The president of the National African Federated Chamber of Commerce and Industry (Nafcoc), Lawrence Mavundla, has criticised the small business proposals in President Cyril Ramaphosa’s jobs summit framework, claiming they won’t stimulate effective small business growth.
Nafcoc, which claims to represent the majority of small businesses in the country, believes the government won’t achieve immediate, large-scale job creation unless it eradicates “draconian” regulations that impede small business success and transforms the financial sector’s approach to funding small enterprises.
In his address at the opening of the jobs summit last week, Ramaphosa acknowledged the importance of small businesses in creating jobs. “If we are to succeed in creating the number of jobs we need, it is essential that small, medium and micro-enterprises like these take their rightful place in the economic life of our nation,” he said.
But Nafcoc has asked why it, as a representative of small business, was left out of all discussions before the summit. The organisation is demanding to be included on the monitoring committee that will be set up track the implementation of the proposed measures.
Speaking to the Mail & Guardian this week, Mavundla said municipalities were sitting on business applications that could inject more than R1-trillion into the economy and create more than 500 000 jobs a year.
He said the applications were for zoning permits to allow pockets of land to be used for business purposes and for environmental impact assessments (EIAs) to determine the environmental consequences of developing targeted areas of land. Businesses run the risk of being shut down if they fail to follow these procedures.
He said the processes were an impediment to establishing new businesses and he called on the government to intervene to ensure an immediate approval of all zoning applications, as well as a three-year ban on environmental legislation that acts as a barrier to small and medium entrepreneurs.
“If President Ramaphosa can call all the mayors and municipalities and environmental affairs MECs and say ‘put on the table all the applications awaiting your approval’ and say, ‘because we have a crisis these applications are approved this minute’, a trillion rand will be in the economy immediately,” Mavundla said.
“Yes, we must be in line with regulations, but if we are going to follow [all] the rules of EIA and zoning, a lot of private-sector investment cannot happen. Those investors have to wait two years just for the EIA,” he added.
The National Development Plan, adopted in 2012, projected that South Africa would need to create 11-million new jobs to almost eradicate unemployment by 2030. It looked to small businesses to create 90% of these, believing the sector had the greatest potential to create employment.
Although the government has since acknowledged it will not meet its 2030 targets, Ramaphosa believes the proposed interventions decided on at the last week’s summit will create 275 000 jobs annually.
In particular, the government, business and labour hope to stimulate job creation in the small business sector by increasing collaboration with it through hubs and incubators, ensuring that 30% of procurement is reserved for small businesses and educating emerging entrepreneurs on how to comply with the procurement application processes.
But Nafcoc criticised the framework for rehashing what it believed are old promises and failing to acknowledge the need for an urgent change by the financial sector and its approach to funding small businesses.
The framework acknowledges the need to strengthen one development finance institution (DFI), the Khula SME fund, to allow it to give guarantees to commercial banks in exchange for them granting loans to small businesses.
But it does not address the failure of DFIs to fulfil their mandate of funding small businesses without setting the same restrictive conditions demanded by commercial banks.
DFIs have previously been criticised by Small Business Development Minister Lindiwe Zulu for acting as a barrier to access capital by also demanding guarantees from small business owners.
Mavundla said Ramaphosa’s framework would have to come up with a new strategy on the role of both commercial banks and DFIs if it was to meet its job creation targets.
“Why is it that, if I want R3-million to buy a car, the application takes a day? But if I want the same R3-million in order to generate jobs and start a small business, that application takes six months to two years. Why?
“It is my constant complaint [with DFIs] that you cannot have an application for a small business taking more than a week [to process]. But when they appoint people on the [DFI] boards, they take people from the banks who already have that indoctrination [to frustrate small business applications].
“Both government and big business are talking about retrenchment but then they meet alone to talk about creating jobs. This is something very funny. It makes you wonder who is fooling who,” Mavundla said.
“We are seriously being disenfranchised. Government must do more to make sure Nafcoc is part of that [further deliberations], because we represent the majority of small businesses.”