Date: 29/06/2004
Source: Department of Trade and Industry
Title: L Hendricks: Youth Entrepreneurship Conference
SPEECH BY DEPUTY MINISTER OF TRADE AND INDUSTRY, MRS LINDIWE HENDRICKS, AT THE YOUTH ENTREPRENEURSHIP CONFERENCE, 29 June 2004
CREATING AN ENABLING ENVIRONMENT FOR SMME DEVELOPMENT
Programme Director
Ladies and Gentlemen
Thank you for inviting me to address this conference, which is looking at improving the culture of entrepreneurship amongst youth in South Africa. The issues that this conference and Umsobomvu youth fund are looking at are a priority for the country and for the government. If we are to be successful as a country and have economic growth, a reduction in the levels of poverty, and an increase the levels of employment then we need to have a greater number of entrepreneurs and a greater number of successful enterprises. This success starts with the youth and it is the reason that we have put substantial resources into the Umsobomvu youth fund. It is also necessary for us to have an enabling environment for business, which is the subject that I have been requested to address you on today.
It is important to remember that it is not the responsibility of government to create businesses but rather to create the environment in which businesses can start and grow. There is no doubt that South Africa has over the past ten years been relatively successful in creating an enabling environment for small business development. When one looks at the opportunities and possibilities for small businesses prior to our attaining democracy and when one compares it with the position we are in today, it is easy to see how far we have come.
Our progress in creating an enabling environment has not only been in improving small businesses access to support services, access to information, access to finance, access to government contracts, and a reduction of the tax burden, but it has been on stimulating economic growth more broadly and improving the structure of our economy. It is important that we recognise that our broader efforts to grow the economy have a positive impact on small businesses as it provides new opportunities and new markets for them. This growth also gives space for new entrepreneurs, in particular youth entrepreneurs, to enter the market.
The government first embarked on a small business strategy there was wide consultation with many groups and structures. Arising from these consultations we developed a programme of action that included the formulation of legislation, establishment of institutions such as Ntsika, Khula and the National Small Business Council. We have reviewed these institutions and our programmes as we have seen that the impact that we needed was not sufficient and improvements needed to be made to our structures.
The government has recognised that in order to further grow the small business sector and improve the environment changes need to be made. Consequently, the department of trade and industry (the dti) has reviewed the small business strategy; and it has emerged that:
* The support that government and its agencies provide to small businesses needs to be improved; this would include better provision of business support services, information, and training. This area of support will be improved in part through the merger of Ntsika and the Manufacturing Advisory Centre programme, which will be finalised towards the end of this year
* There needs to be greater co-operation between the three layers of government and across government departments to ensure better and more focus provision of support to small businesses
* The products that the private sector offers to small business need to be extended so that the reach is greater
* More resources need to be channelled into the small business sector; in particular we need to see an improvement in access to finance for small businesses, and access to finance for micro enterprises. The former will be address through the financial services sector charter and through the capitalising of the National Empowerment Fund; in addition the role that the Umsobomvu funds play in improving access to finance for small businesses should not be underestimated. Access to finance for micro enterprises will receive a great boost through the launch of the Micro Finance Apex fund later this year
* The regulatory burden on small enterprises needs to be decreased. This will see interventions taking place to streamline the regulatory process; a simplification of regulations for entrepreneurs; and by ensuring that new legislation is assessed for its impact on small businesses
* There needs to be greater promotion of entrepreneurship in our country so that more people are drawn into the sector. This will include supporting the creation of new forms of enterprises such as co-operatives
* There needs to be greater levels of research done on the small business sector so that our levels of understanding are increased and our ability to make effective interventions are thereby enhanced. For example, the differentiation in the support that we give to micro enterprises and small to medium sized enterprises needs to be based on a good understanding of the different needs of these enterprises
* Lastly, we need to improve small businesses access to technology and levels of competitiveness.
Ladies and gentlemen, while it is important we have an enabling environment that allows and accommodates new small business entrants, for me, one of the most important aspects of creating an enabling environment for small enterprises is the ability of these enterprises to grow. This growth potential is amongst other things linked to access to markets, having strong business systems and processes, and use of technology. As people who are involved in supporting and advising small businesses you need to consider these issues in the advice and support that you give to businesses.
Firstly, in the area of access to markets, the government has created a very favourable environment for small businesses and it is an area that we are continually working on improving. As has already mentioned we have opened up our own state sector procurement to small businesses; and as part of the Broad Based Black Empowerment legislation we are encouraging large companies to source more from black businesses, many of which will be small enterprises. In addition our international policies have created many new opportunities for trade with Africa, Europe, the USA, China and with India and Brazil. Small businesses need to become more aware of the international opportunities that have been created and gear themselves up to engage more effectively with the markets.
