/ 3 February 2017

Lindiwe Zulu laments inadequate budget

Minister Lindiwe Zulu says radical steps are needed to build up black-owned small businesses.
Minister Lindiwe Zulu says radical steps are needed to build up black-owned small businesses.

Small Business Development Minister Lindiwe Zulu says the R1.4-billion budget allocated to her department is not enough to provide support to small and medium enterprises (SMME), identified by the ANC as key to growing the economy and creating jobs.

She wants Finance Minister Pravin Gordhan to allocate not less than R5-billion to her department in the new financial year. He will deliver his budget speech later this month.

President Jacob Zuma created the small business ministry in 2014 to support the goals of the National Development Plan, which anticipated that 90% of the jobs would be created by that sector.

But given the state of the economy and the slow pace at the department, this is probably a pipe dream.

The economy grew 0.5% last year and is forecast to grow by 1.4% this year. In the third quarter of last year unemployment reached its highest level in 13 years, increasing from 25.5% to 27.1%.

Zulu believes there could be an improvement if more resources were allocated to her department. “I think if we were to start with something like R5-billion it would go a long way. How [do] we [talk] about people needing financial access and yet we don’t have financial access?”

Last week the ANC’s national executive committee took a resolution to focus on radical socio-economic transformation through changing ownership patterns of the economy.

Now, just three years since its creation, Zulu’s department has the task of trying to stimulate economic growth and transformation through SMMEs.

Apart from an insufficient budget, the department also has an inadequate staffing component with fewer than 200 employees servicing the needs of many small business owners across the country, Zulu lamented to the Mail & Guardian this week.

“It’s impossible to think you can be able to cover nine provinces with less than 200 people. It just doesn’t work that way,” she said.

Zulu also lambasted the business sector for failing to deliver on its promise to contribute money to support small businesses.

Last year the private sector committed itself to giving R1.5-billion to assist SMMEs. But the funds have not been forthcoming, with big business deciding instead to seek shares from the small businesses that they help.

“The private sector should have just stayed with their R1.5-billion and looked for equity and not come to us and make us maklea whole lot of noise. It’s almost a year now that that announcement was made,” Zulu said.

She also expressed frustration with the development finance institutions supported by government for hampering the growth of small businesses by putting in place stringent criteria, such as requesting guarantees before issuing loans to small business owners.

Zulu said this behaviour was counterproductive and went against the goal of a development-focused economy.

“We need to relax some of the conditions that are put on people because what’s the point of getting people not to go to the bank, but to go to the development agencies, only to find that the conditions are almost the same but they’re just put in a nice way?

“When I engaged with people that were given loans, I began to understand that [with] many of them, it’s not because they took the money and chowed it.

“It’s because the environment is not conducive for them to return the money.”

In its January 8 anniversary statement, the ANC announced that legislation would come into effect this year that would require large companies to subcontract 30% of their projects to SMMEs.

Zulu said the move to include SMMEs had been long overdue and would go a long way towards exposing small businesses to relevant markets.

“The fact that this has taken so long was one of the most annoying things for me when I arrived,” she said.

“It is the people who are sitting in there with the contracts and looking at people who have applied who have to make sure that is implemented. So we are going to be like a watchdog and oversee that.”

Even if her department did get the budget allocation Zulu wants, she said the most pertinent trans-formation would be an overhaul of the economy to make it more inclusive of small players.

“The question is, does this economy provide a conducive environment for people to participate? And my view is that it doesn’t because monopoly is still occupying so much.”

The minister said the ANC-led government had spent its two decades in power fostering social transformation and creating a stable political environment and had been too slow in transforming economic ownership.

She said radical steps needed to be taken now to offer financial and nonfinancial support to small business owners to increase and diversify access to the economy.

“We need to ask ourselves: How can we empower especially SMMEs by making sure that they slug it out and they grow through it?

“But they need to jump certain stages because, if we are saying they must go through certain stages that others have gone through, it means black people will never be able to see the economy.”