SMME strategy a game-changer says Eastern Cape government

BY SUPPLIED - DECEMBER 3, 2015

A recently-approved five-year strategy that supports SMMEs and cooperatives is already making its impact in renewable energy and manufacturing says the Eastern Cape Department of Economic Development, Environmental Affairs and Tourism.

The Department, which is currently holding entrepreneurship workshops for SMMEs throughout the province to highlight global entrepreneurship week, says “great strides in coordinating support for SMMEs to participate in the renewable energy independent power producer procurement process have been made in the province”.

Already more than 16 SMMEs have been supported and a second phase should ensure long-term viability through a mentorship programme which is likely to be replicated across other targeted sectors.

The national response, which is supported by a host of provincial SMME focused activities, highlights the plight of SMMEs in the province.

The Department, which recently completed two provincial SMME studies, reports that SMME numbers, according to Statistics South Africa, have dwindled over the past 10 years to 185 000, down from 225 000.

These worrying numbers are echoed by the Global Entrepreneurship Monitor which reported an alarming drop of 34% in the early entrepreneurial activity rate in 2014.

Other results from the provincial studies indicate that most SMMEs are survivalist and exist because the owners started a business in order to earn a living. Almost all are micro-businesses and very few graduate to small or small-to-medium businesses. These SMMEs operate in retail or sell direct to the public.

Furthermore, there is also little value-adding production by SMMEs with only four per cent being involved in manufacturing and needing “considerable” development in order to become competitive or export-ready.

The latest strategy, works hand-in-hand with three policies, is part of government’s plan to create an enabling environment for SMMEs to become involved in value-adding activities, focusing on the productive sectors of the economy.

The localisation policy aims to help develop local enterprises through state-owned entity and private sector supplier development programmes.

The amended Preferential Procurement Policy Framework Act makes provision for the entry of black-owned companies where these are well represented.

The amended BBBEE policy encourages the support of small SMMEs through socio-economic and enterprise development in order that these may graduate to being bigger businesses and so make bigger contributions to the economy.

At the provincial level, the Eastern Cape government is also dealing with one of the biggest hurdles facing small business, red tape. The plan, led by the Department of Trade and Industry, assists municipalities and sector departments in creating an environment that makes it easier to do business.

The Department says that South Africa has low entrepreneurship culture when compared to other developing economies. This is due, it explains, to many factors including the historical lack of participation of in the mainstream economy.

Secondly, “our education system has not promoted entrepreneurship beyond the tender system and developed the skills that are needed to operate vibrant and sustainable enterprises”.

The SMME strategy’s implementation plan includes a guide for SMME practitioners, government departments, business owners and other relevant stakeholders on support of the SMME sector.

Image: Eastern Cape MEC for Economic Development, Environmental Affairs and Tourism, Sakhumzi Somyo.