DSBD RESEARCH REPORTS
DSBD RESEARCH AGENDA – JUNE 2017
In February 2017, the Department of Small Business Development (DSBD) commissioned a research project to develop a research agenda to address the development and growth within the SMME and co-operative sectors in South Africa. Through various research techniques, such as a Theory of Change, Root Cause Analysis, a survey and interviews with stakeholders working in the SMME and co-operatives developmental landscape, information was discerned on what research areas to include in this research agenda, how to implement the agenda, fund the research, disseminate it, and monitor and evaluate the implementation of the agenda. In this report, all the mentioned aspects will be discussed in more detail.
2014 REVIEW OF SMALL BUSINESSES IN SOUTH AFRICA
The period covered by this review (2008-2013) was characterised by considerably difficult economic conditions, with generally subdued overall
growth performance, high lending rates, falling business and consumer confidence resulting in slowing demand and weakened capacity utilisation in the private sector. Business bankruptcies soared and the ease of doing business, as measured by the World Bank, deteriorated. These tough trading conditions undoubtedly have impacted the business prospects and performance of SMMEs. South Africa boasts a wide range of public and private sector small business support institutions, presently estimated at around 214 in total, providing a variety of support services. However, the ongoing criticism levelled at the support system is that it tends to be fragmented or unintegrated and the quality of some of the services, particularly business advisory services, is continuously being questioned. The quality of small business data remains a challenge, resulting in lack of accurate figures on the total number of small businesses in the country. This has a negative bearing on policymaking and implementation.
REGULATORY BURDENS ON SMALL BUSINESS: OPTIONS FOR IMPROVEMENT
1. BACKGROUND AND AIMS
Compared to peer economies, small business accounts for a relatively limited share of the South African economy. World Bank data show that in South Africa less than 20% of all employed people are employers or self-employed. In contrast, the norm for upper middle income economies, excluding China, is around 40%. Self-employment tends to be mostly in smallholder agriculture, retail trade and food services.
The limited share of small business in South African society was entrenched under apartheid. Before 1994, government policies deliberately suppressed black small enterprise in a variety of ways; through restrictions on land ownership, city centres, financial services and education, and licencing requirements.
As a result of these measures, democratic South Africa did not inherit a large pool of small enterprises or the institutions and regulatory frameworks required to stimulate small businesses. The available data suggests that the transition to democracy has produced very limited growth in the small business sector. The data from 2008 to 2015, which are the most reliable statistics, shows that the number of small formal businesses remained virtually unchanged at around 600 000 during in this period.
UPDATE OF SCHEDULE 1 OF THE NATIONAL SMALL ENTERPRISE ACT (NSEA)
This report has been commissioned to update Schedule 1 of the National Small Business Act (NSBA). The last update of this schedule was concluded in 2003. The research conducted in the following report outlines the recommendations in two prior review reports of Schedule 1 (NSBA) concluded by the DTI in 2010 and the Department of Small Business Development (DSBD) in 2017. These two research reports outline proposed methodologies and considerations to be included in the updating of the schedule and recommendations to effect the changes. This report will not detail the rationale to the need for the Schedules updating and will only recommend, having concluded research, the amendment of the Schedule.
The proposed Schedules included in this report have been developed from firm level data captured by SARS and National Treasury. The report recommends updating on both the employment cut offs as well as the turnover cut-offs for SMMEs and recommends to drop the asset level cut-offs for the schedule due to verification challenges.
COMPARATIVE ANALYSIS OF SMME LEGISLATION FROM EIGHT COUNTRIES TO THE NATIONAL SMALL BUSINESS ACT NO 102 OF 1996, AS AMENDED IN 2003 AND 2004
This report presents the results of a comparative analysis of South Africa’s National Small Business Act (No. 102) of 1996 with small business legislation in eight other jurisdictions – Brazil, India, Kenya, Malaysia, Nigeria, Taiwan, United Kingdom, and United States. The purpose of the analysis was to gain an understanding of the legislative and regulatory measures that the countries under study have adopted to stimulate, support and grow their small business sector, with a view to ascertaining best practices and innovative approaches that South Africa could learn from. This knowledge would, in turn, enhance the amendment of the National Small Business Act currently underway.
BUSINESS RESCUE, TURNAROUND AND RETENTION FOR SMME & C’S REVISED REPORT 2 OF 2SMALL BUSINESS DISTRESS AND RECOVERY STRATEGIES
Report 1 has identified the relevant associated issues that drive and restrain the turnaround and BR industry with specific relevance to the SMME and the cooperatives sector. It explains that business rescue may be regarded as an effective formal turnaround procedure despite its early “childhood” problems. Regardless of some restraining forces, it appears to save jobs and businesses similarly to that achieved by international regimes. Report 2 reported the findings as a status quo situation of the SMME economic sector. It applied the strategy consulting process by stating the situation (from findings) and thereafter proposing some potential strategies for the application.
THE STUDY ON THE SOUTH AFRICAN SMALL ENTERPRISE ECO-SYSTEM
The Government of South Africa prioritises the promotion of small, medium and micro enterprises (SMMEs) inclusive of formal, informal, rural, co-operatives and township enterprises that operate within the ‘small enterprise sector’. Particularly, the Government is committed to ensuring that the small enterprise sector actively contributes towards economic growth, which is fundamental in addressing poverty, inequality and unemployment.
There is a wealth of information pertaining to the challenges and needs of small enterprises in South Africa, however, the same cannot be said for collated information on other ecosystem actors and the services they offer to enterprises. Building on previous research, our review of current literature and publicly available information, the ecosystem mapping focuses on the supply-side of the South African small enterprise ecosystem, that is to say, we have mapped actors providing services to enterprises.
The rationale for the ecosystem mapping is to succour the DSBD in successfully carrying out its mandate to create a conducive and enabling environment that promotes, develops and supports the small enterprise sector as advocated by the National Development Plan: Vision for 2030 (NDP). In addition, the study endeavours to influence policy formulation, governance and implementation within the various institutional structures. It is intended that the ecosystem mapping will highlight the identified gaps and opportunities that can strategically position the DSBD at the forefront of leading and coordinating the small enterprise ecosystem.