It’s time to walk the talk and support small businesses

Mere weeks before being announced as South Africa’s new finance minister, Enoch Godongwana, laid out his vision for the economy, most notably how to tackle endemic levels of youth unemployment.

He wrote: “Key elements of such a growth strategy will include, among other things, structural reforms, public investment, particularly in infrastructure, and small, medium and micro enterprise (SMME) support, including access to finance.” 

To those of us embedded in the growth and wellbeing of the small and medium enterprises (SME) sector it was music to our ears, as we know first-hand the power of the sector to grow the economy and create jobs.

However, our ears have heard a great deal of music over the years. The problem is that talking the talk is a strength of our government, but we are yet to see it translate into walking the talk, which is exactly what the SME sector needs. Time and time again, there has been a startling dissonance between lip service and actual support for the small-business sector. Godongwana has certainly said the right things, and we sincerely hope that he has the ability and willpower, in his new vitally important national position, to follow through on his vision.

A few times every year, opinion sections in newspapers around the country are filled with words about how we can ensure the national development plan’s (NDP) lofty vision for small and medium enterprises will be realised, such as creating 90% of jobs by 2030. This is not to say the sector cannot do this – it most certainly can – but as things stand it will get there despite, and not because of or alongside, the government.

Many said at the onset of the Covid-19 crisis that it was almost certain the government would lose credibility in the way it would handle the SME crisis triggered by the global pandemic. Sadly, on this front, it didn’t disappoint.

The pandemic hit the SMME sector disproportionately hard. You don’t need me to tell you this – take a walk through retail centres and count the cost of closed doors. The government knew this would be the case, which is why very early on President Cyril Ramaphosa announced a raft of measures, not least a grand plan to support the vulnerable sector to the tune of R200-billion, among other interventions.

Some SMEs may have accessed the temporary employer/employee relief scheme benefit, but this was not enough to cover lost revenue. Instead, it may have covered salaries and other expenses, and only for a limited time. SMEs have needed to do exactly what they did for most of 2020, and that is instil salary cuts or dig into their personal savings in order to keep paying their employees and keep their businesses afloat. This is not how you save a sector or create jobs.

Regarding the much-publicised R200-billion, only a portion ever made it to real small businesses. The overwhelming majority of deals went to bigger, established companies with turnover in the range of R100-million to R500-million. Over our 10 years of existence, Retail Capital — a business funding company — has developed a unique position to have an up-to-date and accurate view of the sub-R10-million SME sector. Of the almost 40 000 businesses we serve, many of which fall into the sub-R10-million category, not a single enterprise received a cent from the government.

The exercise had the shiny veneer of having the best interests of SMEs at heart, whereas in practice it merely protected banks’ balance sheets because the onerous conditions meant the scheme could not, and would not, support distressed businesses. In times of crises, not least the biggest disruption in living memory, surely it is the distressed businesses you must support?

Sections of the private sector stepped up to the challenge, and non-bank financiers such as Retail Capital supported these small enterprises when they needed it most.

Godongwana’s predecessor, Tito Mboweni, had numerous opportunities in his budget and medium-term updates to steady the ship. And while Mboweni’s budgets certainly came across positive, allaying fears of investors by focusing on fiscal consolidation while balancing the developmental needs of the country, the SME sector continued to languish in the missing middle.

Any rational person will congratulate government when it does good work. In the last budget, government allocated R4-billion to grassroot businesses, which is to be commended. We simply need township and rural enterprises to succeed and grow. However, when read against the reality that SMEs play a substantial role in driving our GDP, one is left with the feeling that they don’t get the attention nor respect they deserve.

It is not unreasonable to expect the national treasury to commit up to 5% of the budget to a sector that drives 30% of the economy. In other words, SMEs deserve to be allocated R100-billion at the very least so that they can get the support they need if they are to live up to anywhere near to their potential.

Our appeal to government is to listen to the suggestions and appeals from those working in and with the SME sector. Meaningful suggestions include increasing SME access to non-bank funders, bringing SMEs with on-the-ground and industry-specific insight to the national planning table, focusing on streamlining systems and digitisation across the sector and especially in how government interacts with the sector, taxi regulation to shore up the tax base, a legislated drive to ensure SMEs are paid within 30 days, a reduction in red tape and a relook at the cost of doing business, and a drive to bring cashless payment technology to all parts of the economy, which would increase revenue collection, but also provide a financial technology base for these micro enterprises to become financially included and access financial services.

There is much we can all do to revive and renew the SME sector. Our message to the government is that the private sector is walking the talk, and is willing and able to walk this talk alongside the government.

Keep the powerful accountable

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Karl Westvig
Karl Westvig is chief executive of Retail Capital, a business funding company.

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