Minister Lindiwe Zulu: Villages, Townships and Small Dorpies Economic Lekgotla

Remarks by the Minister of Small Business Development, Ms Lindiwe Zulu, On The Occasion Of First Villages, Townships and Small Dorpies Economic Lekgotla in Mmabatho Convention Centre

Programme Director,

Premier of the North West, Mr Supra Mahumapelo,

MEC of Finance, Economy and Enterprise Development, Ms Wendy Nelson,

All MECs, Mayors and councillors,

All senior government officials across all spheres,

Colleagues from the private sector,

Representatives of small business and co-operatives,

Ladies and gentlemen,

I am honoured to be addressing the First Villages, Townships and Small Dorpies Economic Lekgotla. I am confident that the people of North West and of South Africa will be inspired by the practical and innovative ideas that will emerge from this Lekgotla.

Our democratic government has made a commitment to set the country on a path of radical economic transformation in order to accelerate our onslaught on the triple challenge of poverty, inequality and unemployment. This Lekgotla is a practical effort by the North West provincial government to take this call forward.

Working together with provinces, my department seeks to enhance co-ordinated and integrated support to small businesses and co-operatives. This Lekgotla provides a perfect opportunity to remind all three spheres of government of the economic challenges that confront us as a nation as well as of the urgency of acting with speed and without undue delay.

For us this Economic Lekgotla is a clarion call to action and a bold assertion about the critical importance of small businesses and co-operatives in economic transformation, job creation and economic inclusion. I am confident that, arising from today’s engagement, will emerge concrete and practical programmes that will assist the provincial government to respond effectively to the challenges that confront small businesses and co-operatives. The people of this province are pinning their hopes on the outcomes of this summit. We dare not fail them.

As a department, we are determined to make our humble contribution and discharge our mandate of leading an integrated approach to the promotion and development of small businesses and cooperatives. Our vision is to see a radically transformed economy through effective development and increased participation of SMMEs and cooperatives in the mainstream economy.

Small businesses are the heartbeat of our economy and engine for economic growth and job creation. If we want to turn around our economic fortunes, we need to redirect our collective energies towards building and growing a small business sector. It is exciting and encouraging to see that there is a universal appreciation that at the heart of any economic plan must be recognition of the role of small businesses and cooperatives.

There is acknowledgement across the globe that small business and entrepreneurship development is a vehicle for stimulating economic growth. We have examined countries that have excelled in propelling economic growth and concluded that these countries have achieved higher growth rates, created wealth and higher earnings per capita through a mind-set of lifting one another up.

President Jacob Zuma has instructed me to lead a process of unlocking the potential of SMMEs, cooperatives, township and rural enterprises which seeks to ignite growth and create jobs. The growth and sustainability of the underdeveloped Small, Medium and Micro Enterprises (SMMEs) sector rests on our collective shoulders. The Department of Small Business Development has been charged with the mandate of leading this national effort. In fulfilling our mandate, we will seek to promote a co-ordinated and integrated support across government spheres and institutions for SMMEs.

In order to unlock the potential of SMMEs and Co-operatives, we are focusing on five critical areas that will drive the development and sustainability of the small business sector, namely, public sector procurement, building market access into private sector value chains, simplifying the policy and regulatory environment, access to finance, and support to township and rural economies.

Government is keen to ensure co-ordinated support to small businesses and co-operatives because each government department or agency across all three spheres has something to offer to small businesses and co-operatives. The department that I have the honour to lead is entering into transversal agreements with other government departments and government agencies across all spheres to implement requisite support measures for SMMEs and Co-operatives. The critical benefits of transversal agreements is that they will assist us to avoid duplication, utilise scarce resources optimally and give concrete expression to co-ordinated and integrated governance and service delivery.

We remain convinced that if we are to sustain the growth and development of SMMEs and Cooperatives, we need to ensure a co-ordinated and integrated approach across all spheres of government. For this reason, our department is focusing on strengthening its working relationships with provinces and municipalities.

As we continue to seek better ways of supporting small businesses and co-operatives, we must appreciate the need for synergy between national, provincial and local government programmes. Policy harmony is critical if we are to unlock the potential of SMMEs and co-operatives.

We are clear that through this intervention, we will be able to unlock economic opportunities and thus achieve inclusive economic growth and sustainable employment, particularly for women, youth and people with people with disabilities.

This important sector of our economy cannot remain small forever. We have a responsibility to help foster closer working relationships between big and small businesses. Let us remember that big companies have for a long time managed to crowd out small businesses through their financial muscles, cash reserves and economies of scale. It is much easier for big companies to sell products at lower prices and in the process squeeze out small businesses when competing for government procurement opportunities, especially because government considers the lowest price when procuring goods. Only through a genuine symbiotic relationship between big and small businesses, we can honestly declare that our economy is inclusive, equitable and fast growing.

This province is endowed with natural resources and has the potential to propel us towards our economic destination. The With your vast mineral resources, especially platinum, your advanced tourism sector, promising creative industry and your established agricultural sector present opportunity from which this province can launch a sustained economic drive towards economic inclusion and prosperity. Let us do whatever it takes to harness the potential of these sectors as they hold the key economic development. Let us continue to open opportunities for small businesses and cooperatives in these sectors. This approach will help us to defeat the social ills of our times – poverty, unemployment and inequality.

