Developing small businesses crucial for SA economy: Ramaphosa
President Cyril Ramaphosa says to achieve a successful economic reconstruction and recovery plan, SA is going to need to more effectively support the growth of vibrant and sustainable small, medium and micro enterprises and co-operatives.
“As we make the transition from relief to recovery, it is critical that we continue to provide support to enable companies to recover. We therefore set up major schemes like the credit guarantee scheme of R200bn.
“At the same time, we need to introduce new business processes, technologies and equipment to assist them to adjust to the new reality,” said Ramaphosa, who was speaking on Thursday during a virtual engagement with SMMEs and co-operatives.
In October last year Ramaphosa presented the economic reconstruction and recovery plan to the nation, which outlined the actions SA must take to rebuild the economy in the wake of the coronavirus pandemic.
Ramaphosa said a business viability scheme that will help to position SMMEs to drive economic recovery had been developed.
“I am impressed with the targeted interventions the department has extended to help enterprises in townships and rural areas. I say this advisedly because these areas have been neglected for a long time.”
He said in many developed and developing economies, SMMEs account for more than 90% of all formal businesses. They also contribute significantly to GDP and create and sustain lots of jobs in those countries.
“In SA, while 98% of formal businesses are SMMEs, they make a far smaller contribution to employment and GDP. If we are to achieve the goal of the National Development Plan for SMMEs to create at least 90% of the targeted 11 million new jobs by 2030, we need to pay far closer attention to developing small businesses,” said Ramaphosa.
He added that the measures put in place to contain the spread of the coronavirus pandemic “are measures that we sought to assist those businesses that have been so damaged by the virus.”
“The department of small business development, together with the Small Enterprise Finance Agency, reprioritised more than R500m to establish the SMME Debt Relief Scheme.”
This was to help small businesses stay afloat during this difficult time.
It has been reported that, as a result of the funds paid out under this scheme, more than 23,000 jobs were saved.
“Of the SMMEs approved for support, 67% were black owned, 33% were female owned and 21% were owned by young people. It is a concern, however, that only 0.3% were owned by people with disabilities.”
Ramaphosa explained that the Small Enterprise Finance Agency extended payment holidays on capital and interest payments of up to six months to 220 direct lending clients and six wholesale lending clients. The total value of interest and capital repayments foregone by the agency was about R106m, resulting in more than 37,000 jobs being saved.
The president said, “Given the limitation of resources, it is commendable that so many businesses received support within such a short space of time. To some of these enterprises this has been life support.”
He added that SA needed to accelerate the implementation of the Township and Rural Entrepreneurship Programme, which will bring a lot more people into the mainstream economy.
“These include sectors such as automotive, personal care, clothing and textiles, bakeries and confectioneries, shisanyamas and cooked food, fruit and vegetable vendors, butcheries and spaza shops.”
Ramaphosa said through the Township and Rural Entrepreneurship Programme, the country is providing both financial support and business development assistance.
“One of the key elements of the Economic Reconstruction and Recovery Plan is localisation, and we expect SMMEs and co-operatives to play a central role in driving localisation. They are nimble and have great insights.”
Ramaphosa said some work has already been done by the department of small business development to introduce SMMEs and co-operatives to wholesalers and retailers.
He encouraged South Africans to continue to buy local produce, saying, “in this regard, the state, including our state-owned enterprises, must take the lead”.
The department is already supporting those who need assistance with certification, quality improvements, compliance and the like.
“The era of big corporates creating thousands of jobs has passed. We have recognised [the need] to open opportunities to entrepreneurs and we have set procurement targets to empower this sector,” said Ramaphosa.