SMME ministry is the real deal for jobs dilemma

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LettersBox http://www.sxc.hu/

I read the opinion piece by Pierre Heistein (Business Report, April 24) with utter disbelief. I thought as the convener of UCT’s Applied Economics for Smart Decision Making course, he should know better.

He has no clue what he is talking about.

That’s the biggest challenge with South Africa’s armchair critics from the ivory towers of our education system. Their solutions to economic problems are bereft of reality and wisdom from the streets.

One of the advantages of a business organisation such as Nafcoc [the National African Federated Chamber of Commerce and Industry] is that we are in touch with the challenges of entrepreneurs at grassroots level. From the farmers of Malamulele in Limpopo to the spaza shop owners of Soweto, they share with us the challenges of running businesses on the fringes of the economic mainstream and we are able to advise the authorities about appropriate strategies in addressing the challenges of the SMME sector.

And one such intervention is the ministry for small, medium and micro enterprises, which will focus solely, in an activist role, on developing this important sector of our economy, which employs almost 67 percent of our workforce.

Nafcoc first called for the establishment of an SMME ministry at the dawn of our democracy. The fact that the ruling party has seen the light 20 years later is immaterial. The important fact is that we have all the empirical evidence we need and experience to make a compelling case for such a ministry.

Big business, despite sitting on a R500 billion cash pile, has not moved a finger in terms of investing in the economy, nor has it created sufficient jobs over the past 20 years to make a dent on the unemployment figure of 26 percent.

Economists such as Dawie Roodt and many of his ilk have argued passionately that businesses are not created to create jobs but to make a profit. Big business the world over is shedding rather than creating jobs as they mechanise to maximise profits to shareholders.

In the next 50 years, studies are indicating that formal employment will be a thing of the past in favour of self-employment and a bulging informal economy. This should be supported rather than discouraged. An SMME ministry is one intervention we need to make such a future possible for South Africa.

Nafcoc recently sent a delegation to South Korea and was amazed at how a country that was once ravaged by civil war is a shining example of what government could achieve when it puts SMMEs at the centre of its economic development strategy.

Aside from the advanced infrastructure of Seoul, where there is free internet connectivity in major centres, it has been able to transform itself from an agrarian economy in 1960 to a knowledge-based economy today – all in one generation.

At the dinner hosted by our ambassador, Hilton Dennis, for the SMME delegation, he told us that the South Korean economy was smaller than that of Ghana in the 1960s. Their gross domestic product (GDP) is now 10 times that of Ghana at more than $1 trillion (R10.66 trillion). With a GDP per capita of $22 500, it is ranked among the top world countries.

Importantly, this phenomenal economic growth was state led, with clear instructions as to what was expected of the private sector and its role in supporting SMMEs. As early as 1965, the government made it mandatory for commercial banks to extend at least 30 percent of their loans to SMEs; this ratio was increased to 45 percent in 1992, significantly improving the financing environment for SMMEs.

In 1982, the government set up protectionist measures, which blocked large multinationals from entering designated industries, including barring big corporations from tendering for big contracts in the public sector. As we all know today, in South Africa we have gone in the opposite direction and almost all major contracts have been awarded to the big companies, with some even colluding to steal taxpayers’ money during the 2010 World Cup build programme.

However, there is a silver lining in this storm. The recently announced Transnet R50 billion locomotives build programme, where clear instructions have been given to multinationals such as General Electric to localise certain components by using local black manufacturers, is a good example of transferring skills and expertise and boosting the local industrial base. This will go a long way towards broadening South Africa’s industrial capacity and developing black industrialists.

 

Instead of the current approach, where SMME-related institutions are strewn all over the government bureaucracy, with the SMME ministry entrepreneurs will be able to knock on [its door] one day and access all the assistance they need, from access to capital, business advice and support to other services.

For instance, the Small Enterprise Finance Agency (finance support) is under the Ministry of Economic Development while the Small Enterprise Development Agency (non-financial support) falls under the Department of Trade and Industry. This does not make sense and the SMME ministry will help clarify this confusion and unnecessary duplication.

Khaya Buthelezi NAFCOC head of communication



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