On Thursday the World Bank Group (WBG) is set to launch its flagship annual report, “Business Ready (B-Ready)”, which aims to benchmark the business environment and investment climate in most economies worldwide.
It says this is an improved replacement of the discontinued “Doing Business” series, with ” robust data (safeguards) obtained directly from firms”. As it will provide data that is comparable across economies and over time, “B-Ready provides actionable evidence to promote reforms for a stronger private sector”.
The report is intended to assess “the regulatory framework and public services directed at firms, and the efficiency with which regulatory framework and public services are combined in practice”. But, from the SA perspective, what use is this in helping government create an enabling environment for business, and for small, medium and micro enterprise (SMMEs), in particular, if the right hand doesn’t know what the left hand is doing in improving the regulatory environment?
Has there ever been a proper review of the small business environment from the executive and legislature (oversight) perspective in the context of the Doing Business report and data that ran from 2003 to 2020? The small business development department, the fledgling custodian of small business in SA, was one of the standout or stand-alone additions when the national government was reconfigured for the fifth administration in 2014. Ten years on, is the department up to the task, or ill-fated? And where does the buck start and stop in the political hierarchy?
President Cyril Ramaphosa signs performance agreements with his ministers that are then made public — ostensibly for transparency and accountability — after the approval of the departmental annual performance plans by parliament. It should be noted that 100 days into the new administration, cabinet ministers in the new government are yet to sign their performance agreements.
Three parliaments down the line, the National Council of Provinces’ select committee is still raising concerns about its inability to track the monitoring and implementation of the annual performance plan from this department. The National Assembly’s small business development portfolio committee was even more scathing, saying “the department has been slow in the development, implementation and reviewing of existing policies, strategies and legislations.
“Parliament has only dealt with one bill [National Small Enterprise Amendment Bill] thus far,” the committee says in its July report to the department’s budget vote presentation for the 2024/25 financial year.
Some of the five-year performance targets for returning minister Stella Ndabeni-Abrahams, signed with the president last term, were 100,000 competitive small businesses and co-operatives supported by 2024, the same number of rural and township enterprises supported, and, of course, a bias towards women, youth and people with disabilities.
The division and allocation of responsibilities to her deputy minister included reducing red tape, legislation, regulations and policies, as well as a programme to address nonpayment or late payment of SMMEs.
Of course, Covid-19 was blamed for missed targets, let alone the tanking of an enormous number of small businesses. The most recent post-Covid figures from Stats SA suggests as many as 1,500 firms went belly up in 2023, with 600 having already closed shop in the first half of 2024.
World Bank says the first three editions of the B-Ready project are pilots. The launch edition will cover 50 economies with a further 62 added in the second report to cover 112 economies. SA, together with 71 other countries, will be added to the third edition featuring 184 global economies.
B-Ready focuses on 10 topics that follow the life cycle of the firm and its participation in the market while opening, operating or expanding, and closing or reorganising a business. These are business entry and location (opening a business), utility services, labour, financial services, international trade, taxation, dispute resolution and market competition (operating and expanding a business), and business insolvency (closing a business).
On face value the cure for all of these ills is within the department’s purview. However, all the 32 seventh administration departments and their entities have a role to play in creating an enabling environment for start-ups to hit the ground running, and for small businesses to flourish.
So what is the point of the department of small business development if it cannot co-ordinate an integrated approach and lead the reforms needed to rescue the business environment?
A case in point: in the next quarterly report to its oversight portfolio committee the department has been asked “to brief the committee about the most recent efforts to save the [small business] sector by easing the impacts of load-shedding”.
The department has also been called to account after the portfolio committee discovered during an oversight visit to the North West province that the department’s own Small Enterprise Finance Agency outsources agency functions to microfinance and retail financial intermediaries. The agency is tasked with supporting the development of sustainable SMMEs through the provision of finance through its own credit guarantee schemes programme. The intermediaries “continue to provide lending facilities to SMMEs via third parties, charging (usurious) interest rate beyond what is legally permissible and prescribed in the National Credit Act”.
Persistent uncoordinated inaction by the government will have grave consequences for small businesses as going concerns and deter new start-ups, a corollary of which is increasing joblessness — this sector is SA’s biggest employer — and threats to national security from issues such as crime, black markets, and an informal market that does not contribute to the fiscal purse.
In this disjointed policy environment, the buck starts and stops with the president, not any minister and certainly not the small business development minister.
If the president can promise 1-million houses for Alexandra township knowing full well, by his own mea culpa, that there is no land available to build that many houses in the township, what is stopping him from continuing to keep a department that he knows full well does not have the capacity to deliver on its mandate of removing onerous obstacles to small business and entrepreneurship if it were to meet its target of 9-million jobs by 2030?
Under these circumstances, how can we hope that this new approach by the World Bank to “assessing the business and investment climate” will be taken seriously by the president and department of small business development?
• Mothapo consults in the crisis and reputation management space.
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