the dti Presentation to the Select Committee on Economic Development

1. the dtiPresentation to the Select Committee on Economic Development INTEGRATED STARTEGY AND REVIEW OF GOVERNMENT SUPPORT TO SMMEs Mojalefa Mohoto CD: Enterprise Development Contacts: 071 605 8812/mmohoto@thedti.gov.za

2. PRESENTATION STRUCTURE • Policy and Strategy Perspective • Purpose of the review • Review focus and scope • Review results • Key recommendations

3. Policy Perspective • After the political transformation of 1994, government adopted the White Paper on the National Strategy for the Development and Promotion of Small Business in South Africa (1995) • The National Small Business Act, 102 of 1996 enacted to provide for the establishment of support institutions-then Ntsika, National Small Business Advisory Council, with Khula Established through the provisions of the Companies Act • In 1999 A mid Term Evaluation of the Strategy undertaken to review progress made on the implementation • In 2004, the Department of Trade and Industry led a Ten Year Review on the status of small enterprise support in South Africa. • This led to the rationalization of the support institutions through the amendment of the NSBA to form Seda • Based on the 2004 review, cabinet approved the Integrated Strategy on the Promotion of Entrepreneurship and Small enterprises

4. Policy Perspective-Cont. • The Integrated Small Enterprise Development Strategy presents the way forward for small-enterprise development in South Africa over ten years (i.e. 2005 to 2014). • Yearly reviews of the state of small business in South Africa will provide us timely feedback while the five-yearly impact reviews will reveal what progress we are making over time and what adjustments are necessary (Minister’s foreword). • In 2011 the dti commissioned a review of the strategy to identify weaknesses the upshot of which is the fact that South African SMMEs are also less than dynamic, with a majority of enterprises remaining in the nascent and 'infant business' phases (less than 3.5 years in existence. • With review concluded, the remaining challenge is how do we coherently implement the findings in order to realise a “step change” in enterprise development and support.

5. SMALL BUSINESS SEGMENTATION AND DIFFERENTIATION ON NEEDS

6. Strategic Actions Three strategic pillars were identified Strategic Pillar 1: Strategic Pillar 3: Strategic Pillar 2: Increase supply for financial and non-financial support services Creating demand for small enterprise products and services Reduce small enterprise regulatory constraints Collaborative approaches; Streamline resources from the public sector and crowd-in private sector resources • New Policy Directives; • Public sector procurement • strategy as a lever for increased • demand • BBBEE codes of good practice as a lever for increased demand Establish a regulatory impact assessment framework and Business Environment monitoring mechanism

7. Micro, Very small, Small and Medium sized enterprises SUMMARY OF SEDA’S EXPENDITURE BASKET 80% Medium sized Enterprises Business Associations 20% Seven basic Services: - Business registrations - Business planning - Market Access - Access to finance - Cooperatives support - Training and mentoring - Access to technology Information, referrals and advice Assessments Counseling Data capturing on small enterprises, service providers and market opportunities Delivery of services Identification of opportunities and business linkages for small enterprises Establishing partnerships in small enterprise development and support Development, support and monitoring of enterprise information centres Co-ordination, facilitation and support funds disbursement and administration, Marketing and stakeholder relations, Service provider identification, Vetting and monitoring of Branches Information centre identification and support, Network performance management Design and manage network system, coordinate marketing and reporting, provides network technical support facilitates network partnership agreements EICs (50) seda Branches (42) • Sector Programs: • - Small Scale Mining (DMR) • - Construction (DPW) • - Agribusiness (DOAF) • - Mining and beneficiation • (DME) • - Tourism and cultural • industries (DOAC+NDOT) • Partnership Programmes • Technology Stations and Incubators • Special Projects seda Provincial Offices (9) seda National Office

8. Review Purpose To conduct an assessment of current SMME and cooperative support programmes and make recommendations on ways to improve: • Coordination and rationalisation – across spheres of government, departments, institutions and programmes • Accessibility, responsiveness and transaction costs. • Overall efficiency and effectiveness • Monitoring and evaluation practices

9. 1. Purpose of the review 2. Review focus and scope 3. Review approach and methodology 4. Review results 5. Key recommendations

10. Review focus and scope Guided by the 3 pillars of the Integrated Small Business Strategy: • Increasing the supply of financial and non-financial support. • Creating demand for SMME products and services 3. Reducing regulatory constraints.

