Issued by: North West Communication Service
SPEECH BY MARTIN J KUSCUS, MEC FOR FINANCE AND ECONOMIC AFFAIRS, NORTH WEST PROVINCE AT THE LAUNCH OF THE NORTH WEST PROVINCIAL SMALL, MEDIUM AND MICRO ENTERPRISES SUPPORT PROGRAMME AT BRITS TOWN HALL 13 AUGUST 1996
As important as recent political changes in South Africa, is the fundamental restructuring of the economy. Not only is there a need for an economic transformation to support the political changes, but evenly vital is the fact that the community must feel that it has equal access to the economic mainstream.
North West Province has a relatively small economy, contributing only 6,9% to the National Gross Domestic Product (GDP). The regional economy has grown at a rate of 1,9% per annum between 1980 - 1990, the population growth for the same period being 3,5% per annum, resulting in negative per capita income growth during that period.
Production is dominated by mining, contributing some 60% to the GDP of the Province. Although it is an asset of the North West Province, mining creates only limited value added and forward and backward linkages in the economy. Much of the raw materials and salaries leave the Province.
What we can deduce from this whole scenario is that the economy of the North West Province is desperately in need of economic diversification.
Since the inception of the new Government our main aim has been to ensure equity in terms of resource allocation taking into account the historical imbalances that exist among our communities. Great care has been exercised in assessing the needs of our people. To this end we have been supporting entrepreneurship at all levels with special emphasis on the small and emerging businesses.
Our responsibility and challenge as government is to create an enabling environment in which jobs can be created, backlogs both in social and infrastructure addressed and an everlasting social stability attained.
THE SMME SUPPORT PROGRAMME
The Small, Medium and Micro Enterprises (SMME) sector represents an important vehicle to address the challenges listed above. Throughout the world one finds that SMME's are playing a critical role in absorbing labour, penetrating new markets and generally expanding economies in creative and innovative ways. We are of the view that with an appropriate enabling environment - SMME's in this Province can follow these examples and make an indelible mark on this economy.
The legacy of apartheid constitutes an important factor in the inability of Black Small Enterprises to develop further into viable economic entities.
It is important to draw few lessons on the development and promotion of SMME's in other parts of the world. In Germany for instance, this business sector is so strong to an extent that almost two thirds of the Gross Domestic Product comes from this sector.
Other countries like Japan, Malaysia, have worked on this model and have indeed made a success out of it.
During the past two years several discussion papers and reports have been prepared and circulated at National Level among Small Business Support Agencies in South Africa.
Numerous conferences and workshops have been held to air the concerns of entrepreneurs and business associations reflecting the full spectrum of Small, Medium and Micro Enterprises. All along there has been a search for consensus about support needs, feasible programmes and consistent national strategy. This search culminated in the Discussion Paper on strategy for the development of an integrated policy and support programme for small, medium and micro enterprises in South Africa, and finally the White Paper on national strategy for the development and promotion of small business in South Africa.
Within the context of the North West Province, various key stake holders were brought together in 1995 by the Provincial Government to work out the provincial strategy and concrete detailed plans for the support of SMME's. In our deliberations we identified the following as obstacles that hamper SMME development in our Province:
1 A lack of information and sales techniques
This entails a lack of information on where and how to sell, inadequate market research, a tendency to duplicate and serious competition.
2 Legal restrictions
It is common knowledge that unrealistic and often unreasonable legal restrictions seriously hamper activities in the SMME sector.
I can assure you that the Government of the North West Province will seriously work towards the adoption of fair and appropriate laws to regulate the position of the SMME sector as has already been done in the case of legislation on trading licenses.
3 Animosity of big business and authorities
Probably due to fear of competition, big business display animosity or a lack of support towards the SMME sector, resulting in difficulties to obtain credit, etc.
Regarding the attitude of authorities, it is said that, despite support at high levels, such support is seldom put into practice at an executive level. Related to this, is the ever-present problem of excessive bureaucracy, both in government and private institutions.
4 Inaccessibility of sources of finance
This aspect is without doubt one of the most serious problems experienced by the SMME sector.
Many potential entrepreneurs lack collateral for obtaining loans, largely as a result of the small quantity of housing stock in black hands and the undeveloped market for housing in black town- ships. In rural areas, the tribal land tenure system prevents farmers from borrowing against their land holdings which cannot be sold.
I say with due respect that the efforts of commercial banks to finance small business activities, probably have very little impact on the financing requirements of this sector, if any at all. This reluctance is a world-wide phenomenon, the reasons being that costs related to these small loans are high and that there is a big risk-element involved.
The provincial strategy was completed and approved by the Executive Council during the third quarter of 1995. Today's launch of the Provincial Small, Medium and Micro Enterprises Support Programme is a culmination of the above process.
During the course of the year the Department of Finance and Economic Affairs, the North West Business Forum, the Small Business Advisory Bureau and the North West Development Corporation agreed on the most urgent SMME's support programmes to be launched in the first phase of the Government Support Programme.
In terms of the agreement between the Government and the North West Development Corporation, the NWDC has been granted R5,6 million Rands in terms of which the NWDC will provide the following programmes:
Programme 1
Business Counselling and Aftercare
This programme is aimed at the provision of assistance to owners of SMME's on inter alia, General Management, Finance, Productivity, Appropriate Technology, advice, Business Plan Compilation, Book- keeping, Marketing and Personnel Related Matters. R1 million has been budgeted for this programme and the targeted number of busines- ses is 400 during the first phase. This programme has already been commenced in all Regional Offices of the NWDC and it is estimated that an additional 600 businesses will be considered in the next phase.
Programme 2
Capacity building for infrastructure delivery for the Small Building Sector
This programme is aimed at enabling the small and emerging building contractors to participate in a meaningful way in the RDP Programme and will include:
(a) Skills Transfer (b) Skills Training (c) Consultations/Management Training; (d) Productivity
This programme is aimed at training 1 000 people in 50 building courses. This means therefore that there will be 20 people per training session.
An amount of R1.1 million has been budgeted for this purpose and is allocated as follows:
R100 000 will be allocated in each of the regions in Moretele, Odi, Rustenburg, Klerksdorp and Potchefstroom; R75 000 will be allo- cated in each of the regions in Mankwe, Mmabatho and Taung; R50 000 will be allocated in each of the areas in Kudube, Vryburg, Lichten- burg and Brits and R30 000 will be allocated in each of the areas in Ganyesa, Ditsobotla, Lehurutshe and Madikwe.
I strongly urge the North West Small Builders Federation to have their members on this programme.
Promotion and Development of the Micro Enterprise Sector programme is aimed at the subsidisation of existing Micro Sector Financing Programmes. An amount of R2.5 million has been set aside for this purpose.
Of this amount R1 million is earmarked for infrastructure development for the informal sector, e.g. hawker stalls. The balance will be directed at disadvantaged communities with reference to women, the disabled, youth, cultural products, small scale manufacturing enterprises and the unemployed.
R750 000 has been allocated to each of the regions in Moretele, Odi, Rustenburg, Klerksdorp and Potchefstroom. R300 000 has been allocated to each of the region in Mankwe, Taung and Mmabatho. A further amount of R2 million has been allocated to the Small Business Advisory Bureau for the following projects:
An amount of R778 400 has been allocated to Small Businesses. The purpose of this programme is to encourage participants to learn from each others experiences in solving business problems. The training consists of five course modules which are presented over a period of five weeks.
An amount of R759 500 has been allocated to Small Business Development Programme for existing businesses. The objective of this programme is to enhance the business management skills of the small businesses. There will be an after care service by the presenters to make sure that the skills learned are implemented.
An amount of R152 250 has been allocated for Small Business Training Programme for the unemployed. The objective of this pro- gramme is to make the unemployed aware of the concept entrepreneur- ship, establish an entrepreneurial culture and encourage them to self-employment.
The programme will introduce participants to the following areas:
Business opportunities Practical Marketing Management Practical Financial Management Business Planning
Due to limited funding only ten training sessions of twenty people each will be conducted in this phase. This means that at the end of the programme two hundred people will have been trained. An amount of R165 900 has been allocated for the Refresher Training Programme for existing businesses.
The purpose of this programme is to develop and increase the effectiveness and profitability of small and micro business enterprises by training them on an ongoing basis. It is anticipated that 1 200 people will be trained in this phase.
An amount of R143 950 has been allocated to the Small Business Counselling Programme. The purpose of this programme is to provide assistance to small business entrepreneurs on general management, finance, productivity, etc. Three hundred consultations will be conducted during this phase.
The overall budget for this support programme amounts to R7,6 million. It however it is not the Government's intention to merely throw money at the SMME' problems. For this reason sufficient care has been taken to ensure that the programme which is embarked upon meets the needs of SMME's in the Province. In addition to that an SMME Desk has been established in the Department of Finance and Economic affairs to look after the interests of Small, Medium and Micro Enterprises.
Way forward
While these programmes have already started it is important for us to ensure that continuity is maintained. For 1996/97 financial year R20 million has been set aside for the SMME support programme. A Task Team comprising of the major stake holders is being consti- tuted to prepare a detailed business plan on how these funds will be utilised.
I believe you will now start to appreciate the challenges faced by Government in making the SMME a success. I also believe that you realise that the current and future budget allocations from Govern- ment alone cannot meet this important challenge. I therefore call on the private sector to contribute towards the development of the SMME. It is only through partnership between Government and business that will make our efforts succeed.
Conclusion
Although government has a crucial role to play in creating the policy framework for development and to bring about a fair distri- bution of resources, government should not be the main agent for development. Government should rather create conditions conducive to entrepreneurial and private sector development.
Given our vast development problems partnerships between the public and private sectors, NGO's, labour unions and all organs of civil society are essential. Let us apply our collective ingenuity to address South Africa's development problems and to make our country internationally competitive.
This sector represents an important vehicle to address the challenges mentioned.
Throughout the world one finds the SMME's are playing a critical role in absorbing labour, penetrating new markets and generally expanding economies in creative and innovative ways. We are of the view that with an appropriate enabling environment- SMME's should be seen as part of an integrated strategy to promote a diversified economy and where entrepreneurship flourishes.
During the past two years several discussion papers and reports have been prepared and circulated at National Level among Small Business support Agencies in South Africa.
The objective of this programmes is to enhance the business management skills of the small businesses. There will be an after care service by the presenters to make sure that these skills learned are implemented.