News Release from the Small Business Institute
10 February 2020
An Opportunity Knocks in Support of SMMEs
This year at the World Economic Forum (WEF) in Davos (a gathering not known for championing the small guy), a white paper was tabled which could help South Africa focus some attention in that direction.
Small Business Institute CEO, John Dludlu, said the paper, ‘Toward Common Metrics and Consistent Reporting of Sustainable Value Creation’, lays out new proposals for the way companies disclose their behaviour in society. The metrics are a gentle attempt to steer the big guys away from shareholder capitalism toward stakeholder capitalism.
“While the Small Business Institute and our member constituents object to the burden of unnecessary regulations and the time it takes to comply with them (which inevitably affects small businesses disproportionately), we see an opportunity here,” said Dludlu.
“If disclosure guidelines are under review,” he suggests, “it’s time we mirror what is happening in other jurisdictions and ensure businesses governed by the Companies Act disclose the time it takes them to pay small businesses in their supply chains. This should not be the ‘confidential’ or ‘proprietary’ information they’ve claimed.”
Members of the WEF International Business Council introduced a standardised way to measure sustainability, which for them incorporates governance, prosperity, people and the planet. They hope to see the 22 new metrics disclosed in annual reports by 2021. These include the number and nature of incidences of corruption within an organisation, the way companies protect and encourage reporting of unethical behavior, land use and ecological sensitivity.
“South Africa is a lot farther down the road to a new kind of inclusive capitalism than a lot of countries,” said Dludlu.
The King Code, much of which is now codified in law, has for years provided guidance for better governance and reporting; government’s sector codes require stakeholder engagement and investment in communities and people far beyond crèches and sport sponsorships (though these, too, are worthy investments) and many companies have, from necessity, taken on much of what municipalities are meant to be delivering where they operate, just as small businesses and chambers work to hold them to account and must be consulted in respect of their budgets.
“Supporting small businesses, which make up 98.5% of our economy, has to be reflected in an aspirational definition of sustainability. Without successful job-creating small and medium enterprises, our country could face an economic and social crisis,” said Dludlu
“South Africa now has powerful representation at WEF following the election of Patrice Motsepe to the WEF Board of Trustees and Sipho Pityana’s appointment as co-chair of the new Africa Regional Stewardship Board. We hope they help us steer the conversation towards this key aspect of stakeholder capitalism vital to our country’s success.”
To have significant impact on small businesses’ sustainability, big businesses must follow the lead of government by requiring invoices to be paid in 30-days or less, said Dludlu. Poor cash flow is indisputably one of the reasons most businesses fail in their first two years. Embracing prompt and early payment – and disclosing their payment terms – will also help further an important aim of the National Development Plan, which is to ensure that the envisioned job creation by small businesses (90% of new jobs by 2030) becomes a reality.
“Transparency and disclosure lead to corporate self-awareness even if many companies default to a tick-box mentality,” said Dludu. “Examining and reporting their support for each company’s enterprise development beneficiary could address South Africa’s unemployment emergency and lead the way in how the world understands economic sustainability”.