Minister Ntshavheni’s plans to grow contribution of SMMEs to GDP

The Department of Small Business Development has laid out ambitious plans of growing small business contribution to gross domestic product from 35% to 50% by 2024.

In its revised 2020/2025 Strategic Plan, it said this can be achieved by upscaling support to small businesses and cooperatives through the provision of blended finance instruments, the establishment of incubation centres and digital hubs among other proposed measures.

It was forced to revise its plans in response to the Coronavirus pandemic. One of the key plans is to finalise the process of having one entity that will offer both financial and non financial support to small enterprises, increasing efficiencies for the benefit of small and medium businesses and cooperatives.

Minister Khumbudzo Ntshavheni said the cabinet took a decision to either repurpose, consolidate or abolish some state-owned enterprises (SOEs), adding that the main objective of this exercise was to ensure that SOEs occupy their critical role of supporting government to implement economic development and transformation imperatives.

“Affecting our department was the decision to establish one entity to ensure integrated provision of business development support as articulated in the National Development Plan,” Ntshavheni said.

“The entities that were identified were Seda [Small Enterprise Development Agency], Sefa [Small Enterprise Finance Agency] and National Empowerment Fund [NEF] for possible consolidation. The exercise of developing a business case has started initially with Seda and Sefa, while discussions are ongoing with NEF also coming on board.”

A study by the World Bank shows that formal SMEs contribute up to 40% of national income in emerging economies. These numbers are significantly higher when informal SMEs are included.

A lack of funding has often been blamed for low growth in South Africa’s SMME sector, with commercial banks showing little risk appetite to fund the sector.

Carl Lotter, the CEO of South African Small and Medium Enterprises Federation, said South Africa needs a long term infinite vision for small business that is robust and agile enough to weather short term cycles. “The government should show a lead by putting down the building blocks for an indefinite and long-term future,” Lotter said


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