Business Day: ‘Think small first’ can be state’s SME motto

Giving a key job-creating sector a fair chance in this tough economic environment should be a priority, not an afterthought in policymaking and execution.


02 April 2017 – 11:48 BERNARD SWANEPOEL

Nearly 20 years ago, the UK and the EU began considering a new approach to regular revisions of company laws. By adopting a “think small first” approach, policymakers were encouraged to evaluate whether legislation, statutory instruments, directives and costs unfairly burdened small and medium-size enterprises – key drivers of innovation, growth, and job creation.

The review determined that 13200(!) directives and regulations were relevant to business. Yet only 83 mentioned SMEs . Further, only half of those suggested that SMEs be considered for special treatment, though none suggested how to do this .

Similarly, in South Africa, various policy documents, white papers and shared growth initiatives all pay tribute to the importance of SMEs. But few, if any, give recommendations for special treatment, simplified reporting requirements, measures for guidance, or other forms of relief, let alone innovative ideas to increase SME participation apart from mandating, “where feasible”, procurement targets.

The AHI Small Business Chamber calls on the president and cabinet to adopt a “think small first” approach. Such a process could make it easier for SMEs to establish themselves, grow, employ and contribute to national savings and thereby economic growth. We issue a special plea to the minister for the Department of Small Business Development to support this idea.

One example of thinking small first would be to extend the tax amnesty for SMEs by a year, to help them regularise their affairs and come into the system, and in parallel to offer more accessible assistance to encourage compliance. Doing so would also assist data collection.

We have no idea how many formal SMEs exist in South Africa, let alone informal businesses outside the tax net. Different researchers suggest South Africa has between a million and six million SMEs. Estimates of their contribution to GDP and job creation vary wildly.

At a minimum at least half of all start-ups in South Africa fail within two years. Last year’s Global Entrepreneurship Monitor report suggested that “instead of facilitating entrepreneurial activity in this country, the government is one of the major impediments to developing a strong SME sector”. This is an alarming indictment.

Plenty of research compares the ease of doing business in various countries. The World Bank’s Doing Business 2017 report examines 10 metrics: starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting minority investors; paying taxes; trading across borders; enforcing contracts; and resolving insolvency. This year it excluded labour market regulation – high among our member chambers’ concerns – and South Africa still fell two places in the rankings.

Where there is consensus is that South Africa needs to grow. Yet government rhetoric seems only to tolerate the private sector (at best), or worse, echoes the inaccurate “white monopoly capital” meme. The Centre for Development and Enterprise pointed out in its Growth Agenda study that the government cannot be both pro-growth and anti-business.

With a “think small first” approach, the government can test the impact of its actions on SMEs and job creation. It can ease entry with pro-competitive legislation and ease the burden of laws written with big business in mind. The mindset should be entrenched in all layers of government. An employee at the South African Local Government Association suggested recently that municipalities were considering taxing businesses to help fund their financial shortfalls. Apart from Salga having no mandate to do so, making up budgetary holes at the expense of job-creating businesses at the local level would be killing the goose that lays the golden eggs.

The AHI Small Business Chamber hopes that the government, by “thinking small first”, would rectify the crippling effect that withholding VAT payments and paying invoices late have on SMEs. Giving a key job-creating sector a fair chance in this tough economic environment should be a priority, not an afterthought in policymaking and execution.

Swanepoel writes in his capacity as AHI Small Business Chamber president and convener of the SME indaba, Creating Jobs Against All Odds, to be held in Centurion on Wednesday

By: Business Day –¬†