BUSINESS LIVE / 04 APRIL 2019 - 09:22 / THEMBELA NTLEMEZA
Female entrepreneurs face more barriers than male counterparts in a sector that delivers key innovations
The finance minister did not spare us harsh truths as he delivered the 2019/2020 national budget speech in Cape Town on February 20. A small-scale farmer himself, Tito Mboweni used the aloe ferox to illustrate that if we tirelessly and patiently nurture our seed, it will likely yield fruit even in the toughest of conditions, much like the hardy, drought-resistant aloe plant he held up to the audience.
As he further unpacked government expenditure as projected in his fiscal framework, he announced an allocation of R481.6m to the Small Business Development Agency (Seda), an entity established to uphold the government’s small business strategy. While the minister did not break down how much of the portion is set aside for women-led businesses, he did articulate that the provision of funds is meant to “expand the small business incubation programme” headed by the government.
This is, of course, a move in the right direction as the role of small business in driving economic development is well recognised in both the local and global context. Not only do small enterprises fuel economic growth through employment creation and direct contribution to the national GDP, they are also, and mainly, engines of innovation. In fact, several studies argue that in certain sectors, small firms tend to innovate at higher rates than their larger counterparts.
These infant businesses engage in higher innovation activity in attempts to compete at levels comparable to those of older, larger companies. In SA, many start-up companies led by both men and women are a result of innovation created from institutional research and development. In agreement, the SA National Innovation Survey reported an innovation rate of 51.7% for small firms between 2002 and 2004. The survey results further listed enterprises with five to 100 employees as the most innovative of all small enterprises in the country, with an innovation rate of 39.3%.
In addition, the study found the innovativeness of SA small businesses to be higher than that of the Organisation for Economic Co-operation and Development (OECD) countries.
Thus, the integral role of the small enterprise sector, in which women are active participants, is apparent in both the National System of Innovation (NSI) and the broader SA economy. As such, our government elevates these entities as central to socio-economic development in the country.
During the 2018 state of the nation address, President Cyril Ramaphosa stated: “The ultimate growth of our economy will be sustained by small businesses … it is our shared responsibility to grow this vital sector of the economy.”
This commitment to small enterprise development was first reflected in the 1995 white paper on small, medium- and micro-sized enterprise (SMME) development, in which the government pledged a formal strategy to extend support to small businesses, both financially and otherwise, to create an enabling domestic market environment for goods and services offered by SMMEs and to weaken regulatory hindrances for SMME business activities.
While the government’s various support programmes are undoubtedly making a difference, barriers to SMME growth still abound. According to a 2017 study conducted by SME SA, these include unfavourable economic environments; limited financial and human capital; market uncertainty; stringent regulatory environments that underpin bureaucratic processes; limited access to investment information; high tax rates that hinder revenue growth; limited access to credit; and inadequate infrastructure, among other things.
These challenges are sadly compounded for female entrepreneurs. SME SA reveals that, compared to men, women face greater obstacles in obtaining funding to develop businesses as investment decision-makers are predominantly male figures who tend to “fund people who look just like them”. Similarly, despite records showing higher loan repayment rates for women, securing credit is much more difficult for female business owners. This, too, is due to the sexist attitudes of banks and other lending groups.
In this respect, it is warranted that we concern ourselves with questions such as how much of Mboweni’s R500m allocation to small business development will benefit women entrepreneurs? Of the reported 34% women-led SMMEs in SA, how many will get a piece of the pie?
The Water Research Commission is leading by example in supporting women-led small enterprises.
The commission has formed collaborations with women entrepreneurs and researchers involved in developing innovative solutions to address some of the country’s water challenges. Among these businesswomen is a young entrepreneur who has designed a grey-water harvesting system that treats used water for domestic re-use, a businesswoman who has co-invented a method and plant for treatment of sulphate-containing wastewater, a researcher whose technology uses fly ash to neutralise acid mine drainage and reduce toxic element concentrations in acid mine drainage streams, and others.
Granted, challenges facing women-owned enterprises require more than blanket-approach financial solutions, but a fair share of Mboweni’s pie would go a long way towards an enabling entrepreneurial environment for women.
• Ntlemeza is technology transfer officer at the Water Research Commission.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER