The high failure rate mentioned (67percent by the SMMEs fourth year) indicates that more is needed. The ultimate performance indicator is the unemployment rate. At 26.7percent we are in a national crisis. Seventeen million people depend on social grants and about 9million are unemployed.
Human beings have the unfortunate capability of acclimatising to almost any environment. Joblessness and consequent dependence on the charity of state and private donors has come to be accepted as normal. But it is grossly abnormal.
Another potentially self-defeating tendency is the inability to see how an individual’s actions contributes to a macro-level problem and eventually comes back to impact them individually. Everyday symptoms include low voter turnout, willingness to offer a bribe to traffic officers, littering, etc. As South Africans, we seem blind to the economic impact of buying foreign-made products at the expense of locally produced goods. We are similarly apparently blind to the detrimental impact of buying from a large corporate entity rather than a small local business.
SMMEs employ 60percent of our labour and contribute about a third of our GDP. In China, they employ 90percent of labour, contribute 60percent to the GDP and are responsible for nearly 99percent of new jobs. Donald Trump’s recent attempts to alter the US trade balance with China shows just how effectively China has managed to force business in and with their country in the Chinese favour. This has generated market access opportunities for Chinese companies while erecting barriers to foreign-produced products. I am not advocating protectionism, but the ultimate performance indicator, the unemployment rate, points to a resounding success for China at 3.9percent. The US jobless rate itself is 4.1percent. Yet the two are still fiercely fighting hard to create and retain jobs!
South Africa’s National Development Plan (NDP) targets a 6percent unemployment rate by 2030. To be on target, we should have been at around 16percent by now. We are 10 years behind schedule, and this should be resulting in national panic sobered with a review of the NPD and its implementation strategy.
One may think “Well, nothing to do with me. Unemployment is all because of greedy corrupt politicians and that’s Cyril Ramaphosa’s problem... Thuma yena!”
But it is your problem and you are the cause. It results in you paying one of the highest personal tax rates in the world, and having to roll-up your window at traffic lights to signal an approaching beggar to move on to the next car. Something as simple as checking the source when buying fruit and veggies at a supermarket, or better yet, at a local spaza shop, is an act that will lower your income tax rate, VAT and eventually improve your quality of life.
Proudly SA has not been able to effectively change the national psyche to buy local and small businesses. To be fair, they cannot do it by themselves.
The buy local and buy from small business campaign should be a collective effort of the economic cluster ministries: Treasury; the departments of small business development, economic development, trade and industry, agriculture, rural development and land reform, as well as provincial governments, municipalities, etc.
Such a campaign should also be directed at the government in general and corporate SA. The 30percent target set by the B-BBEE Codes of Good Practice is simply not enough. We should be aiming for 60percent.
Mashimbye notes that Proudly SA intervenes once SMME development has taken place from various incubators and development entities. His organisation comes in at the tail-end of the process. With all due respect, this is an incorrect approach. Proudly SA should come in at the beginning of the process.
Putting SMMEs through three years of development and then hoping to find market opportunities afterwards has been the norm locally. It has clearly had very little “return on (a lot of) run-around”.
Sadly, it has resulted in tens of millions of wasted development funds. Without a clear market opportunity directing development interventions, we have a confused mess, heavy on unnecessary training and exhibitions, but very low on impact.
The truth is that black SMME owners have development and training fatigue.
Karabo Mashugane is the chief executive of 20/20 Insight - specialists in B-BBEE advisory, supplier development and SME financing.
- BUSINESS REPORT