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National Integrated Small Enterprise Development masterplan a call to arms to stimulate development of small businesses

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Nigel Gwynne-Evans and Brendon Darroll are team leader and senior expert, respectively, of the EDSE Programme, a R1-billion, five-year partnership between the European Union and the South African government. The gazetting of the masterplan opens up the opportunity for public comment and closes on 10 June. It can be found here.

What is most heartening is the government’s commitment to doing things differently, by essentially issuing a call to arms.

A new masterplan, published on 10 May for comment, offers an unflinchingly honest assessment of government intervention in small business development: “After 20 years, support for small enterprises remains uncoordinated and fragmented with duplication of initiatives based on symptoms and, at best, anecdotal evidence. Research and data to monitor SMME [small, medium and micro enterprise] performance remain elusive at the national level, resulting in the ill-informed design of programmes and support to match SMME needs and opportunities (financial and non-financial).”  

The plan also confirms that small businesses’ growth has been stagnant (at best) for the past three decades, as has their contribution to GDP. The latest data available, from 2018, show that South Africa still had less than 300,000 formal SMMEs with employees and perhaps another 600,000 to 800,000 formal enterprises, which include sole proprietors. And this data, of course, do not reflect the impact of Covid-19.  

What is most heartening, however, is the government’s commitment to doing things differently, by essentially issuing a call to arms. 

The plan states: “The overall objective of the National Integrated Small Enterprise Development (Nised) Masterplan is to coordinate the many actors on essential undertakings as tabled in the National Development Plan and the new Economic Reconstruction and Recovery Plan … It is wholly understood that the development and support of small businesses is not the domain of one department but the collective action of many public and private actors.” 

Can an integrated ecosystem approach help deliver the goods to sustain the “small” in business? The Nised Masterplan is banking on it. 

Its 10-year, flexible approach offers four key, measurable pillars to guide its focus: 

  1. A well-informed South Africa about its small businesses.
  2. Policy, laws and regulatory reform to enable SMME growth and efficient governance.
  3. Effective support and services (both financial and non-financial) for SMME growth.
  4. A coordinated government seeking private sector partnerships. 

Recognising that the state does not have all the answers and that, in a nutshell, it takes a village to raise an SMME, is a key departure from two previous strategies beginning with the 1995 White Paper on Small Business. The Nised Masterplan aims to harness an integrated and well-functioning ecosystem that mobilises all role players into a seamless and streamlined solution for the development and support of small enterprises.   

By involving a collection of independent actors across the public and private sector to act in concert for the creation and growth of enterprises, particularly those with high growth and employment potential, South African businesses and the 35.3% of people without a job may well have a fighting chance.  

Dan Isenberg, an internationally renowned observer of ecosystems, identifies six domains that are vital for a well-functioning environment: human capital; SMME support; culture; access to finance; enabling policies; and well-functioning markets. They foster a “process that blends the invisible hand of markets and the deliberate helping hand of public leadership that is enlightened enough to know when and how to lead as well as let go of the grip in order to cultivate and ensure (relative) self-sustainability.”  

The masterplan embraces this sensibility and demonstrates that the state – arguably the primary change agent in the ecosystem – recognises that its role is an enabling one. This will see it working at different governmental levels and across different geographical and sectoral spheres of the various ecosystems to connect, stimulate, empower, incentivise, unblock, listen, support and enable small enterprise development.   

An enabling environment does not refer only to the policy, legal and regulatory regime of a country; it also applies to the quality-of-service delivery and strong partnerships between government and the private sector, civil society and labour. Providing effective support and a supportive environment for SMMEs requires a coordination of efforts by all stakeholders; improvements in infrastructure, especially at local municipal level; and capable delivery of effective services and products that match the needs of SMMEs.  

This marks a fundamentally different approach to the state’s role, from that of a direct delivery agent for services and resources, to one that uses its limited resources to leverage private sector players – from large businesses to academics and researchers, to business chambers and organisations, to statistical agencies, to civil society and international development agencies – for financial and non-financial support.   

For example, the programmes offered by the Khula Credit Guarantee fund, administered by the government’s Small Enterprise Finance Agency, have the ability to leverage nearly six times the capital injected compared with its direct lending portfolio, which reports 40% in non-performing loans and limited data on the efficacy or impact of the funding provided.   

Similarly, incubators established and run by the state are often not attuned to market needs, limiting their impact. However, those formed in partnership with the private sector, such as the Bandwidth Barn in Cape Town or the Timbali Technology Incubator in Mpumalanga, are successful examples of the state leveraging and enabling private sector energy, expertise and resources.  

The Nised Masterplan also introduces the concept of high-impact “game-changer programmes”. The skills and capacity to understand, design and implement game-changers generally lie beyond any single institution and require partnerships across the state and between the state and non-state actors. A number of these game-changers are being targeted and designed in key policy areas such as the digital economy, township development and enterprise supplier development. 

All too often, the South African government is caught in the delivery of a Gordian knot of poorly designed and uncoordinated micro programmes and pilots across different spheres that have no scale or critical mass. The game-changer concept, as adapted from Professor Mariana Mazzucato’s approach of mission-oriented goals, sees the state facilitating collective agreement by actors in the ecosystem on the big goals and the route to achieving these goals.  

Nised, itself conceived in partnership with the Ecosystem Development for Small Enterprise (EDSE) Programme, presents a new, pragmatic strategic framework that is adjustable to prevailing conditions, which guides all actors engaged in SMME development with clear direction, measurable outcomes and programme interventions that are evidence-led. We urge role players in the ecosystem to read, consider and comment here on this “game-changing” masterplan. DM/BM 

 

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