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CONSOLIDATION OF SMME LEGISLATION MUST USHER IN REAL SERVICE NOT RHETORIC

Andile Ntingi | 4 September 2024


President Cyril Ramaphosa has the gift of the gab. When he was deputy to then president Jacob Zuma he mesmerised the business community in November 2017 with his “New Deal” speech, in which he acknowledged that the SA economy needed to undergo structural reforms to grow.


This speech drew inspiration from former US president Franklin D Roosevelt’s New Deal programme, a series of economic reforms and infrastructure projects introduced between 1933 and 1938 aimed at ending the Great Depression. 


Then on February 16 2018 Ramaphosa serenaded South Africans with the “Thuma Mina” (Send Me) state of the nation speech, delivered two days after Zuma had dramatically stepped down as president of the country and been replaced by Ramaphosa.


These two famous speeches gave hope to many people that Ramaphosa was a reform-minded, benevolent leader capable of turning the economy around and stopping SA’s slide into a basket case status.


In the Thuma Mina speech, an adaptation of late saxophonist Hugh Masekela’s 2002 song Thuma Mina, Ramaphosa pledged to support efforts to “triumph over poverty”. “I wanna lend a hand. Send me,” he famously pledged.


South Africans were prepared to follow his lead, roll up their sleeves, and help him rebuild their country from the ruins of overwhelming corruption, a stagnant economy, failing SMEs and rising unemployment.


Six years on, there has been no economic turnaround and unemployment has soared. Under Ramaphosa’s leadership the economy has grown at an average of 0.32% a year, more than four times slower than the annual growth rate of 1.57% achieved during Zuma’s nine-year tenure, which started during the 2009 global financial crisis and ended at the beginning of 2018. 


Under Zuma, unemployment rose from 20.51% to 24.22%, but it has since jumped to 33.5% under Ramaphosa. Small, micro and medium-sized enterprises (SMMEs), which contribute 57% of SA’s GDP and 56% of national employment, have had to deal with the worst of it, suffocating under the weight of the Covid-19 pandemic, power cuts, logistics constraints, water shortages, excessive red tape, a high cost of doing business and the lack of access to capital and markets.


Yet, according to the National Development Plan (NDP), by 2030 SMMEs are expected to contribute 60%-80% to GDP and generate 90% of the 11-million new jobs that need to be created. But, given the severity of the challenges our country faces, the targets envisioned in the NDP are unlikely to be met by 2030.


To make matters worse, there was a lengthy delay in developing and promulgating the National Small Enterprise Amendment Bill, which is meant to accelerate the SMME sector’s post-Covid recovery. The delay has had a knock-on effect because it has also held back the proposed merger between the Small Enterprise Development Agency (Seda), the Co-operative Banks Development Agency and the Small Enterprise Finance Agency (Sefa) to establish a new entity known as the Small Enterprise Development Finance Agency (Sedfa).


The merger should have been concluded by April 1 2022, but the cabinet gave it a 20-month deadline extension to enable the department of small business development to finalise the National Small Enterprise Amendment Bill. It was eventually introduced in parliament in June 2023 to facilitate public consultations. The 20-month extension meant the merger should have been completed by the end of February 2024, but this did not happen as the country was bracing for the May 29 general elections. 


Ramaphosa finally signed the bill into law in July. Now small business development minister Stella Ndabeni-Abrahams has the task of implementing the new legislation, which also provides for the establishment of the office of the small enterprise ombud services. This ombud will mediate disputes involving SMMEs and aim to reduce the number of disputes that degenerate into costly litigation. 


The National Small Enterprise Amendment Act has raised the hope of struggling entrepreneurs and SMME owners, who are counting on it to improve the ecosystem for SMMEs, streamline bureaucracy, minimise duplication and enhance the delivery of services to SA’s estimated 2.6-million SMMEs, most of which are informal.


SA has tinkered with its SMME landscape before through a consolidation of SMME institutions, but these mergers have not boosted the contribution of SMMEs to the economy, which remains dominated by oligopolies and monopolies. Since 1994, the government has restructured and consolidated state institutions supporting SMMEs three times.


In 2004, Ntsika Enterprise Promotion and the national co-ordinating office of manufacturing advice offices merged to form Seda, an entity that offers nonfinancial support and advisory services to SMMEs.


The second consolidation took place in 2012, when Sefa was established after the merger of Khula Enterprise Finance, the SA Micro-Finance Apex Fund and the Industrial Development Corporation’s small business funding unit into a single lender offering loans to SMMEs. This merger was a forerunner to a third shake-up in the SMME landscape, which resulted in the establishment of the department of small business development in 2014.


There are three key challenges Ndabeni-Abrahams must address if we are to move the needle as far as SMME development is concerned. The first involves Sefa, which has a R4.2bn loan book. The agency deals with loan applicants whose business plans are usually drafted by Seda, which expects Sefa to automatically approve the loans. But the reality is that loans are approved or rejected based on the loan applicant’s ability to repay debt, not on who prepared their business plans. 


The second pressing matter is the manner in which the R20bn government expenditure on enterprise development is monitored. Sedfa must be given the mandate to co-ordinate this expenditure to ensure maximum impact in the SMME sector, instead of the practice of giving this mandate to various departments, where the funds are funnelled into a black box that no-one can account for. 


The third issue is the proliferation of extortion syndicates, which threaten and demand protection fees from SMMEs, primarily those that trade in townships and rural towns. Ndabeni-Abrahams must put pressure on her colleagues in the security cluster to eradicate these brazen criminals, which are forcing more and more SMMEs to shut down.


In the wake of the historic May 29 election, SMME owners expect real service from their government, not the rhetoric and lip service they have been subjected to for so long.


‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.


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