tangible benefits
Lynda Loxton
IT could take 10 to 15 years for the government’s strategy to promote small and medium-sized enterprises to start paying off in tangible terms, Trade and Industry Deputy Minister Phumzile Mlambo-Ngcuka said this week.
Replying to the debate on the parliamentary trade and industry committee’s special report on small business finance, Mlambo- Ngcuka said it would take that long to erase the baggage of apartheid and create a level playing field for small business.
The report had been critical of some aspects of the government’s plans to promote small and medium-sized enterprises (SMMEs) and many MPs complained during the debate that not enough was being done quickly enough to help SMMEs.
She said experience in Europe and Asia had shown that developing SMMEs was no quick or easy task and the fact that South Africa had to overcome numerous structural problems had not made the task easier.
“We are happy that in one year (since the launch of the national small business strategy) we have been able to successfully establish four institutions to address all the issues identified,” she said.
These were the Centre for Small Business Promotion, Khula Enterprise Finance Limited, Ntsika Enterprise Promotion Agency and the National Small Business Council.
She agreed that these alone would not do the trick and that the provinces would have to provide additional support in the form of capacity building for support services. For its part, the government would, within the limits of the fiscus, do what it could to help.
The report had taken issue with the fact that it had taken so long for Khula to come on stream. Mlambo-Ngcuka said it was true that it had only been capitalised in September 1996, but that this had been due to protracted negotiations with the Small Business Development Corporation to withdraw part of government’s share capital. It also took time to appoint the board and senior staff.
But it had been able to grant loan finance, operating funds and capacity-building funds to seven institutions worth R34-million. In all, 18 institutions have been evaluated for support and guarantees had been extended to 117 loans made by banks valued at R29-million.
Banks had also not responded fully to the credit guarantee scheme offered by Khula, which was only being 45% used.
In addition, it was not appreciated that Khula had been established as a wholesale agency. This meant that it could not lend directly to small businesses but would find partners who could act as intermediaries to lend money directly to small businesses.
Khula had started trying to make banks aware of the scheme but Mlambo-Ngcuka admitted that much more needed to be done to create a banking sector that was more responsive to the needs of SMMEs.
Ntsika was now ready with a funding model for local business service centres and would provide a capacity-building programme this year. But this was an entirely new concept and there were no role models with which to match the way forward and “we had to undergo a considerable amount of growing pains which will be corrected under the new priorities,” she said.
The main focus would be decentralisation to provide a better provincial focus, better monitoring of SMME needs and more direct face-to-face consultation.
A new branch network of central business service centres would be launched from July this year.
She supported the committee’s recommendation that the small business budget should be re-examined but said that other sources of financing were also being identified.