Despite teething problems support for small business ‘firmly on track’ says Zulu

South Africa’s small business minister Lindiwe Zulu says three years on since the formation of her department — which was again criticised by opposition members yesterday for doing little to help the sector — the government’s support for the small business sector remains “firmly on track”.

Delivering her department’s budget vote in Parliament yesterday, Zulu said despite “teething problems” and a budget which is “far below” what is needed to boost the sector, the department had made a difference to small business support in the country.

“Because of our collective and concerted efforts, the majority of our citizens now appreciate the value and contribution of small businesses to our economy,” she said.

She added that there is now also a “high level of awareness” within government on supporting small business.

‘Thanks to our efforts the majority now appreciate value of small business’

Her department had pushed for the implementation of the 30% set-aside for small businesses announced by President Jacob Zuma in 2015. New procurement rules which came into effect last month compel state agencies, departments and municipalities to set aside 30% of procurement of large contracts to small firms.

Read more: SA procurement rule change will be a boost for startups

She said a framework with an implementation plan for the monitoring of the set-aside has been developed in collaboration with the National Treasury.

The department has also commissioned research into how to best craft a response to the potential impact of the downgrade on small businesses.

‘SME contribution rising’

Small, micro and medium enterprises contributed 40% of the R2.3 trillion generated by the private sector in the fourth quarter of 2016 according to Statistics SA’s Quarterly Financial Statistics Report (opens as PDF), she said

But she said if government departments and entities heeded President Jacob Zuma’s directive to set aside at least 30% of government procurement budget of around R600-billion towards small businesses and co-operatives, the contribution of the sector would rise.

However she said the contribution by small businesses continued to increase in terms of four tax categories: Pay-As-You-Earn (PAYE), which increased from 57% to 59%, the contribution by small firms to the skills development levy increased from 51% to 54%. Corporate Income Tax (CIT) from 65% to 67% and Value Added Tax (VAT) from 57 to 58%. The contribution of Small Businesses to the Unemployment Insurance Fund (UIF) also increased from 62% to 64%.

“The contribution of SMMEs to the economy continued to increase despite the increasingly difficult economic conditions,” she said.

She said the department would aim to by 2019 — boost the contribution of small businesses from 42% to 45% of gross domestic product (GDP) and increase the number of small firms and startups from 2.15 million to 2.56 million, while increasing the number of jobs created by small firms from 7.33 million to 9.09 million.

Zulu said government support for small businesses – across various departments, agencies and municipalities – totalled R15-billion which her department wanted to better co-ordinate.

“We have been talking to Treasury in this regard. This coordination will be far more effective in our small business development strategies than the current silo approach in which we duplicate support, and thus waste valuable resources.”

She said the department would report back on the progress of co-ordination efforts in next year’s budget vote.

‘Department invisible’

However DA MP Toby Chance said in a speech in response that three years after the department was set up it remains “invisible to 97% of businesses in South Africa”.

He said when it came to registering a business and obtaining finance the department is mostly absent from assisting small business – as mainly other entities and departments assisted small businesses or entrepreneurs were forced to turn mainly to friends and family to fund their business.

By the department’s own reckoning, he said, it supported around 80,000 businesses in the last financial year through its various support programmes – or about three percent of the three million or so businesses in South Africa.

He charged that the department is too internally focused, leading it to conduct its third strategic review in as many years, that its top management is staffed by more acting than permanent positions and that it failed to spend 7% of its budget in 2016/17 financial year.

“The Department’s mandate is to create a conducive business environment for SMMEs, as well as cooperatives. This means all, not just the tiny handful it’s supporting directly,” he said.