A step in the right direction

2014-06-06 00:00

I HAVE to say that I greeted the government’s plan to establish a new government department for small business with mixed feelings.

The Witness is an ardent supporter of small business. Over the past year, we have carried many stories of successful entrepreneurs in Durban and Pietermaritzburg.

These are people, often working on little more than a dream, who have had to work to extraordinary levels, and who have taken on major risks, to change their lives fundamentally for the better.

And they have also changed the lives of many others — their employees, suppliers and service providers, all of whom are necessary for the success of a small business these days.

By small business, I mean one that aims to be competitive in the market, and not merely an informal operation created merely for survival purposes.

It is no mean feat to run a small business these days — most have to close within two years. The difficulties have been thoroughly researched.

They include accessing finance and markets, meeting industry standards, and the heavy regulatory burden.

Lack of experience, of business management and entrepreneurial skills, fragmented support infrastructure and the skills shortage compound an already difficult environment.

The economic benefits of stimulating the small business sector has been well-researched globally. (This does not detract from the job-creating ability of big firms). For instance, small businesses make up more than half the non-farm, private sector GDP in the United States and about half of private sector employment there. It is South Africa’s biggest employer outside the government.

In South Africa, big companies are largely cutting back on staff and investment, and the government is also under a fiscal whip.

So there are few sectors left, other than small business, that could conceivably carry the economy forward in real terms, and create a large number of jobs at the same time (tourism and alternative energy are two other sectors with the same potential).

A single small business department may also resolve another problem — the disparity among small business support agencies in this country.

The government’s existing promotion of small businesses is done through a number of different departments and quasi-government agencies, such as the Department of Trade and Industry, Industrial Development Agency and even the Presidency.

There are also a range of private sector and non-profit small business development agencies.

Presumably, and although it has not yet been fully specified, the new small business department will streamline the government’s promotion of the sector.

In addition, a government department is particularly well-placed to start whittling away at the tangle of regulations and compliance requirements that currently make the running of a small business legally, near impossible.

So, there are plenty of reasons why a small business department sounds like a brilliant idea.

But there are some questions that need answering.

Why hasn’t the government been able to eliminate the red tape and other well-known problems in the sector already?

Will the creation of yet another government agency solve the problems?

Will the new department mean new rules, regulations and levies for the sector?

Government departments can take years to start implementing policy — what happens to the other small business development functions in the meantime?

Just how much clout will the new department really have in the Zuma administration?

Will the substantial small business development budgets in various departments be rerouted to the new department?

And how will the new department fit into President Jacob Zuma’s plans for “radical transformation” — notwithstanding the fact that the creation of the department itself represents a pretty big break from previous policies?

There seems to me to be little doubt that if properly managed, this department could become this country’s cutting edge of new job opportunities, specifically for youngsters struggling to find formal employment.

As always though, the devil will lie in the detail.

And when it comes to new government departments, the detail lies in the who, what, when and why of policy implementation.

My guess is not to be too optimistic, just yet. But yes, this department is a step in the right direction.

In the meantime, if you see a hero in the shop across the road or in the same building that you are working in, let me know, so that we can feature him or her in our newspaper.

• Edward West is the business editor at The Witness.

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