Small enterprises present strongest growth potential – Ramaphosa

With the local and global economy under pressure, it is small enterprises that present the greatest potential for growth, says President Cyril Ramaphosa.

Despite small, medium-sized and microenterprises (SMMEs) being fundamental to the growth of the economy, they are often overlooked in terms of government planning and investment, he points out.

“As we forge ahead with plans to raise R1.2-trillion in new domestic and foreign investment over the next five years, we must consider how to better showcase the investment potential of our SMMEs.”

He stresses that government must consider what needs to be done to promote and encourage an entrepreneurial spirit and an entrepreneurial culture.

“Entrepreneurial skills should be included in the basic education curriculum. Far too often, our citizens are risk averse when it comes to entrepreneurship, preferring the so-called comfort of gainful employment to the perceived insecurity that comes with self-employment.”

Further, in government’s many engagements with the SMME sector – mainly through the Department of Small Business Development – concerns have been raised by SMME owners and operators about access to financing, late payment for services rendered to government, a high regulatory burden, a lack of access to information and economic infrastructure, as well as rising fuel and utility costs, besides others.

It is government’s priority to provide greater support for the SMME sector, as these challenges severely impact on the viability of SMMEs and even force some of them out of business, he advances.

Structured Support

Working with social partners, government remains committed to improve the legal and regulatory environment.

Ramaphosa explains that this is to ensure access to markets, finance, skills training and quality infrastructure for SMMEs, especially in townships and rural areas.

He also states that under the soon-to-be finalised Public Procurement Bill, organs of State will be required to subcontract SMMEs to a minimum of 30% of the value of the contract for contracts that are more than R30-million.

This means that whoever is awarded a tender must subcontract a minimum of 30% of the value of the contract to SMMEs that are at least 51% black-owned. As such, government will strengthen monitoring and compliance through the Office of the Chief Procurement Officer.

“Compliance with the 30-day payment period plays a key role in ensuring the operational sustainability of SMMEs. We are going to ensure that SMMEs thrive and succeed,” says Ramaphosa.

He warns that organs of State will be closely monitored on their compliance with the 30-day payment period and any noncompliance is regarded as financial misconduct and will be dealt with accordingly.

Moreover, as public procurement is being used to promote local production, SMMEs will benefit from designated products when they participate in public procurement systems.

The tax regime for SMMEs is also being simplified, such as the requirement for annual rather than biannual tax returns, while the grants they receive are also tax exempt, Ramaphosa highlights.

Notably, enhancements have also been made to the venture capital company tax regime to encourage investment in SMMEs and junior mining companies.

“Another measure to support SMMEs is in the form of the Competition Amendment Act. Once it comes into operation, it will increase access to the economy for small, medium-sized and black-owned businesses.”

Ramaphosa has appealed to the global investor community to support SMMEs through the procurement of goods and services for the projects that will result from the commitments made at the annual South Africa Investment Conference.

“Through working together, in true partnership, we can develop the SMME sector to become the real engine of growth and employment in our economy.”

Ramaphosa was addressing delegates at the third and final day of the 2019 South African Investment Conference last month. The final day of the conference took place at the University of Johannesburg’s Soweto Campus.