11. PROGRAMME AREAS COVERED Increasing access to financial support • Debt, equity and venture capital • Credit indemnity • Incentives and grants Increasing access to non-financial support • Incubation and technology transfer • Mentorship and capacity building • Technology stations and advice

12. …Continued from previous slide Creating demand for SMME products and services • Public and private sector procurement • Expediting payment to SMMEs • Export promotion Regulatory impact • Current government initiatives • New initiatives

13. 1. Purpose of the review 2. Review focus and scope 4. Review results 5. Key recommendations

14. Small Business Policy • Policy formulation within government fragmented • The role of provincial and local government not clear • Issues with institutional mandates and political directives • The resource conundrum

15. SMALL BUSINESS SUPPORT PRACTICE GENERAL POLICY & PROGRAMME IMPLEMENTATION ISSUES • Lack of long-range planning • Weak coordination and integration of support • Weak monitoring and evaluation of support • Weak human resource capacity • Operational inflexibility (red tape/turnaround) • Paucity of small business information

16. Small Business Support Practice INCREASING THE SUPPLY OF NON-FINANCIAL SUPPORT • Inadequate business incubation programmes • Lack of mentorship programmes • Lack of technology transfer and manufacturing advice • Access to quick and affordable legal process • General management and capacity building support

17. Small Business Support Practice INCREASING DEMAND FOR SMME GOODS & SERVICES • Improving the local business environment • Encouraging break-out and business diversification • Strengthening access to public sector procurement • Building market access into private sector value chains

18. Small Business Support Practice REDUCING REGULATORY CONTRAINTS • Preventing negative regulation ex-ante • Building capacity to formulate better regulation • Reducing the burden of existing regulation • Simplifying access procedures and requirements

19. THE SMALL BUSINESS MARKET • Entrepreneurial capacity • Support for young entrepreneurs • Targeting students and employed persons

20. 1. Purpose of the review 2. Review focus and scope 3. Review approach and methodology 4. Review results 5. Key recommendations

21. RETHINK SMALL BUSINESS POLICY

22. RETHINK POLICY (1) Key recommendation: Strengthen the small business leadership capacity, through capacitating the National Small Business Advisory Council to cover the work of key departments and agencies with SMME development responsibility, to: • Ensuring long-range planning • Ensuring coordination, integration & monitoring and evaluation of support 4. Ensuring quality SMME research

23. RETHINK POLICY (2): Subsidiarity and mandates Key recommendation: Review the National Small Business Amendment Act (2004) to: • Clearly define the SMME support role for provincial and local government • Review institutional mandates, especially that of Seda (re: coordination, research, regulatory environment, sector focus / alignment with industrial policy)

24. RETHINK PRACTICE (1): Increasing non-financial support Key recommendations: • Establish a clear programme for rolling out of more incubators; and encourage / incentivise involvement of other private sector actors in incubation • Establish a dedicated SMME research capacity, preferably within Stats SA and develop a national small business research programme

25. RETHINK PRACTICE (1): Increasing non-financial support Key recommendations: (Continued) • Undertake a mandate-resource review of key institutions and close resource gaps • Review Small Claims Court system to increase amounts handled by these Courts thereby providing SMMEs with access to quick and affordable justice

26. RETHINK PRACTICE (3) : Increasing demand Key recommendations: • Encourage targeted procurement for SMMES • Work with various bodies such as SA Supplier Diversity Council and partner to encourage greater synergy between private sector supplier diversity initiatives and dti funding mechanisms

27. RETHINK PRACTICE (4): Reducing regulatory constraints Key recommendation • Develop and deliver a national educational programme on regulatory impact assessment and regulatory simplification, targeting relevant government personnel, in all three spheres of government • Roll out the dti / COGTA Red Tape Reduction initiative nationally, after the completion of the pilot phase. • Require agencies to review their procedures and access requirements and develop and implement simplification measures

28. RETHINK THE SMALL BUSINESS MARKET Key recommendations • Establish a limited-duration team to craft an integrated national strategy to fostering entrepreneurship throughout society • Re-look and expand the activities of NYDA to enhance the support of young entrepreneurs • Develop and implement dedicated entrepreneurship promotional campaigns and start-up support packages targeted at encouraging employed persons and graduates to start their own businesses

29. RETHINK PARTNERSHIP (2) Key recommendations • Engage with business formations to fashion out national private sector-led SMME support initiatives in the areas of business incubation programme • Establish a Chamber Support programme within the dti to strengthen the capacity of national sector associations to deliver support services (information, advocacy) to their SMME members. Over time delegate certain basic functions to Sector Associations

30. IMPLIMENTATION PLAN Key focus areas: • Government wide action plan (long range planning) • Rollout/scale up the incubation programme • Entrepreneurship Development Strategy • Informal Sector Strategy • Chamber support guidelines • