The future of SMEs looks bright

I became the CEO of the Small Business Institute (SBI) – a small but loud outfit – advocating for informal and formal sector small and medium-sized enterprises (SMEs) at the beginning of 2020.
Two months into what was supposed to be an exciting job, the first case of Covid-19 was reported in our country. My fortunes soon changed dramatically, alongside those of the wider SME segment of the economy.
But even before Covid-19 or covivi (as it is known in our communities), our SMEs were already suffering from other underlying conditions. Last Friday, I reminded an esteemed audience of a webinar organised by the SA Local Government Association (Salga) of these truisms: late payments by big business, government departments and state-owned enterprises (SOEs), rolling power outages, a technical recession and multiple credit rating downgrades which have made the cost of borrowing unaffordable.So, when Covid-19 hit our shores, it already found this segment exposed and vulnerable.
Since then, I’ve often been asked by clever journalists if there’s any silver lining I’ve spotted during the pandemic as far as SMEs are concerned. And actually there is one. It’s two-fold: first, SMEs have become the hit of the town; and second, something might come out of it.
To the first point, the SBI has been campaigning around a few issues: reduction of red tape on SME owners, an end to late payments to SME suppliers and a stop the transactional relationships between big business and SMEs as well as an end to the dysfunctional relationship between the informal and formal sector economies.
During the pandemic, the late payment campaign got adopted by big business through the CEO Initiative and is now gaining traction and is about to hit a new landmark in weeks (watch this space).
At the Salga webinar last Friday, it was pleasing to sit in the same room – so to speak – with the Department of Small Business Development (DSBD) talking the same language about eliminating red tape which is strangling our SMEs. Not only do we use the same terminology, we are also amplifying each other’s voices in public.
Not only are we talking about eradicating unnecessary red tape, we are also looking at implementing Section 18 of the Small Business Act which envisages an impact assessment of all new laws, policies and regulations on SMEs prior passage. This is a huge step forward.
Last Thursday, it was pleasing to listen to President Cyril Ramaphosa’s speech on the economic reconstruction and recovery plan. What’s envisaged in the plan is potentially exciting, but it requires hard work and real commitment if the silver lining is to be realised.
At a macro-level, the plan must be applauded for two things: first, its statement of intent (that is, what it seeks to achieve); and second, for mainstreaming SMEs and co-operatives (co-ops).

The latter has the real potential of actually transforming the shape, size, form and complexion of our economy. After all, we all must accept that there’s nothing to celebrate (and hanker after) from the pre-Covid-19 South African economy. It was not only imperfect, it was deformed, racialised and exclusive.
The new post-Covid-19 economy has to be inclusive, deracialised, transformative and sustainable and must create jobs.
It’s possible. But, not without effort.
Here’s what the effort looks like. Firstly, Covid-19 has taught us that it’s possible to be self-sufficient – that is, to replace or substitute imports. By the way, we didn’t need Covid-19 to tell us this. As a country, we are blessed to have institutions such as the Industrial Development Corporation that could work this out for us. We need to look at their list. Covid-19 only brought the spirit of collaboration forth.
This is what is known as localisation in Ramaphosa’s plan.
Secondly, for localisation to happen in a meaningful manner, there has to purposeful action. By this I mean, we have to delineate previously agreed decisions such as a 30% local set-aside and define it. What is meant by 30% local set-aside – is it a product or service from a ward, township/village, district, provincial or national or sub-regional (southern Africa) for example? This is significant, because it’s currently a matter of controversy in many communities.
And thirdly, it’s important that we also agree that if SMEs and co-ops are to form the engine of this reconstruction and recovery, we cannot expect them to compete with large national and multinational corporations on an equal footing. Put differently, the work must be broken down to chewable chunks for them to have a credible fighting chance to bid for it.
Otherwise, the silver lining will turn into another dark storm cloud.

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by Vutivi Business News