Business Day: Cut rhetoric and red tape, is the SME plea

The government hampers small businesses when it fails to provide adequate, proper services, says Ernest Messina, CEO of the Handelsinstituut, or AHI. Picture: Alaister Russell

One of the greatest impediments to economic growth and job creation in South Africa is the failure of the government to take the small business sector seriously, says the CEO of the Afrikaanse Handelsinstituut, Ernest Messina.

The government is out of sync with the global trend that sees SMEs as a major engine of economic growth and jobs, he says.

The once all-white Afrikaans business chamber, which boasts corporate giant Sanlam among its members, committed itself at its conference in Durban last week to fighting for small and medium-size enterprises.

Although the Department of Small Business Development and ANC treasurer-general Zweli Mkhize, who gave the keynote address, make the right noises, Messina says it has been all talk but little action.

“There is much talk about the sector but not enough tangible support from government to suggest that SMEs are being taken seriously.”

When the government talks about its relationship with business it means big business, he says. “We’re saying it is time for government to put its money where its mouth is and create an enabling environment for small business.”

It could start by paying small businesses on time for work done, he says. “Until we get to a point where government can say that they are paying SMEs on time, what they say about supporting small businesses is all talk.”

Typical of the government’s attitude was the withholding by the South African Revenue Service of R5-billion in VAT refunds. “Such a lot of money not in the pockets of the real owners is hugely detrimental to small businesses.”

Another strong indication of the lack of importance the government attaches to SMEs is the failure to reduce red tape. South Africa is well behind its peers in creating an enabling environment, he says.

This view is supported by the World Bank, which recently said the proportion of new businesses in South Africa was “well below that of other emerging markets”.

Says Messina: “If we compare ourselves with other parts of the world, including Africa, then a lot needs to be done.”

An accurate measure of the amount of red tape is how long it takes to register a small business, he says. It takes seven to 10 days to open up a small business in Rwanda, three or four days in Singapore and three or more months in South Africa.

He used to run his own small business. “I went through the process of having to register and get started, so I know first-hand what that is like.”

He blames “a lack of political will and leadership”. Also playing havoc with small businesses is having to deal with dysfunctional municipalities that pay late and provide poor services. “Often small businesses and municipalities don’t even talk to each other, or they meet each other in court.”

The AHI, which represents 118 business chambers around the country and 10000 small businesses, is working with the Department of Co-operative Governance and Traditional Affairs to identify municipalities that “desperately need help”, he says.

“And there are many of them.”

He acknowledges that previous initiatives to help local authorities develop skills have had little impact but says: “We have to keep trying or they will be even worse.”

His predecessor at the institute, Christo van der Rheede, said three years ago that business should spell out clearly what it expected from the government. If there were no results within a set timeframe then it should stop funding the ANC.

Would Messina go that far?

“Yes, certainly, because the damage to the country and its people of government inaction and bad policy is so detrimental that we cannot afford it.”

Van der Rheede also said that if it didn’t stop state-owned enterprises such as Eskom from sabotaging the economy then business should launch a class action against the government at the Constitutional Court.

Messina says business is too “fragmented” for this to work. He blames a lack of business unity for its weak influence on the government. “We are such a small economy, and yet we still have not succeeded in getting together and making common cause. This has certainly been detrimental to the cause of business and growing the economy.”

Selfish leadership ambitions rather than fundamental differences have hampered attempts at unity. “We’re all about growing the economy, and we should be big enough to say that whatever differences there may be, we must unite behind certain issues.”

What about white monopoly capital?

“The South African economy is still largely in the hands of white businesses. Whether it’s monopolistic is debatable, but there is still a long way to go to get equity.”

Targeting whites is not the answer. “In this country there are certain historical facts. The situation we’re in is complex, and for us to create a more equitable future we need to do certain things right now. We can start by not looking at white or black but address issues that affect SMEs. In that way we transcend colour issues.”

Messina, 59, has two master’s degrees and a PhD in history. His doctoral thesis was on the Black Consciousness Movement, and his first master’s thesis was on the Voortrekker centenary celebrations of 1938.

“I wanted to understand fellow South Africans who referred to themselves as Christians. I wanted to understand what made them tick.”

What did he learn about white Afrikaners? “Like everyone else in our diverse population, they want to be successful in terms of certain universal values,” he says.


24 September 2017 – 00:18 CHRIS BARRON

By: Business Day