The jury is still out on whether the new framework for small business policy can be put into action, writes Aspasia Karras
The White Paper on a National Strategy for the Development of Small Business in South Africa, endorsed in March 1995, is finally kicking into life. The national Small Business Act was tabled in cabinet this week, after extensive consultation, and the Enterprise Africa Conference, one of the more visible interventions, will take place this month.
The aim is to establish links between big business, the government and small businesses, concentrating on procurement. However, on the question of whether policy is finally being turned into action, the jury is still out.
The process of negotiation with the much criticised Small Business Development Corporation (SBDC), and the establishment of four new institutions — to put right the older institutions’ wrongs — Khula Enterprise Finance Limited, Ntsika Enterprise Promotion Agency (Nepa), the Centre for Small Business Promotion (CSBP) and the National Small Business Council (NSBC) — have been plagued by the natural organisational nightmares inherent in the transfer of funds, the division of competencies, and even the technical time-frame problems of employing and training staff.
Dr Alistair Ruiters, head of the Centre for Small Business Promotion in the Department of Trade and Industry, set up to co-ordinate the national small business strategy, explains: “We have tried to establish a long-term programme that will achieve a sustainable institutional framework for the next century. We have looked at best practice internationally and attempted to create a dispensation within which small business can become the backbone of economic growth.”
He argues that the government has taken a cautious approach to the issue. “It is a very difficult sector, composed of widely divergent entities. You have to be very specific about what you are trying to achieve, otherwise you can waste a lot of money.”
Clearly the tension between effective strategic planning and actual delivery on the ground needs to be resolved. Septi Bukula of Upstart Business Strategies, a consultancy providing research and policy advice to provinces, and the Centre for Developing Business at Wits, elaborates: “They have set themselves very ambitious targets, which may be an indication of their deep commitment to the issue.
The massive publicity campaign around the new institutions may have promoted expectations that could not be fulfilled. He says: “They announced targets but ran into serious institutional problems.”
The financial wrangling that has slowed down Khula highlights two problems facing most of the government’s institutional transformation process: rationalising inherited entities and dealing with complex bureaucratic financial arrangements. Khula is responsible for promoting small and medium enterprises’ access to finance and administering the National Credit Guarantee Scheme, while providing financial and capacity-building support for non- governmental organisations, provincial development corporations and banks.
“A lot of thinking and negotiating with financial institutions has been packed into the past 12 months to ensure that a credible and accountable service can be provided,” claims Ruiters. More importantly, the relationship with the old SBDC had to be renegotiated. The culmination of this process will take place on July 16, when the government’s share in the SBDC is cut to only 30%. The transfer will boil down to R599,8-million over the next five years, with the state holding 51% of Khula.
Ruiters is adamant that Khula will soon be ready to roll. The company said it will probably take 60 days, while Bukula points out the bureaucratic hitches that could hamper the process: “The government’s share is held in trust by the Industrial Development Corporation (IDC). So the SBDC will release the funds to the IDC, which will then pay back the treasury, which will then transfer the money to Khula. The cycle will be completed many months hence.”
He is also not sure whether the private sector will indeed invest the other 49% in Khula. Ruiters explains that 16 financial institutions have been approached and Khula is almost ready to become a fully-fledged retail lender.
Despite delays, the new institutions are definitely attempting to address the inherent problems of the SBDC. The confused desire to be all things to all people by providing both financing and support resulted in poor delivery, especially to the black community.
The problem appears to be co-ordination. Bukula cites a case where a Nepa initiative was opened in Cape Town. Because of conflicts of interest with the national programme, it had to be closed down and moved to Pretoria, after it had in fact begun to deliver in the area, thus leaving a vacuum. Says Bukula: “One is not unduly pessimistic; when you are establishing completely new institutions you will run into problems, and learn from mistakes.”
But, says Ruiters: “When people talk about delivery, they must realise it is not just up to government, but about the people and government working together to deliver the programmes they need. We have the basic elements of success, a vision; institutional capacity. We now need to ensure that we work with the community. It is certainly not about just throwing money at the community.”