Secondly, if small businesses are to take advantage of the opportunities and the enabling environment that has been created, they and their advisors need to look at how improvements can be made to the companies business systems and processes. One of the findings of the Global Entrepreneurship Monitor, which I believe you received a presentation on during this conference, was that small businesses need to improve their systems in the areas of management of cash flow, stock control, debtors book, etc. as they are being held back or their growth constrained by poor systems in these areas as well as impacting on their need for additional capital (which is often hard to come by). There are a number of areas where improvements to the processes used in a business can make the enterprise more competitive and lead to a more effective use of resources.
Thirdly, in the area of access to technology it is necessary for small businesses to utilise technology more effectively if they want to grow through being competitive in the domestic market, which is necessary in the face of international competition; and if they want to export into new markets. As a government we would like to see our economy become more dynamic and competitive and we are supporting the use of technology by enterprises as a way to achieve this goal. For example we have several science institutions, university programmes, and government incentive schemes to support businesses being able to access and effectively utilise technology. In addition to that we have programmes such as the Godisa technology incubator programme and the Technology for Women in Business programme that are specifically targeting small enterprises use and adoption of technology.
I believe it is important that when you are advising and supporting small youth owned enterprises that you consider their use and adoption of technology, even at its most basic level; as technology is able to push businesses into the first economy, which as we well know is the more dynamic and growth orientated area of our economy. It is not desirable for businesses to be trapped in the second economy, as businesses that are located in this area are often marginal and therefore unable to break out of the cycle of poverty that pervades the second economy. I would strongly argue that you should be playing a facilitative role and linking your clients up with technology institutions and to programmes that support the adoption and use of technology.
To conclude it is necessary for both the public and private sector to find ways to improve the enabling environment for small businesses. While a lot has been done to create a more favourable environment for businesses, including for youth entrepreneurs, a lot more needs to be done. I have outline some of what the state sector will be doing to increase our levels of support for SMMEs; the challenge has been put to the private sector to do the same. Some of the private sector responses to the BEE charters and to supporting SMMEs have been very positive.
Part of creating an enabling environment for small businesses is to ensure that those entrepreneurs that are successful in starting their business are able to grow. To do this they need to receive the right support that links them directly into the first economy. They need to access new markets, they need to improve their internal operations, and they need to use technology to its full benefit. You, as advisors and supporters of youth owned small businesses, have an important role in ensuring that from the beginning your clients are set on the right path that will see their enterprises grow and make a more meaningful contribution to our country, to our economy, and to reducing unemployment in our society.
I thank you.
Issued by: Department of Trade and Industry
29 June 2004
Source: Department of Trade and Industry
Title: L Hendricks: Youth Entrepreneurship Conference
SPEECH BY DEPUTY MINISTER OF TRADE AND INDUSTRY, MRS LINDIWE HENDRICKS, AT THE YOUTH ENTREPRENEURSHIP CONFERENCE, 29 June 2004
CREATING AN ENABLING ENVIRONMENT FOR SMME DEVELOPMENT
Programme Director
Ladies and Gentlemen
Thank you for inviting me to address this conference, which is looking at improving the culture of entrepreneurship amongst youth in South Africa. The issues that this conference and Umsobomvu youth fund are looking at are a priority for the country and for the government. If we are to be successful as a country and have economic growth, a reduction in the levels of poverty, and an increase the levels of employment then we need to have a greater number of entrepreneurs and a greater number of successful enterprises. This success starts with the youth and it is the reason that we have put substantial resources into the Umsobomvu youth fund. It is also necessary for us to have an enabling environment for business, which is the subject that I have been requested to address you on today.
It is important to remember that it is not the responsibility of government to create businesses but rather to create the environment in which businesses can start and grow. There is no doubt that South Africa has over the past ten years been relatively successful in creating an enabling environment for small business development. When one looks at the opportunities and possibilities for small businesses prior to our attaining democracy and when one compares it with the position we are in today, it is easy to see how far we have come.
Our progress in creating an enabling environment has not only been in improving small businesses access to support services, access to information, access to finance, access to government contracts, and a reduction of the tax burden, but it has been on stimulating economic growth more broadly and improving the structure of our economy. It is important that we recognise that our broader efforts to grow the economy have a positive impact on small businesses as it provides new opportunities and new markets for them. This growth also gives space for new entrepreneurs, in particular youth entrepreneurs, to enter the market.
The government first embarked on a small business strategy there was wide consultation with many groups and structures. Arising from these consultations we developed a programme of action that included the formulation of legislation, establishment of institutions such as Ntsika, Khula and the National Small Business Council. We have reviewed these institutions and our programmes as we have seen that the impact that we needed was not sufficient and improvements needed to be made to our structures.
