoc’s assistance in setting up her operations in South Africa to grow her business.
Interestingly, what the Indonesian government has done well is to tap into people’s enterprising spirit in seeking to grow its economy and alleviate unemployment instead of grand policies that benefit big business at the expense of the SMME sector.
Joe Hlongwane is the president of the National African Federated Chamber of Commerce and Industry and the chairman of Nafcoc Investment Holdings, known as Nafhold.