The clearest sign that South Africa does not yet have a culture of entrepreneurship is the lack of understanding of how small businesses work.
Take the government’s skills development system.
The Department of Labour set up an imaginative system under which every business must pay 1% of its payroll as a skills development levy.
If it shows that it trains its workers, it can claim back up to 65%.
Last year 67% of businesses employing more than 150 workers claimed their levies back.
Of small businesses — those with fewer than 50 workers — only 9,57% reclaimed the levy. The sectoral education and training authorities (Setas), which administer the system, were shocked.
Many officials blamed small business owners for not bothering to train and being interested only in enriching themselves.
Today the accusations are more muted, as the true nature of small business dawns on Setas.
The most dedicated human resource developers in South Africa are small business owners. This is not because they have fuzzy feelings about unemployed matriculants. They have to train to survive.
South Africa’s small enterprises are critically under-financed because banks and investors are terrified of them. They want safe investments and too many small businesses fail for their liking.
Of a total of R8,4-billion available for venture capital and private equity, only R1,5-billion has been invested, according to the latest SA Venture Captial & Private Equity handbook.
There are an estimated one million formal small businesses in South Africa, most desperate for expansion finance.
This figure does not include survivalist street traders, who should not be mistaken for small businesses.
What do small businesses do in these conditions? They carry on regardless, and suffer for it.
They cut corners, they buy second-hand machinery; they use the revenue service as a bank by surviving on VAT money; they squeeze every bit of credit they can from suppliers and pay them late; they barter; and they hire cheap, unskilled workers and train them on the job.
Small businesses employ people that corporations and the government would not dream of taking on.
The skills development system not only fails to recognise this on-the-job training, it is (unwittingly) designed so that for a small business the levy is a tax.
For a small enterprise, 1% of its payroll can be as little as R500 a year. The time spent on paperwork to claim back 65% of R500 makes no business sense if you are under constant pressure to ensure your existing customers are happy, to seek new customers and to train under-skilled staff.
Formal training does not work well for small businesses. It is too expensive. Why send a worker on a R5 000 training course to claim back 65% of R500?
And small concerns cannot let a worker off for a week to attend training. The only training suitable for small businesses is the on-the-job kind, which the Setas system is loath to recognise.
The standard response is to call for the immediate exemption of small businesses from the skills levy. But the entire skills development system would then sideline the most active trainers of unskilled people in South Africa.
Another proposal is a voucher system, through which the levies of small business owners would be accumulated as vouchers to be redeemed for formal training courses.
This would cut out much of the paperwork, and small operators could build up vouchers until it was worthwhile redeeming them.
The solution will ultimately lie in harnessing the huge amount of informal training that takes place inside small enterprises.
Some Setas, realising this, are beginning to supply learning materials suited to this informal process.
The transport Seta, for instance, is sponsoring learning material aimed at training small business owners to become better managers.
The material is written such that by reading through it, an owner can learn something that he can immediately implement.
A solution is taking shape through a system that runs alongside the Setas: learnerships. This is the new word for the old “apprenticeships”.
Enrolling a worker into a learnership formalises on-the-job training, and adds a slight theoretical dimension.
Above all, for every worker that a business puts through one year of a learnership, the owner qualifies for a R25 000 tax deduction.
There is only one problem: so far, only a few hundred learnerships have been registered.
Most are very specialised apprenticeships, unsuitable for the vast majority of businesses.
At the current pace, the system will take decades to evolve.
Barrie Terblanche is the editor of Big News, which focuses on small business