The government has recognised that in order to further grow the small business sector and improve the environment changes need to be made. Consequently, the department of trade and industry (the dti) has reviewed the small business strategy; and it has emerged that:
* The support that government and its agencies provide to small businesses needs to be improved; this would include better provision of business support services, information, and training. This area of support will be improved in part through the merger of Ntsika and the Manufacturing Advisory Centre programme, which will be finalised towards the end of this year
* There needs to be greater co-operation between the three layers of government and across government departments to ensure better and more focus provision of support to small businesses
* The products that the private sector offers to small business need to be extended so that the reach is greater
* More resources need to be channelled into the small business sector; in particular we need to see an improvement in access to finance for small businesses, and access to finance for micro enterprises. The former will be address through the financial services sector charter and through the capitalising of the National Empowerment Fund; in addition the role that the Umsobomvu funds play in improving access to finance for small businesses should not be underestimated. Access to finance for micro enterprises will receive a great boost through the launch of the Micro Finance Apex fund later this year
* The regulatory burden on small enterprises needs to be decreased. This will see interventions taking place to streamline the regulatory process; a simplification of regulations for entrepreneurs; and by ensuring that new legislation is assessed for its impact on small businesses
* There needs to be greater promotion of entrepreneurship in our country so that more people are drawn into the sector. This will include supporting the creation of new forms of enterprises such as co-operatives
* There needs to be greater levels of research done on the small business sector so that our levels of understanding are increased and our ability to make effective interventions are thereby enhanced. For example, the differentiation in the support that we give to micro enterprises and small to medium sized enterprises needs to be based on a good understanding of the different needs of these enterprises
* Lastly, we need to improve small businesses access to technology and levels of competitiveness.
Ladies and gentlemen, while it is important we have an enabling environment that allows and accommodates new small business entrants, for me, one of the most important aspects of creating an enabling environment for small enterprises is the ability of these enterprises to grow. This growth potential is amongst other things linked to access to markets, having strong business systems and processes, and use of technology. As people who are involved in supporting and advising small businesses you need to consider these issues in the advice and support that you give to businesses.
Firstly, in the area of access to markets, the government has created a very favourable environment for small businesses and it is an area that we are continually working on improving. As has already mentioned we have opened up our own state sector procurement to small businesses; and as part of the Broad Based Black Empowerment legislation we are encouraging large companies to source more from black businesses, many of which will be small enterprises. In addition our international policies have created many new opportunities for trade with Africa, Europe, the USA, China and with India and Brazil. Small businesses need to become more aware of the international opportunities that have been created and gear themselves up to engage more effectively with the markets.
Secondly, if small businesses are to take advantage of the opportunities and the enabling environment that has been created, they and their advisors need to look at how improvements can be made to the companies business systems and processes. One of the findings of the Global Entrepreneurship Monitor, which I believe you received a presentation on during this conference, was that small businesses need to improve their systems in the areas of management of cash flow, stock control, debtors book, etc. as they are being held back or their growth constrained by poor systems in these areas as well as impacting on their need for additional capital (which is often hard to come by). There are a number of areas where improvements to the processes used in a business can make the enterprise more competitive and lead to a more effective use of resources.
Thirdly, in the area of access to technology it is necessary for small businesses to utilise technology more effectively if they want to grow through being competitive in the domestic market, which is necessary in the face of international competition; and if they want to export into new markets. As a government we would like to see our economy become more dynamic and competitive and we are supporting the use of technology by enterprises as a way to achieve this goal. For example we have several science institutions, university programmes, and government incentive schemes to support businesses being able to access and effectively utilise technology. In addition to that we have programmes such as the Godisa technology incubator programme and the Technology for Women in Business programme that are specifically targeting small enterprises use and adoption of technology.
I believe it is important that when you are advising and supporting small youth owned enterprises that you consider their use and adoption of technology, even at its most basic level; as technology is able to push businesses into the first economy, which as we well know is the more dynamic and growth orientated area of our economy. It is not desirable for businesses to be trapped in the second economy, as businesses that are located in this area are often marginal and therefore unable to break out of the cycle of poverty that pervades the second economy. I would strongly argue that you should be playing a facilitative role and linking your clients up with technology institutions and to programmes that support the adoption and use of technology.
To conclude it is necessary for both the public and private sector to find ways to improve the enabling environment for small businesses. While a lot has been done to create a more favourable environment for businesses, including for youth entrepreneurs, a lot more needs to be done. I have outline some of what the state sector will be doing to increase our levels of support for SMMEs; the challenge has been put to the private sector to do the same. Some of the private sector responses to the BEE charters and to supporting SMMEs have been very positive.
Part of creating an enabling environment for small businesses is to ensure that those entrepreneurs that are successful in starting their business are able to grow. To do this they need to receive the right support that links them directly into the first economy. They need to access new markets, they need to improve their internal operations, and they need to use technology to its full benefit. You, as advisors and supporters of youth owned small businesses, have an important role in ensuring that from the beginning your clients are set on the right path that will see their enterprises grow and make a more meaningful contribution to our country, to our economy, and to reducing unemployment in our society.
I thank you.
Issued by: Department of Trade and Industry
29 June 2004
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