The National Development Plan seeks to encourage all South Africans to become active citizens. It is expected that by 2030, 90% of the 11 million jobs will be created through small to medium enterprises. We are setting bold targets in this regard. We want to create the number of jobs that are created by the small business sector from the current 7.1 million to 9.2 million. However, we cannot do this alone. We need partnerships with all critical stakeholders to help us achieve our targets.

Government fully is aware that small businesses and co-operatives find it difficult to flourish in underdeveloped areas such as townships and rural communities due to lack of adequate investments in infrastructure and lack of appropriate policies to protect informal businesses.

The strategy of developing township and rural enterprises is coordinated by our department with the support of the Departments of Economic Development and Rural Development and Land Reform as well as all Provincial Departments of Economic Development. This strategy is aimed at intensifying government’s support to township and rural enterprises to ensure their sustainability and competitiveness. At the heart of our strategy of revitalising township economies is effective partnership between provincial and local governments.

It is a matter of concern that our townships are a hive of economic activity, yet the bulk of people buy in townships do not come from townships but are brought from elsewhere. Our provinces must continue to lead the programme of revitalising township and rural enterprises.

We are also prioritising the co-location programme. We have a number of institutions in government and private sector which offer business development services in the country. Unfortunately, we are not offering these services in an integrated manner. We are increasing access to business development services by SMMEs and Cooperatives through decentralisation and colocation approach. At the same time, we will work with municipalities to ensure that we strengthen Local Economic Development (LED) offices as they are the coalface of delivery for township economic development.

Through our programmes, we will work with small businesses and cooperatives to improve quality of products, assist local suppliers to expand production capacity (existing and potential); assist suppliers to reduce input costs; facilitate market access for products (locally and internationally) and to establish and build long-term, effective supplier partnerships. We are not doing supplier development programmes for the sake of ticking a box. For us linkages with potential buyers is critical.

Our approach to supplier development is partnership with the private sector to enable SMMEs and Cooperatives to have a ready-made market for their quality products. For example, our partnership with the South African Breweries is bearing fruit. The department, South African Breweries (SAB) and the Agricultural Research Council (ARC) have partnered in a multi-million rand investment initiative to fast track the inclusion of black emerging women farmers into the formal economy.

The Women-in-Maize programme seeks to empower 5 000 women maize farming co-operatives over the next five years and will increase the inclusion of black women-owned co-operatives in SAB’s supply chain; develop skills of women farmers; improve food security; and stimulate local economies by increasing procurement from local suppliers. I urge entrepreneurs to find creative ways of seizing the opportunity presented by the private sector supplier development programme.

We are also confronting the challenge of red tape head-on. We remain seized with the task of easing regulatory and compliance burdens on the shoulders of small businesses. We recognise the fact that compliance with policies, laws and regulations are necessary in any modern society. The department is keenly aware that in some instances, policies and compliance processes may have the unintended consequences of being a heavy burden that may constrain the growth and development of businesses.

Consistent with the action plan on radical economic transformation, we will focus on providing effective support to small businesses and to ease the regulatory and compliance burden on the part of small businesses and to expand access to economic opportunities for historically excluded and vulnerable groups.

Our ultimate goal is to reduce obstacles to doing business wherever possible, particularly in areas such as compliance and regulation, transport and infrastructure, water and electricity supply, telecoms connectivity, licencing and labour. We are reviewing the current policy and legislative environment governing the small business sector in order to remove whatever constraints that undermine their success and to open the way to a co-ordinated and integrated support to small businesses.

We proceed from the premise that financial and non-financial support for small businesses is critical to their growth and sustainability. As I announced in my Budget Speech, the Black Business Supplier Development has been allocated R245 million and the Cooperatives Incentive Scheme R75 million. For National Informal Business Upliftment Scheme the allocation is R96 million and the Enterprise Incubation Programme is allocated R46 million. For the Craft sector we have allocated R10 million.

Seda has been allocated R634 million, to drive non-financial support to small businesses and cooperatives. Sefa has been allocated a budget of R1 billion of which R213 million comes directly from the Fiscus and the balance comes through the IDC.

Our Shared Economic Infrastructure Facility programme covers the funding of a common infrastructure that is either new, upgrading or maintenance and shared by a certain number of businesses. It is a 50/50 contribution with municipality and is up to R5 million. Together with local authorities we can provide requisite infrastructure for our SMMEs interested in beneficiating.

We are also implementing the Enterprise Incubation Programme (EIP) as a pilot programme during this financial year. The objective is to support the establishment of new business incubators and for the growth and expansion of existing incubators. It will offer incubation for small businesses and co-operatives with potential but limited technical and business skills and expertise, to be mentored so that they can take advantage of market opportunities.

The Department and Seda hosted the inaugural Southern African Business Incubation Conference, with the Deputy President delivering the keynote address. The main objective of the conference is for SEDA to lead a dialogue on aligning the incubation ecosystem in the country.

As at the end of March 2016, the 57 Seda-supported incubators housed 2,492 small enterprises, and created 2,331 permanent jobs during the 2015/2016 financial year. The sectors that contributed the most to this performance are the labour absorbing sectors of Agriculture, Construction and Manufacturing. In an effort to strike a balance between high-technology, innovation focused incubators and job-creating incubators, Seda is remodelling some of its incubators in high-technology sectors such as ICT, Chemicals, Bioscience, and renewable energy.

Working together we can help to grow our economy and create jobs through the small business and cooperative sector.

I thank you

Source: Government of South Africa.

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