Investing in small businesses can fuel growth
The year 2024 was a pivotal year in the world’s history. For SA, the 30th anniversary of the first democratic election ushered in the second incarnation of the government of national unity (GNU).
The context for GNU-2024 was different, but just as it was in 1994, it necessitated the building of bridges on many fronts, national cohesion and reconciliation and reimagination.
For the Public Investment Corporation (PIC), emerging from an unflattering past, 2024 meant that the pursuit of excellence in asset management in a globally competitive environment needed to also address the pressing socioeconomic imperatives. These include unemployment, small business development and the country’s economic inequality. This explains its investment in the R1.4bn SA SME (small and medium enterprises) Fund.
The case for investing in SMEs is compelling and warrants ramping up with the right amount of prudence. SA desperately needs increased investment in the SME segment.
The World Bank estimates that formalised SMEs contribute only 40% of the national income of emerging economies. In SA, it is less. According to data from the International Labour Organisation, micro and small enterprises make up 70% in successful economies.
As was recognised in the National Development Plan, SMEs are likely to create more jobs than their large corporate counterparts. This makes it important for SA to invest in SMEs if it is to credibly tackle its many challenges.
It’s important to identify common features between the GNU of 1994 and that of 2024. These include the urgency with which SA must build bridges between those previously excluded by apartheid and those who benefited from it, if it stands a chance of enjoying sustained sociopolitical stability.
Data from Stats SA demonstrates that black South Africans are still disadvantaged economically. Unemployment among blacks, who constitute 80%, was recently at 36.9% (national average 28.5%).
If the 1994 GNU sought to build bridges between the different race groups, then fighting the high unemployment rate among 90% of the population should be a priority for the 2024 GNU.
The other common priorities of the two GNUs are the facilitation of national cohesion and reconciliation.
Cohesion and reconciliation among South Africans will be unattainable if such socioeconomic disparities remain racially typified. Reimagination also, of a country where people work together regardless of race to build a country that can compete in the new digitalised, multilateral and environmentally responsible world order, cannot happen either if different race groups face their socioeconomic crises separately.
The racially skewed income inequality, unemployment rate and overall quality of life confront the GNU and its agencies or entities, like the PIC, to rethink economics and politics. These ills threaten the prosperity, safety and profitability of the well-off minority and international investors, making the country unattractive as an investment and tourist destination.
Within the confines of an asset management corporation, the PIC’s investment in the SA SME Fund is indicative of the realisation that SMEs are central to the mandate of the GNU, the quest to build bridges and close the income inequality gap so that SA can become a stable economic success story, a sustainable society and an attractive investment or tourism destination.
Undoubtedly, more remains to be done to close the income inequalities that plague SA. Many other stakeholders need to come on board with the SME-focused approach to the rebuilding and reimagining of an inclusive economy. The GNU set the tone in 1994 for all to join hands to find solutions to pressing challenges, and 2024 was an opportunity to reignite the SA dream.
Dludlu is CEO of the Small Business Institute
This OPED was published in Sowetan live –
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