By: Anna Majavu
New research has warned that South Africa urgently needs two million new SMMEs if it is to have any hope of ever reducing its “extraordinarily high level of joblessness”. The Trade and Industrial Policy Strategies (TIPS) economics think-tank says the government needs to “substantially disrupt” its own industrial policy to ensure that 20% of all working-age people can earn their livelihoods from their own businesses.
This would mean generating two million new enterprises, said TIPS senior economist Neva Makgetla, who is the author of a new TIPS paper on Small Business in Industrial Policy. Currently, the 710,000 small formal businesses and 1.75 million informal SMMEs in South Africa are owned by just 6% of people of working age – far below the 20% of other upper-middle-income countries. The government needed to inject “incomparably greater resources and capacity” into the small business sector and support SMMEs that were labour-intensive and job-creating, said Makgetla.
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This would be an about-turn from its existing industrial policy which has a narrow focus, Makgetla found, on encouraging SMMEs to break into export markets and be “globally competitive”. “The ultimate aim would be to support small businesses that can survive in the medium term without subsidies, even if they will never break into export markets or replace national and regional imports on a large scale…,” said Makgetla. The government should set up “programmes to provide basic necessities to working-class communities”, which SMMEs could be part of supplying goods for. SMMEs also needed to be provided with “productive assets on a mass scale”.
The enormous growth of SMMEs could be achieved if small agricultural businesses were given access to processing plants, and if SMMEs working in crafts, tourism and entertainment were given subsidised venues, or marketing for events. Small early childhood development centres in townships should be subsidised by the government.
The government also needed to set up new industrial sites for small businesses close to working-class communities, and should provide subsidies to low-income households for “solar lighting and heating systems, mopeds, e-bikes and bicycles, computers and broadband connections, day-care and preschools, and school feeding schemes,” the researchers suggested. The TIPS State of Small Business 2023 report, also published last week, found that although back-owned small businesses had been hit hardest by the Covid-19 pandemic, they had made a remarkable recovery, and were back to owning 60% of all SMMEs as they did in 2019.
