Attention: All Editors

Small Business Institute media release

SBI’s post-covid recovery series probes challenges facing SMEs and presents growth blueprint.
14 April 2021

The Small Business Institute (SBI) released four additional papers this morning in the series of six aimed at the promotion and development of small business in South Africa, during the Covid -19 pandemic and beyond (two were released earlier and are available here).

The papers are a culmination of evidence, data from the ground and a mix of local and international studies. The research aims to assist decision-makers plan for recovery beyond the pandemic. Furthermore, it provides guidance towards an inclusive growth path that enhances business success and job creation and directs the country to navigate its way into the digital future, according to John Dludlu, CEO, Small Business Institute.

“As a country we also need to embrace failure as a feature of growth, admit it and learn from it. We hope this work will encourage leaders to concede that it’s time to re-evaluate ideological-driven ideas and explore more practical and growth orientated approaches,” says Dludlu.

The SBI, which commissioned the research, and researchers from the Small Business Project (SBP) conducted the studies with funding support from Exxaro.

The research identifies three important challenges traversing each topic, thus presenting three general recommendations for government consideration:

  • Strive for transparent, evidence-based policy making. Solutions tend to be illogical when the problem is not clearly understood.
  • Lighten the heavy hand of regulation that shifts from necessary rules to red tape.
  • Sort out infrastructure. From a stable power supply to roads and water infrastructure maintenance and development – Let the private sector help and be incentivised for its expertise.

In addition:

To overcome the blockages that undermine South Africa’s digitalisation:

  • Prioritise long-term investment in digital and relevant softer education and skills development for students, the teachers who teach them and the employed requiring re-training.
  • Seek public-private partnerships in building ‘govtech’ solutions to e-governance, innovative institutions, and execution of digitalisation.
  • Data, data, data is vital.

Local champions (link to paper) taught us about their can-do pragmatism, experimentation, and proactive engagement which strengthen cooperation, builds trust and creates a sense of belonging. Learn from them:

 For business chambers: Actively foster networking with peers to ‘take hands’ and share experiences, learning from others who have similar challenges.

  • For big business: Explore partnerships. Identify and connect with local champions who demonstrate leadership to help empower local communities in which you operate.
  • For government: Citizen groups at a local level are taking action to fix services and infrastructure in the towns and areas in which they live. Let them help to identify priorities, share resources and collaboratively build functioning communities with the basic services that people and small businesses require.

Develop a compelling reason for and simplified path to, formalisation for small businesses (link to paper); move from a compliance and enforcement regime to one in which businesses can see social and commercial benefits in formalising.

  • Consider it as a continuum and a journey rather than an ‘either or’ binary condition.
  • Enable new pathways – think digital.
  • Ensure that school leavers are employable and have the skills to run businesses; fund and promote e-learning platforms.

The creation of an Enabling Environment (link to paper) is achievable when pursued through the following steps:

  • Implement transparent and methodical regulatory impact assessment (RIA) methods to improve the quality of evidence-based policies, laws and regulations.
  • For Parliament: Strengthen parliamentary oversight – invoke Joint Rule 159, a mechanism to improve parliamentary capacity to assess the impact of draft legislation presented by the executive and to beef up parliamentary oversight.
  • For government and business: in partnership, support and conduct a Reduce Red Tape Challenge. The SBI proposes a crowd-sourced red tape reduction challenge similar to those held in Mexico and the UK. Engage businesses and small firms to advise on what is costly, time consuming and does not provide adequate stakeholder protection. Let them inform the support they need to focus on running their businesses and not spend time developing compliance programmes.

The Local Maybe Lekker, but is it Possible? (link to paper) examines data available to assess the pragmatism of government’s continuing and accelerated emphasis on localisation policy.

The research demonstrates that during the three ‘eras’ of GEAR, ASGISA and the NDP, policies aimed at advancing the primary sectors of agriculture and mining failed throughout the two-decade period for these industries.

Records show a country wide total decline of all secondary industries, especially manufacturing, construction and energy production. The GDP contribution of the tertiary industries are muted for the period, exposing the absence of effective policies to accelerate their stimulation.

The research also demonstrates that South Africa has not achieved the minimum criteria for GDP growth above population growth for the past eight to nine years, nor has it achieved any of the aims set by the NDP. In addition, middle income countries are on a trajectory to outperform South Africa, currently classified as an upper-middle income country, in the next two years.

“More concerning, the data shows that small businesses are disappearing at an alarming rate in South Africa; this was the case even prior to Covid-19. New business entry into the category is not sufficient to offset the exit of established businesses over the entire period our research investigated,” adds Dludlu.

The paper calls for localisation requirements to be sector and context specific, considering the availability of skills and demand within the sector, the potential for achieving market scale at competitive prices, and the cost of any additional government support or protection to the local industry.

012 348 5440


Keynote address on the research outcome.