President Cyril Ramaphosa in his state of the nations address (Sona) outlined measures that the government will take to help small, micro and medium enterprises (SMMEs), “the businesses that create the most jobs and provide the most opportunities for poor people to earn a living”.
The government will, among other things, introduce a redesigned loan guarantee scheme to enable businesses to recover from the pandemic and unrest, and review the Business Act — alongside a broader review of legislation that affects SMMEs — to reduce the regulatory burden on informal businesses.
“There are too many regulations in this country that are unduly complicated, costly and difficult to comply with. This prevents companies from growing and creating jobs,” Ramaphosa said.
Cas Coovadia, CEO of Business Unity SA, said the growth and development of SMMEs were critical to the country and the bottom line was that no business can grow if the economy is not growing.
“Unless you create an environment for business to grow, [Ramaphosa's aims] are unlikely to be achieved.”
He praised the theory of the Sona, but the real issue was the lack of investment and growth. “That is what we have to address. It is well and good on paper but we somehow just don't want to tackle investment and growth. We need to have clear policies that are geared towards attracting investment and growth.”
Gerhard Papenfus, CEO of the National Employers’ Association of SA, said he was not enthusiastic about the plans given the government’s poor track record. “These things have been said for years and nothing has happened,” he said.
Companies are finding it hard to do business and ensuring compliance with government requirements has become a full-time job, he said.
There are too many regulations in this country that are unduly complicated, costly and difficult to comply with. This prevents companies from growing and creating jobs
— President Cyril Ramaphosa
In a statement, Business Leadership SA CEO Busi Mavuso welcomed Ramaphosa’s focus on the small business sector, saying cutting red tape was something the organisation had long been calling for.
But she said: “The presidency’s commitment to improving the ease of doing business, made early in his term of office, has seen little momentum.”
Jeremy Lang, executive director at Business Partners, said: “The tone in which the government wanted to approach and remove some of the obstacles for SMEs to thrive was very strong.”
Lang welcomed the government’s plan to leverage private-sector funding for the Covid/unrest bounce-back scheme because this “can be released into the market immediately and it doesn't put pressure on government availability of funds”.
The government appointed Sipho Nkosi, chair of the Small Business Institute, to head a team that will focus on cutting red tape across the government.
Lang said the big focus on reduction of red tape will benefit all businesses — big and small.
“This has been called for for a number of years already and the fact that it will be a special office in the presidency is an indication that the president is taking this seriously,” he said.
Some red tape issues included the complexity of legislation that business owners needed to understand, the tax structures for small business, licensing processes and cumbersome labour legislation, said Lang.
“It takes the owner away from focusing on growing the business ... and imposes a heavy burden on owners [because they have to] ensure they comply with a multitude of pieces of legislation and compliance-related matters. I think if we make it quite easy for SMEs to operate, they can grow and thrive.”
But, ultimately, Lang said, “success will lie in the implementation”.
Ramaphosa said the government had started discussions with social partners as part of the social compact process to review labour market regulations for smaller businesses to enable them to hire more people, while continuing to protect workers’ rights.
Cosatu spokesperson Sizwe Pamla said the federation welcomed the idea of reviewing the regulatory and legal framework to help small business. This should be accompanied by efforts to fix the national electricity supply, curb fuel price increases and address access to funding, he said.
Affordability and accessibility of ITC services needed urgent attention and development finance institutions should play a leading role in helping SMMEs, Pamla added.
“We need a state bank that will focus on productive lending to help small businesses. The Reserve Bank needs to impose controls on commercial banks to ensure that a quarter of their loans go to small businesses and to the productive sector instead of consumption.
“We believe that this will help reduce unemployment because small businesses ... employ workers, unlike big corporations that are competing over who can mechanise first or automate first,” he said.
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