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A ministry dedicated to small and medium-sized enterprises (SMEs). This is what was promised by ANC secretary-general Gwede Mantashe at a recent breakfast meeting of the SA Chamber of Commerce and Industry.
Many of you reading this are involved in the SME sector. Perhaps you even have or run your own business. What, if anything, could a ministry for SMEs do for you? Mantashe says that small businesses are critical to the growth of the economy and deserve to be supported – of that there is no doubt. But starting an entirely new ministry sounds more like election-year talk than a well thought out plan. When economic policy is proposed it needs to be evaluated not on the thought behind it, but on how effectively it can be implemented.
A new ministry is murky waters as it needs to be made clear what its goals are, why those are different from any existing ministry, and what tools it has and is allowed to use to achieve these goals.
Internal conflict in government departments is a great barrier to progress and stripping the Department of Trade and Industry (dti) of its SME portfolio to transfer it to a separate ministry is likely to cause friction between the two departments.
National departments, unfortunately, are territorial and similar problems of conflict can be seen between the Department of Agriculture, Forestry and Fisheries and the Department of Environmental Affairs; and between the Department of Basic Education and the Department of Higher Education and Training.
If a ministry for SMEs were to be set up, where would it have jurisdiction that the dti does not? And who would have the final say when it overlaps? The credibility of the announcement is also highly questionable. Mantashe stated that part of the motivation for a new ministry was to halt the erosion of mom-and-pop shops; small businesses that he says are being swallowed up by foreign migrants who don’t pay tax and often don’t obey certain laws.
This cushioned xenophobic statement could hardly be less true. Most often foreign migrants start businesses where they didn’t exist before; employing and training local South Africans who didn’t have jobs before. They are no more prone to tax avoidance or law breaking than a local South African would be and the tax issue would be largely solved if the government made it easier for foreigners to formally register their businesses.
If the ANC wants to take serious action on promoting SMEs then it must look to change things at small business level, not government level. The money and manpower that it would take to set up a new ministry could be put to far better use.
Let’s rather increase education around SMEs. Young South Africans should be taught how to make work, not how to find it. Let the schools system prepare them for risk and the value in taking it; help them to identify opportunities; and give them the knowledge needed to tackle the legal and administrative procedures of running your own business.
If the government really wants to flex its administrative arm, let’s have it create structures that recognise the informal economy as a powerful force in local growth and not something that should be formalised, structured and suffocated. A ministry dedicated to SMEs is a top-heavy misdirection of resources to a problem that needs bottom-up support. We can only hope that talk of the idea remains in the media archives once the elections are over.
Pierre Heistein is the convener of UCT’s Applied Economics for Smart Decision Making course. Follow him on Twitter @PierreHeistein.