It was 2014 and the air in Pretoria was thick with promise and the sounds of backslapping. The department of small business development was born in a flurry of speeches and ribbon-cuttings, the latest in a long line of bureaucratic interventions meant to rescue SA’s sputtering entrepreneurial engine. At last, small businesses would have their own champion in the government, a seat at the cabinet table, a mandate to unlock growth, a ministry that understood the little guy.
Fast forward 10 years and the department has become precisely what it was meant to prevent: another expensive monument to failure. Its agencies, Seda (training) and Sefa (finance), have left a trail of glossy brochures and unmet targets, but precious few thriving enterprises. The 2024 merger into the Small Enterprise Development & Finance Agency (Sedfa) just made things worse. This alphabet soup of Vogon inefficiency has spent the past decade spinning in circles. They’ve hosted workshops, issued press releases, and burnt through billions. But the one thing they haven’t done is what they were set up to do.
We keep hearing the same empty refrain: “one-stop shop,” “ecosystem,” “capacity building”. Meanwhile, SA’s small business sector remains stuck in neutral, and millions remain unemployed. We love to say small businesses are the engine of SA’s economy. It’s a slogan we chant like a national mantra, not a principle we’ve ever truly backed with action. As Bridgit Evans, executive director of the SAB Foundation, told me on Classic Business recently: “Everyone talks about entrepreneurs being the job creators of the future ... but if entrepreneurs aren’t able to borrow money their growth will be slow. That means very limited job creation.”
The National Development Plan (remember that?) said small, micro and medium enterprises (SMMEs) would create 90% of all new jobs by 2030. But we’re now five years from that deadline, and nowhere near the mark. Formal small businesses contribute only 19% to GDP and 33% to employment. Informal ones add another 5% and 17%, respectively. Combined, that’s barely half of total employment. Miles off the National Development Plan’s vision. Why the shortfall? Partly because we’ve taken the most vital part of job creation — entrepreneurship — and trapped it in a maze of government bureaucracy and incoherent funding schemes. We’ve tried to make the state the entrepreneur.
And it’s failing. Astonishingly, more than 300 government departments and agencies run small business support programmes, most offering training or advice with no clear outcomes. No-one can say what works, because hardly any data is tracked. Meanwhile, 28 state-linked entities dish out about R6bn a year in loans and grants, often to businesses that are too undercapitalised to survive, never mind scale. Sefa’s own loan book had a 40% delinquency rate by 2022.
As Bridgit noted, only 3% of SMMEs receive bank funding: “They’re just inherently too risky for banks.” But many entrepreneurs also struggle to present themselves as creditworthy, lacking basic financial records. “They run from hand to mouth,” she said. “If they had better management accounts ... surely the banks would offer better interest rates?” It’s a vicious cycle: no records, no funding; no funding, no growth; no growth, no jobs.
What the SAB Foundation has done, with 4,000 entrepreneurs supported through intensive programmes and R64m lent to 32 businesses in just two years, is proof of a different model. Not one of spray-and-pray funding, but of relationship-based, fit-for-purpose, blended finance. As Evans explained: “The entrepreneurs are not strangers to us. They’ve been through our programmes, mentored, vetted. That’s a great risk mitigation strategy.” Here’s the clincher: “We haven’t had a single default.”
So why isn’t this the norm? Why do we persist with a top-down approach that sees bureaucrats with no business experience designing entrepreneurship policies? There are lessons from abroad. In Brazil, Sebrae, a private nonprofit originally born from government, now operates in every state, offering training, mentorship and financing. In India, the “Startup India” initiative blends credit schemes, deregulation and access to markets. In both countries small businesses contribute about 30% to GDP and employ tens of millions.
What do they understand that we don’t? That real entrepreneurship support requires scale, co-ordination and proximity to the ground. Not a hodgepodge of government programmes with no feedback loop. It’s time to face the fact that the department of small business development is a failed experiment. It should be scrapped. But more importantly, shift the philosophy. The government should be a facilitator, not a financier of first resort. Use blended finance models. Provide guarantees. Leverage the private sector’s ability to evaluate and support entrepreneurs.
“Blended funding is key,” said Evans. “We’ve placed financial managers in businesses post-loan, so entrepreneurs start to see the value of managing finances properly. It’s expensive, but if we’re serious about job creation, it’s what’s required.” Instead of scattering billions across dozens of disconnected funds, channel capital through a competitive structure involving banks, impact investors and foundations, people who know how to pick winners. And tie every rand to measurable outcomes. How many jobs were created? What was the revenue uplift? Was the loan repaid?
As Evans reminded us, entrepreneurship isn’t just about the numbers. It’s about relationships, mentoring and long-term commitment: “This is not a light-touch approach.” The returns? Outsized. One Limpopo entrepreneur supported by the SAB Foundation grew his turnover from R70,000 to R600,000 a month. That’s the kind of growth that creates real jobs.
If we keep propping up a ministry that has proven unfit for purpose we’re not helping small businesses. We’re actively holding them back. It’s time to burn the failed blueprint and let those who know business lead the charge. As Evans put it so clearly, “We shouldn’t only be focusing on making money off these businesses. That’s not a long-term strategy to develop the country.”
Exactly. SA’s prosperity won’t come from another government scheme. It will come from a thousand entrepreneurs like the one in Limpopo, if we give them a fighting chance. Scrap the department. Fund what works. And get out of the way.
• Avery, a financial journalist and broadcaster, produces BDTV's ‘Business Watch’. Contact him at Badger@businesslive.co.za.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.