BusinessLIVE: Cabinet ministers need to think small

Supply chain bullies – big business – treat small businesses as a line of credit

 

Recently the Small Business Institute was part of a business delegation consulted by the government about a reconfigured cabinet. Our approach to the question centred on two tenets:

First, that the cabinet should be designed to prioritise growth and job creation as a national project, conducted by a modern, competent state in partnership with the private sector for the next 10 years.

Second, that to create the quantum of jobs needed to ensure inclusivity and transformation and to fulfil the vision of the National Planning Commission, small and medium-size enterprises must be at the forefront of our national project. Formal, job-providing small businesses make up 98.5% of the formal business community in our economy, yet this significant segment has been siloed and is continually mischaracterised as an economic sector. Instead, it is our economy.

To ensure policymakers, legislators, regulators and big businesses all “think small first”, we propose that the Policy Co-ordination and Advisory Services (PCAS) in the presidency be resuscitated to focus on growth and sustainable employment.

This is not a new idea, but it was an idea whose time came and never should have “went”. Politics threw the baby out with the bath water.

PCAS will be vital once again to oversee co-ordination between ministries and all levels of the government to accommodate the needs of the private sector to unleash the entrepreneurial dynamism of small and medium-size enterprises (SMEs).

As before, the head of PCAS (which would number 10-15 people) would have director-general status. The unit would report to the president and provide a service to the cabinet. It would plan, monitor, co-ordinate and harmonise efforts to fuel growth between ministries, clusters, and throughout the three tiers of the government, remaining mindful of international protocols and treaties.

It would need its own institutional and jurisdictional power. The unit should include people with expertise in policy and regulation as well as, importantly, starting, running and growing businesses.

We include business in the mix not only because business know-how is crucial for spotting legal and regulatory constraints to enterprise, but because big business, too, needs to wear a new hat for the New Dawn. Onerous or exclusive supply chain terms and conditions for SMEs hamper growth and competitiveness; late payments restrict cash flow, hiring, innovation and reinvestment; and goods, services and office space priced for large businesses by large businesses have no place in a new environment for small businesses.

We would suggest that, as its first act, the new government give effect to the section in the National Small Business Act that requires any new policies, regulations and laws to be transparently assessed as to their impact on SMEs. If it will cause more red-tape headaches, raise barriers to entry, make it harder to import or export, or cost disproportionately more for small businesses, it should either be scrapped or provide for relief.

This, too, is not a new idea; it has been in force in Britain and the EU for over 20 years. This initiative – already codified in law – will confer the title of “small business development minister” on every minister.

The top 100 companies on the JSE, many singing Thuma Mina, also have work to do. Each received a letter from the Small Business Institute asking whether it is paying small businesses within 30 days from invoice (also a government policy, with uneven application). Of those that bothered to reply, only one in 10 said they make that information public and only 25% reported a specific policy to pay SME suppliers in 30 days or less. A handful, which are to be congratulated, pay them within seven to 15 days.

In a practice known as “supply chain bullying” in the UK, many big businesses treat small businesses as a line of credit. We would recommend applying the new government definitions of what constitutes small, very small and medium enterprises to a requirement to pay businesses falling into the first two categories within seven days, and medium-sized enterprises, depending on the invoice amount, in 30 days or sooner.

A smaller cabinet also needs to be a more effective cabinet. The successful work of those ministries being dissolved can be absorbed into remaining departments, but care should be taken to: avoid duplication; limit layers of bureaucracy in the interests of preserving civil service jobs (a sector widely acknowledged as bloated); and ensure that policies and interventions are evidence-led.

Finally, depending on our mindset, the coming of the so-called fourth industrial revolution will be either ominous or exciting. By introducing forward-looking, modern objectives into each ministry (for instance, the department of labour would shift its work to that of a department of skills & innovation) we can adopt an entrepreneurial approach to problems by transforming challenges into opportunities.

• Swanepoel is executive director of the Small Business Institute and owns a small business

by BusinessLive – https://www.businesslive.co.za/bt/opinion/2019-04-28-cabinet-ministers-need-to-think-small/

Bernard Swanepoel