The Small Business Institute (SBI) said South Africa needed to re-evaluate its approach to economic growth, as its research showed that middle-income countries were on a trajectory to outperform the country in gross domestic product growth (GDP) growth in the next two years. Picture: Waldo Swiegers
The Small Business Institute (SBI) said South Africa needed to re-evaluate its approach to economic growth, as its research showed that middle-income countries were on a trajectory to outperform the country in gross domestic product growth (GDP) growth in the next two years. Picture: Waldo Swiegers

SA needs new growth approach as it lags its peers, says SBI

By Given Majola Time of article published Apr 15, 2021

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DURBAN - THE SMALL Business Institute (SBI) said South Africa needed to re-evaluate its approach to economic growth, as its research showed that middle-income countries were on a trajectory to outperform the country in gross domestic product growth (GDP) growth in the next two years.

South Africa is classified as an upper-middle-income country.

SBI chief executive John Dludlu said the country needed to embrace failure as a feature of growth, admit it and learn from it.

“We hope this work will encourage leaders to concede that it’s time to re-evaluate ideological-driven ideas and explore more practical and growth-orientated approaches,” he said.

The research demonstrated that South Africa had not achieved the minimum criteria for GDP growth above population growth for almost a decade, nor had it achieved any of the aims set by the National Development Plan (NDP).

The SBI commissioned the research, and researchers from the Small Business Project (SBP) conducted the studies with funding support from Exxaro.

The research identified three important challenges and presented three general recommendations for the government’s consideration.

It said the country should strive for transparent, evidence-based policy-making, as solutions tended to be illogical when the problem was not clearly understood.

Second, it recommended regulations that shifted necessary rules to red tape.

Last, it said the country should sort out infrastructure to provide a stable power supply, roads and water infrastructure maintenance and development. SBI said the private sector could help and be incentivised for its expertise.

To overcome the blockages that undermined South Africa’s digitalisation, the research suggested that the country prioritised long-term investment in digital and relevant softer education and skills development for students, the teachers who teach them, and the employed requiring re-training.

It also suggested that it sought public-private partnerships in building govtech solutions to e-governance, innovative institutions, and the execution of digitalisation capitalise on data.

In its paper titled “Local champions” , the SBI said this taught them about their can-do pragmatism, experimentation, and proactive engagement, which strengthened co-operation, built trust and created a sense of belonging. It said that business chambers actively fostered networking with peers to “take hands” and share experiences and learning from others who had similar challenges.

Big businesses could explore partnerships, and identify and connect with local champions who demonstrate leadership to help empower the communities in which they operated.

Dludlu said the data showed that small businesses were disappearing at an alarming rate in South Africa even before the Covid-19 pandemic.

“New business entry into the category is not sufficient to offset the exit of established businesses over the entire period our research investigated,” he said.

Regarding developing a compelling reason for a simplified path for the formalisation for small businesses, SBI research said there needed to be a move from a compliance and enforcement regime to one in which businesses could see the social and commercial benefits of formalising.

The creation of an enabling environment was said to be achievable when pursued through the implementing transparent and methodical regulatory impact assessment methods to improve the quality of evidence-based policies, laws and regulations, Parliament strengthening parliamentary oversight, and for the government and business in partnership to support and conduct a “reduce red tape challenge”.

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