SMEs Play Vital Role in Creating Employment

SMEs Play Vital Role in Creating Employment

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Small businesses have a key role to play in providing opportunities and creating new jobs in emerging economies, according to the Minister of Trade and Industry, Rob Davies.

Speaking at the International Small Business Congress held at the Sandton Convention Centre, Davies said South Africa needed to develop a more symbiotic relationship between big companies and small suppliers.

In South Africa, small businesses had good potential when it came to job creation, as the cost to create one job in a small firm was less than it was to create a job at a big firm, as large businesses were more capital intensive.

Skills development in SME’s key

However, he said the country needed to raise the skills level of business owners so that firms didn’t simply stumble along, and that their creative ideas could be turned into job-creating enterprises.

Government bodies supporting small business

The government set up the Small Business Development Act in 1996, which led to the setting up of several institutions, including Ntsika – which in 2004 became the Small Enterprise Development Agency (Seda) and Khula Enterprise Finance.

He said the government this year rationalised a number of small business finance agencies – including Khula – into a single entity, the Small Enterprise Finance Agency (Sefa), with the aim of moving towards a single window through which firms could access small business funding.

Focus on incubators

Davies said the government had also chosen to focus more on incubation, but that compared to other emerging economies, South Africa had too few incubators – at just 32 under the Small Enterprise Development Agency (Seda), compared to hundreds in similar other emerging economies.

Seda plans to roll out several more incubators in the next few years. The department this month also put in place the incubator support programme – a cost-sharing funding programme to support the set up of incubation programmes and applications for the grant incentive would open on October 26, said Davies.

Minimise government interference

Speaking about the role that government should play in supporting small businesses, David Irwin, who set up the UK’s first small business support agency and steered UK’s Small Business Service, which addressed government support for small firms, said the state should see their role as an enabler of economic success but otherwise not interfere in the sector.

Irwin, currently a partner of Irwin Grayson Associates in the UK, said governments must craft regulations that are both fair and seen to be fair, and that are consistent – and not have one department penning laws that are contradictory to others.

What was needed was a change in the culture in government, he said.

He pointed out that his “Think Small First” initiative introduced in the UK’s Small Business Service, led to the adoption by the EU of a European Small Business Act, which included a provision that European governments consider the implication of any laws crafted will have on small firms before passing it.

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