Small and medium enterprises (SMEs) are widely considered a major contributor towards the South African economy and one of the biggest contributors to job creation, yet despite this, the SME community continues to face various challenges that limit their growth.
The South African government needs to create an environment that is conducive to SME growth so that businesses can flourish and contribute towards employment, Lionel Billings, head for national consulting services at Business Partners Limited, said. “Small and medium businesses are the bedrock of every economy and society, and government and large businesses need to align their goals to incorporate SMEs.”
Billings was speaking at a workshop hosted by Sanlam/Business Partners Entrepreneur of the Year (EOY), a competition that aims at uplifting South African entrepreneurs. There are an estimated 1.5 million SMEs in South Africa, one million of which are formal micro-businesses employing five or less people.
The Business Partners Limited SME Index, which measures attitudes and confidence levels amongst the SME industry in South Africa, recorded confidence levels of only 33% that labour laws are conducive towards the growth of businesses. It was reported that the effort and cost to comply with the very modern labour legislation is often out of reach for most SMEs and inhibits them from employing more people.
Billings added that business and government needed to instill a sense of entrepreneurship in the country’s youth. “Government needs to cultivate and grow the correct type of culture in order to stimulate business growth within the SME sector,” he said.
Guest speaker at the event, Mzukisi Stephen Dondolo, entrepreneur and CEO of investment firm African Pioneer Ltd, addressed the need for entrepreneurs to group together and to lobby Government to improve the environment for SMEs and to address the high level of unemployment.
South Africa’s current employment rate stands at 25.2%, Statistics South Africa reported on Monday.
“Government has created a platform that allows for black businessmen to enter the economy. On the one hand that has created ‘tenderpreneurs’, but on the other hand there are those hardworking entrepreneurs who take their hard earned money and reinvest it in the community,” Dondolo said.
Dondolo also said that widespread corruption and ‘tenderpreneurs’ do not enable the economy to grow. “Corruption creates an environment where someone will have to increase the price of a service to pay for corrupt tenders. It only benefits ‘tenderpreneurs’, who do not invest back in the economy.
“Corruption has led to the cost of doing business increasing, which prohibits entrepreneurs from entering the market,” Dondolo said. “It also results in the pool of taxpayers remaining small, or even shrinking further, while government expenditure continues to grow, leading to taxpayers being squeezed even more. It becomes a vicious circle that has a very negative effect on the economy and benefits only a select few.”
The culture of corruption and impunity is destroying the South African society and robbing its citizens of an estimated R30 billion (about 10 billion USD) every year through abuse of the procurement system, former World Bank MD and academic-turned-politician Dr Mamphela Ramphele said late last month.
Dondolo said to counter corruption and bolster the working environment for SMEs, the government needed to pay more attention to the SME’s needs.
(Additional reports and final editing by Issa Sikiti da Silva)
*Photo by KBK Communications.