SBI’s submission to the National Integrated Small Enterprise Development Masterplan (NISED)
The SBI submitted it’s comments on the NISED Masterplan on 18 June 2022 to the Department of Small Business Development, the submission can be read below.
SUBMISSIONS BY THE SMALL BUSINESS INSTITUTE
Introduction and background:
On May 10 2022, the government – via the Minister of Small Business Development – released the National Integrated Small Enterprise Development (“NISED”) for comment. The closing date for comments was June 10 2022.
In general, this is a very short period especially for membership-based organisations like the Small Business Institute (“SBI”) which require positions that are mandated by members.
Our plea to government is for this process to be as inclusive and thorough as possible and allow for necessary engagement with the document. Still, as the SBI, we plan to be actively engaged in the next steps envisaged.
About this submission
Owing to the above-referenced background, this document should be considered preliminary submission with further detailed suggestions to be expected at a later stage – through the process at the National Economic Development and Labour Council and the National Assembly.
We will make general but pertinent remarks and then some specific ones from small business owners.
Comments from the SBI
We welcome the attempt – and ongoing efforts – by the government to find a long-term integrated approach towards supporting South Africa’s small businesses. We use the phrase small business to embrace micro, small and medium-sized enterprises (“MSMEs”), and for the purpose of this document we make no distinction between informal and formal sector firms. We return to this point in a minute.
I. Acceptance that government, on its own, cannot resolve the myriad of problems facing the segment;
II. Acceptance that the segment has been under pressure – that its growth, if at all, has been despite, not because of, a supportive regulatory, policy and legislative interventions solely;
III. Acceptance that the dynamics of this segment are poorly understood from a data point of view (lack of credible and consensual longitudinal studies);
IV. Acknowledgment for a need for regular performance monitoring of interventions – the outcome-based approach is a step in the right direction;
V. The need for a collaborative approach amongst all players in the ecosystem;
VI. That government, as a system, should lead in creating an enabling environment for the segment to thrive; and,
VII. The fact that a serious rethink of small business support is long overdue.
We are concerned:
I. That whilst there’s acceptance for an evidence-based approach towards policy-making, there is no evidence that the Masterplan was subjected to a rigorous test for impact analysis on (harm or benefit) to small businesses it is supposed to assist. In section 18, the Ministry has a tool to carry out this assessment prior to publishing the plan for comment. In the event that this exercise was carried out, it ought to be shared with the ecosystem players to enrich debate;
II. If the National Small Business Council or some similar forum were in existence, it would have provided a forum for structured dialogue around the plan before its publication for comment;
III. About the route taken in drafting this plan;
IV. For a 10-year blueprint to gain legitimacy and credibility, it ought to have been thoroughly canvassed;
V. That the plan is based on a flawed approach that regards small business as a “sector” not a “segment”. This approach leads to inappropriate solutions. The attempt to fudge this error in later parts of the document does not fix the defect. It is unclear, for example, how the plan is supposed to complement sectoral masterplans e.g. agriculture, sugar and so on.
VI. That the originators of the plan come from the dominant school of thought that regards small business as a sector not a segment that exists in every sector of the economy – be it banking, mining, agriculture, manufacturing and so on;
VII. With this approach, we fear that the plan is solving a wrong problem;
VIII. That it is unclear, for example, how the plan is an elaboration in support of the Economic Reconstruction and Recovery Plan (“ERRP”) which is to all intents and purposes more of a vision document (no different from the National Development Plan or “NDP”) – there is still a need for an ERR Plan to guide the implementation of this recovery vision;
IX. That the plan does not create clear linkages to the plethora of government-led initiatives such as the mooted comprehensive of all labour laws in the country (announced by the Minister of Labour and Employment) or the Business Act review;
X. That the plan amounts to a further layering of untested solutions to a problem not well understood;
XI. That there is no evidence that the plan has adequately reassessed all the assumptions that have been upended by recent events e.g. the impact of covid-19; the impact of the July 2021 mayhem in Gauteng and KwaZulu-Natal; the cost of living critics; and so on. These are glossed over when they actually warrant a re-evaluation;
XII. That whereas the Masterplan seems predicated on prioritising support for employment in South Africa, there does not appear to be alignment between it and the Covid-19 economic relief measures deployed to assist distressed businesses and their employees which sought to support firms and businesses owned and employing South Africans. A much more pragmatic approach would have been to support businesses that are incorporated in South Africa (where they pay tax) regardless of the nationality of the business owner and also benefited legally employed workers;
XIII. That whilst considerable work has been done to harmonise definitions of MSMEs/small businesses – in terms of workforce size and annual turnover – the Masterplan offered a rare opportunity to standardise across the entire ecosystem especially but not limited to state-owned enterprises, state agencies and government departments and the wider business community; and,
XIV. Worried that the plan appears based on the notion of a capable state ignoring glaring evidence of the hollowing out of state’s capacity which has been laid bare, most recently, by the Covid-19 pandemic.
What small business owners say:
In the last section, we provide a texture of the responses from business owners:
“The master plan has excluded the department of labour which plays a critical role in the well-functioning of SMMEs. Other proposed actions such as skills development and compliance issues require the active involvement of the department of employment and labour. Also, their inefficiencies pose a serious challenge to the well-functioning of SMMEs.”
The department of employment and labour (and all its agencies such as UIF, Compensation Fund, and Employment Services) should be included as one of the key departments.
The proposed time frames for the below actions are too far.
We suggest that these matters be prioritised to be reviewed at least within the 2023/2024 financial years. Challenges facing SMMEs are huge and urgent and therefore require urgent action and commitment from all stakeholders.”
Some of the proposed actions with unreasonable timeframes are as follows:
In conjunction with the Red Tape (business and government) task team determine priority regulatory and legislative reforms for SMMEs. SMMEs and co-operatives. Lead – DSBD Support: Business associations, National, provincial, and local government 2023/24 DSBD.
Extend social benefits and incentives to enterprise (entrepreneurship) activity in the formal and informal marketplace.
Set up a task team to enable ecosystem actors to develop appropriate skills development courses and pedagogy for SMMEs and Cooperatives.
Review tax laws and their effect on SMMEs, explore exemptions to SMMEs for increased employment.
“The challenges that I am facing as an emerging entrepreneur are as follows:
a) “The lack of financial assistance to give my businesses a kick start to be able to buy equipment, transport and premises to operate from, and to have working capital to be able to pursue projects to make a difference in our communities.
b) “The Credit Bureaus’ listing of my name is the one that deprived one to access funding from Financial Institutions.
c) “Please my sincerest and deepest prayer and request to the Management and Directors of Small Business Institute is to help us, we as the Entrepreneurs, to access funding from Financial Institutions for my businesses and (have) all the red tapes scrapped.
d) “Funding must be provided, monitored that its objectives are met and then sort out all the credit bureaus afterwards.”
The Masterplan is an important initiative that requires an inclusive and consultative approach by all role players to succeed. This means more reasonable time frame for all the voices in the ecosystem to be heard especially on issues of principle and substance. As SBI, we are committed to actively and fully engaging with this process.