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South Africa’s Department of Small Business Development in 2016 - Blog

South Africa’s Department of Small Business Development in 2016

South Africa’s Department of Small Business Development in 2016

South Africa’s Small Business Development ministry (SBD) was founded in 2014. The minister in charge is Lindiwe Zulu, a leading member of the ANC Women’s League. While she has no first-hand experience as a businessperson, she was known as close ally of the President, Jacob Zuma, and the appointment was seen as a reward for her tough negotiating stance as special envoy to Zimbabwe.

South Africa’s Small Business Development ministry (SBD) was founded in 2014. The minister in charge is Lindiwe Zulu, a leading member of the ANC Women’s League. While she has no first-hand experience as a businessperson, she was known as close ally of the President, Jacob Zuma, and the appointment was seen as a reward for her tough negotiating stance as special envoy to Zimbabwe.

The SBD’s stated mission is “[to] create a conducive environment for the development and growth of small businesses and cooperatives through the provision of enhanced financial and non-financial support services and leveraging on public and private partnerships.”

For the South African small business owner, then, this ministry should in theory be a source for support. The reality is somewhat different. The ministry’s mandate blends into the government services offered by the much larger Department of Trade and Industry (DTI) and the Economic Development ministry, and the successes of its initiatives are less than obvious.

According to the government’s National Development Plan (NDP), small and medium businesses are the solution to the rampant unemployment that has plagued South Africa for decades. The NDP proposes that 90% of jobs in South Africa will be produced from small and medium enterprises. Developing entrepreneurship in South Africa is unquestionably essential to furthering the goals of economic empowerment, especially among the economically vulnerable and previously disadvantaged.

Prior to the establishment of the ministry, a number of South African small business-focused think-tanks and advocacy organisations cited the over-bearing red-tape that registered small businesses had to navigate as the primary obstruction to the growth of the sector in South Africa. With the establishment of the SBD, many hoped that this regulatory burden would be the central priority of the agency. However, no significant reductions in regulatory red tape have been pushed by government, nor by the SBD.

Of South Africa’s R1.2 trillion budget, only 0.1% was allocated to the SBD in 2016– in total, the government allocates around $15 billion to the development of small business, across a number of government departments. In the minutes of the parliamentary committee for the SBD looking at the work of the Development Finance Institution, it was noted that only 12% of the 43,000 cooperatives (economic groups of five or more members) registered in 2009 managed to survive to the end of 2015. A number of committee members, who come from diverse political parties and perform an oversight role, noted that if the SBD wanted to expand funding opportunities to small businesses, a more robust support system needed to be in place in order to prevent many of these businesses dying out.

The Small Enterprise Development Agency (SEDA), which gives non-financial support to small businesses, and falls under the umbrella of the SBD, was also looked at by members of the parliamentary oversight committee for the SBD. SEDA’s primary role is to provide technical help and education to small business owners. The major success of SEDA in 2016 was that it managed to support over 10,000 small businesses and cooperatives, with 74% of those who came into contact with the agency reporting increased turnover.

However, this may not be enough. The major criticism of SEDA lodged by the committee was that it is urban focused, with 45% of staff located at the national offices, and only 55% spread out across the rest of the provinces. For rural South Africans who have a greater need for small business help from the government, this should be marked as a failure.

South Africa is home to a great deal of entrepreneurial potential, but the work of the government ministry devoted to the sector’s improvement needs to be ramped up if small business is going to be the nation’s economic backbone.