The SA government has realized and confirmed what we as entrepreneurs have been saying for a few years now. It seems that plenty of money and support is provided by the government but its not reaching ground root levels. How many small business owners that you know have benefited from the governments many initiatives? Its time to provide more money and other resources to entrepreneurs at the sharp end and less on the many levels of bureaucracy that's been soaking up most of the money provided thus far.

Mathabo Le Roux reports:

THE need to bridge the gap between the first and second economies through small business development has become almost a mantra with government officials. The latest to punt that line was Trade and Industry Minister Mandisi Mpahlwa at the launch of Entrepreneurship Month this week. While the small business sector is economically significant -- constituting 98% of the total number of firms in SA, contributing 42% to the total wage bill and employing 55% of the labour force -- 87% of small enterprises are survivalist, the minister said.

"Our big challenge is to develop skills of our entrepreneurs and provide an enabling environment that will allow survivalist businesses to graduate to stable businesses."

But the minister also made the point that everything about the needs of small business has been said. What needs to be answered, he said, is: What are we doing? What progress are we making?

And while the minister listed an impressive array of new initiatives, one cannot help but be sceptical. Government's response to small business development has been an incoherent affair at best. Back in the mid-1990s the trade and industry department set up a handful of state agencies to help upcoming entrepreneurs and over the 10 years since, little has been achieved.

But the nondelivery was not necessarily the agencies' fault alone.

The National Empowerment Fund (NEF), for instance, had been running for five years and was still complaining that government had not unlocked necessary funding, while Khula Enterprise's wholesale approach has just not delivered the goods. Yet only now, 10 years after inception, is this approach being revisited.

Last year the state upped the ante when the Industrial Development Corporation (IDC) announced a keener focus on small business development. The most significant strategy shift, however, was a decision to extend its investment reach to small and medium enterprises (SMEs) in economically marginal areas such as townships and rural towns -- exactly where it has to go to ensure empowerment does not perpetuate "islands of wealth in a sea of poverty".

In repositioning itself, the IDC grabbed those notoriously passive state development agencies by the arm and dragged them into what seemed to be a more co-ordinated approach to SME development outside the economic hubs. With the more co-ordinated strategy, government's heart seemed to be in the right place. But goodwill and policy-tweaking cannot substitute for plain common sense. A recent investment conference held by the IDC in conjunction with the NEF and Khula in one of SA's poorest provinces was filled with exasperating anomalies which suggested that, at best, the state has no idea how lacking in resources and skills many poor people are.

IDC CEO Geoffrey Qhena in his presentation at the conference in Kimberley made much of the decision to bring SMEs into the fold. Yet with investment funding starting at R1m it is hard to see those informal enterprises coming within a mile of the IDC's investment radar. Where is the funding of R2000 for a spaza shop, or R5000 to convert a township home into an income-spinning B&B?

By virtue of its name, the NEF's task is a developmental one. Yet even this agency's minimum investment threshold is R250000. And a quick browse through the NEF's application form for funding demands a level of sophistication in supplying information that would put anyone off.

Khula's minimum investment threshold of R10000 is more reasonable, but small enterprises struggle to get that money because the agency's model for disbursing funds hasn't really proven viable.

The picture gets bleaker: financing models were the least of the conference-goers' worries in Kimberley. They had more to say about basic delivery by the financing bodies in the province -- none of the investment bodies have a presence in the provinces, delegates receive no feedback on written queries, calls are not returned, or phones simply ring without being answered.

And while representatives of the state agencies were sympathetic, efficient and helpful in answering these questions, they simply shrugged at suggestions of having a presence at provincial level. Who can blame them with inadequate resources?

Government's heart is clearly in the right place. Its plans are brave; what seems to be lacking is the capacity and experience to implement them. It begs the question: where is the private sector, which is well resourced and a fount of experience?

Empowerment rules put an obligation on companies to help with enterprise development -- companies stand to benefit from greater involvement. Mpahlwa says private-sector involvement is picking up. But isn't it time for this sector to consider a united, coherent drive to help government development agencies help entrepreneurs move off the fringes and into the first economy? It will benefit the economy as a whole.

At stake, however, is more than just formalising businesses to contribute to economic growth. Accelerated growth is an abstract concept in the lives of the millions of people directly and indirectly dependent on survivalist businesses. An economy that grows at 6% is not guaranteed to change their lives. Systematic, continued interventions at grassroots level will bring that change.

Irish cultural theorist Terry Eagleton in his arresting book After Theory describes a disturbing picture of the future: "It is not hard to imagine affluent communities of the future protected by watchtowers, searchlights and machine guns, while the poor scavenge for food in the wastelands beyond." This scenario is not a futuristic one for SA. It is a reality that needs to be addressed. Urgently. The private sector is best equipped to make a difference.

Le Roux is trade and industry correspondent.

Business Day (Johannesburg)
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