Gloria Serobe, co-founder and CEO of women’s investment group Wiphold, says the informal sector’s contribution to employment numbers has been badly underestimated, but the sector could have far greater impact on the economy with more government support.
“People in the informal sector are making a big contribution to employment numbers because it’s the only way they can survive,” Serobe says. “But what is not happening is that they’re not being enabled to contribute what they should and could be contributing to economic growth and jobs.”
A national business licensing policy proposal announced this week may or may not reduce red tape as intended, but it won’t give these people title deeds to their homes or land so they can use them as collateral to expand their businesses .
Serobe says collapsing municipalities must be sorted out “big time”.
“The more dysfunctional they are the more difficult everything is for everyone.”
The national business licensing policy will not work unless municipalities are fixed, “because the registrations of businesses are at local government level”.
Business licensing functions are housed within municipal local economic development units and most of these are not functional, she says.
Instead of another policy, small businesses need co-ordinated government help to grow their value chains and be part of government supply networks.
Family businesses in rural towns across the country grow vegetables on smallholdings, even in their gardens. Schools, prisons, hospitals and clinics are a vast potential market for them and government should be facilitating their inclusion in supply chains.
“But that is not happening,” Serobe says. “It’s because you have government departments that need to talk to each other and they’re not. The department of small business must talk to the health department, to the department of prisons, the department of schools, and say, ‘Can you support our clients? They’ve got all the food you need, why can’t you use them?’
“It’s a conversation that should be happening. You don’t need a new policy to make it happen.”
All it needs is for the provincial MECs of these departments to talk to each other about how they can support the MEC for small business to help small, often family-run businesses in towns across their provinces to grow.
“The MEC for economic development also needs to be in this conversation. So it’s a conversation between government departments, not a policy or some act that needs to be passed.”
We need a vibrant small business and informal sector. For the economy and for jobs and for crime prevention, because we need young people to be occupied, to be busy
The competency to supply hospitals, schools and prisons lies at a provincial level, so it’s the MECs who need to agree that they should source food from local small farmers, Serobe says.
“These are conversations that should be happening at a provincial and local government level but they’re not.”
Fresh produce markets also need government attention because they are “killing small farmers”, she says.
“There are agents there that push the big producers because of commissions and volumes. At the end of the day the small-scale farmer is sent home with his bakkie of potatoes and tomatoes, mindful that this is fresh produce which tomorrow will be rotten and have to be thrown away. Because these fresh produce markets are not prioritising them.
“That needs to be dealt with. We’re all aware of it. If government is serious about supporting small business then things like this need to be called out.”
The issue of zoning for commercial use is something else the government’s latest policy proposal does not address.
“Government has properties all over the place that can be zoned to facilitate small business instead of lying idle as they are. Access to land and property that is zoned for business, commercial, retail purposes is very important for people with small businesses. But this is where they get stuck.”
There are many examples of where government departments working together would make a huge difference for small businesses in the informal sector, she says.
“Zoning is a local competency but the property often belongs to national. For example, a post office building that is no longer being used. But try to get different levels of government to work together so they can be rezoned for small businesses? It’s not happening.”
Practical steps can be taken by the government to help small businesses. They don’t need another policy or act to be passed, she says, they just need political will, which as far as she can see is not there.
“But we need a vibrant small business and informal sector. For the economy and for jobs and for crime prevention, because we need young people to be occupied, to be busy. It is very, very critical.”
In stark contrast to the lack of government support for the informal economy in South Africa is Vietnam, which she has just visited and “which is very big on this”.
In Hanoi every nook and cranny, every passage, every street is humming with small family-run businesses.
“There’s order in the chaos, it works. But there is government support in terms of basic services such as electricity and water, and bringing them into the value chain. They’re not on their own, they’re not left hanging.
“If the fresh produce market doesn’t take vegetables from a small-scale farmer they’re sent straight to these informal restaurants. There’s co-ordination, there is talking to each other. Policies are there to create order and there is order, you can see that. But there is proper co-ordination.
“You can have policy, but below that different levels of government must talk to each other. That’s the main thing. Just having another policy or act is not going work unless that conversation happens.”
The failure of previous commitments to cut the red tape stifling small businesses does not give her much confidence in the government’s national business licensing policy proposal. She hopes what has happened at the department of home affairs will be used as a model.
“There’s a lot of things that can be used from the home affairs experience to cut red tape for small businesses. There are lessons there for everyone.”
The question is whether, in spite of this new policy proposal, the government fully understands how critical a thriving, properly enabled informal sector is for economic growth and job creation.
“They express that understanding all the time,” says Serobe. “I don’t see it yet. I understand there are a lot of initiatives to get there, but I don’t know what their timetable is.”
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