National Treasury’s recently released economic growth policy paper, which outlines its plans to support small, micro and medium enterprises (SMMEs), proves that SMMEs are being prioritised. While this is a step in the right direction, can more be done to support SMMEs to boost growth and create jobs?
“SMMEs run by entrepreneurs are a beacon of light to our economy. They provide job opportunities and contribute significantly to the country’s Gross Domestic Product (GDP), which is why, as a collective in both the public and private sector, we must support them through targeted interventions,” says Sylvester Albanie, Group Executive: Risk at Novus Holdings.
Finance Minister Tito Mboweni recently announced that the country’s growth is only expected to be 0,5% by end of the year, well below the target of 1,5%. The country’s unemployment is also sitting at 29%, the highest that it’s been since 2008. Positively, SMMEs contribute more than 50% to the job market, contributing a further 45% to the GDP.
Albanie says that Treasury’s commitment to supporting SMMEs is a step in the right direction: The economic growth plan includes several proposals that will help to promote the growth of SMMEs such as reducing red tape by 25% over five years, Government paying interest on late payments to small businesses, a Government fund for small businesses and fostering the creation of a subcontracting ombud. Furthermore, Government announced in its 2018 budget speech that it has allocated R2,1-billion towards supporting these businesses.
However, despite this commitment, SMMEs continue to face a difficult business environment that hinders their growth. Data revealed by Africa’s Public Service Delivery and Performance Review shows that the failure rate of SMMEs is exceptionally high at over 70% within the first 5–7 years of inception.
Responding on Minister of Finance Tito Mboweni’s call on the nation to take “deliberate and concerted actions” to raise South Africa’s declining GDP growth rate by up to 3% per year, Albanie says that all big businesses have a tool that can be effective in answering this call.
“This tool is Enterprise and Supplier Development (ESD), which is the cornerstone of job creation as it empowers SMMEs and gives them an entry to market. Through targeted interventions and specific programmes, ESD can play a very relevant role in the sustainability of SMMEs,” says Albanie.
Novus Holdings has assisted relevant SMMEs that are not part of the Group’s supply chain by providing financial assistance (e.g. loans) and non-financial support required for them to operate successfully (e.g. equipment, skilled staff etc). Beneficiaries of the Enterprise Development (ED) programme include Songo Africa, which is run by two passionate young entrepreneurs; a leading provider of draught beverage and fountain services, Drinks Dispense Services (DDS); and seven more SMMEs through a specialist intermediary service provider.
The Novus Holdings ED programme has helped create employment opportunities: A contribution by Novus Holdings to Songo Africa was in the form of an interest-free loan provided in 2017 to expand their business. To date, Songo Africa has grown significantly, employing 18 people. DDS has also grown over the years, servicing in excess of 20 000 pubs, restaurants and retail outlets throughout Africa. Also during 2017, Novus Holdings provided DDS with an interest-free loan, which has helped them to buy their own vehicles rather than leasing.
Novus Holdings’ Supplier Development (SD) approach involves a significant investment in business development, market opportunities, equipment/manpower and financing, where it is of direct benefit to the Group’s supply chain. The Group’s SD beneficiaries include: Pem Finishing – a magazine insertion and bagging company; Rodco Finishing – a supplier of hand-finishing services to the Group; and Van’s Bookbinders – a 100% black-owned bookbinding and print-finishing company.
“Through our ED and SD programmes we aim to help create a business environment that supports the growth and sustainability of SMMEs, enabling them to prosper. The end-goal is that in time, our beneficiaries become valuable partners in our Group’s supply chain.”
“ESD is neither a Government problem, nor a box-ticking exercise. As the private sector, we must show our commitment to helping to grow sustainable, successful businesses. The businesses and the entrepreneurs who run them is key to building the prosperous South Africa we all dream of,” concludes Albanie.
