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New SMME strategy for SA by DTI

Questions as to effectiveness

AS the institution primarily responsible for the SMME sector (small, medium and micro enterprises) in South Africa, the Department of Trade and Industry (DTI) is currently in a process of drastically overhauling its national strategy in this regard. In prioritizing effective development of the SMME sector as a prerequisite for a new economic take-off in SA, the DTI is evidently in a process to organize this year a national indaba on small business, to introduce a new small business act in Parliament and to establish a new national co-ordinating body for the small business sector. However, serious questions are being raised about the eventual practical effectiveness of the new measures. In an interview with The Star newspaper in February this year, Trade and Industry Minister Alec Erwin said:
“We have a number of goals for 2002. A new policy on SMME's will be released by the department this year. New programs to improve access to venture capital via the donor community, government and the Industrial Development Corporation will be in place soon. The South African Women Entrepreneurs Network is being rolled out countrywide, alongside the successful national Manufacturing Advisory Council centres in all provinces.
"Legislative amendments and better performance to accurately track success and failures are all set for 2002. The department is reviewing all its incentive schemes to make them more targeted and more effective and to include more effectively the previously marginalized, such as women, the disabled and people in rural areas. Both depth and reach will be extended.
"Already there are encouraging signs of victories, large and small. Since the inception of Khula Finance, that body has supported the creation of 787 697 jobs. The number of new private companies and closed corporations registered (most of them SMME's) has soared from 25 000 in 1993 to nearly 80 000 in 2000. Now we need to expand these successes exponentially.” Min. Erwin also pointed out that the Industrial Development Corporation (IDC) allocates 75% of new business loans to SMME's.
Meanwhile the DTI's total budget appropriation for 2002/03 is R2 468 570 000, of which a whopping R815 131 000 or 33,02% has been allocated for enterprise and industry development, which includes specifically the SMME sector.
On top of this, it was announced in March that the European Commission (EC) and the SA government have signed a R549 million, 42 month deal to set up a private equity fund aimed at boosting black-owned small and medium businesses. The risk capital facility (RCF) will be jointly managed by the IDC on behalf of the DTI and the European Investment Bank (EIB).

Questions
So the table is set for a new SMME dispensation, but at the same time unignorable negative vibes such as the following are being picked up:
• Questions as to whether the necessary practical support structures are really in place to rectify certain inherent weaknesses in the SA SMME sector, such as grassroots ignorance about basic business acumen and skills; that many SMME's are low-value survivalist enterprises with little or no chance of growth and job creation; the presence of labour legislation discouraging SMME's from hiring staff by raising the nuisance value of firing staff; black empowerment at the exclusion of capable and productive white SMME entrepreneurs; not enough done at youth level to foster entrepreneurship; etc.
• The lack of communication between the DTI and the SMME sector at grassroots level, especially in rural areas. It is for instance understood that the DTI is currently conducting a series of “consultative” workshops in the various provinces, but in the Free State for instance knowledge about the workshop already held was scarce and hard to come by. This was also the experience of The Business Bulletin, despite repeated enquiries.
• Warnings are being sound of not letting the SMME sector be hijacked by politicians for selfish political agendas. It is being said that grandiose approaches lead to white elephants rather than effective small business development.

Act together
The DTI certainly needs to be commended, encouraged and supported for its SMME initiatives, but also for sure the trappings of the past eight years which prevented the getting together of the SMME act in SA, should be overcome. The future of everybody in SA depends to a great extent on the future of the SMME sector - and in even wider context Nepad would hardly get off the ground without a successful South African SMME model as example to Africa.