Treasury's report reveals that support for small businesses is imperative
IOL - OPINION / 15 SEPTEMBER 2019 - 15.24 / MICHAEL BAGRAIM
Economic transformation and inclusive growth is on the lips of the whole of South Africa.
National Treasury and the minister of finance released a document last week entitled “Economic Transformation, Inclusive Growth, and Competitiveness; Towards an Economic Strategy for South Africa”.
The document is worth reading and digesting. Obviously, our minister of finance has brought together a highly-qualified team to look at the enormously destructive job losses and in a mere 75 pages has summarised some of our issues and our solutions.
SMALL businesses spend an aggregate of 4% of their turnover on red tape and rigidities in labour market institutions, and regulations do raise costs for SMMEs, finds a highly-qualified team brought together by the finance minister. Oupa Mokoena African News Agency (ANA)
They state as follows, “The combination of no growth and rising unemployment means that South Africa’s economic projectory is unsustainable”.
“The government should implement a series of growth reforms that promote economic transformation, support labour intensive growth and create a globally competitive economy.”
They outline many areas which need identification which include modernising network industries, lowering barriers to enter and addressing distorted patterns of ownership, this includes competition and small business growth, prioritising labour intensive growth in sectors such as agriculture and services; implementing focused and flexible industrial and trade policy, and promoting export competitiveness, and harnessing regional growth opportunities.
They look at small businesses in particular which must be supported through public procurement.
State-owned entities should draft tenders to create greater opportunities for small business.
Over and above this, there must be a commitment to a reduction of red tape which can unlock opportunities for small businesses.
As has been said many times, the government should consider full or partial exemptions for small businesses from certain kinds of regulations.
These regulations would include the onerous labour regulations.
There is a discussion about the need to continue to implement youth employment interventions, including training opportunities which would remove barriers to entering the labour market and apprenticeships.
Obviously labour intensive growth is necessary to reduce the high levels of unemployment. They mention that the South African economy is not creating jobs fast enough to match the increasing labour force. The discussion refers to the highest level of unemployment since 2003, and also that unemployment rates continue to be the highest among youth at 54.3% for the ages of 15 to 24 years.
They state that agriculture has considerable employment potential particularly to absorb less-skilled labour.
We do need to lower barriers with regard to small business, they specifically state “it is worth considering full or partial exemptions for SMMEs from certain kinds of labour legislation (e.g. the extension of bargaining council agreements)”. The report does mention that government does support SMME development through public funding, non-financial public support programmes, procurement policy, regulation and petition policy.
However, they do state that these interventions have had only varying degrees of success. Shockingly, they assess that small businesses spend an aggregate of 4% of their turnover on red tape and that the rigidities in labour market institutions and regulations do raise costs for SMMEs. The extension of collective wage agreements has been one of the biggest problems.
They state “if these wage agreements raise labour costs without concomitant increases in productivity, it reduces the global competitiveness of South African workers and may inhibit long-term sustainability of SMMEs and contribute to rising youth unemployment”. “In addition, the introduction of the national minimum wage could potentially have an adverse effect on small businesses that cannot afford the increase. While there is an exemption available for small and micro enterprises, there are concerns that having to apply for this exemption introduces additional red tape.”
The report states that there are a plethora of state funds and funders - many with overlapping mandates and a lack of scale and expertise.
Unfortunately, regulation is more costly for small and young firms and they state it discourages informal firms from formalising. Therefore, there should be consideration given to full or partial exemptions for SMMEs and certain types of regulations, including labour regulations. This would mitigate the start-up cost of SMMEs and also reduce the considerable regulatory requirements. In South Africa today we need to lower the barriers to entry and promote small business growth.
One of the readers to our column, Michael Leary, has sent me some comments on how small business in South Africa can grow their businesses to become successful and in turn employ people. He states quite clearly that governments don’t create jobs, but people do. In essence government has to create the environment to allow small entrepreneurs to develop and grow their businesses and be successful.
Leary states small entrepreneurs need to identify opportunities, create their own environments, think new and motivate themselves.
He had developed a programme to try and teach the small entrepreneur to start their own opportunity- driven ventures.
** Michael Bagraim is a labour lawyer.
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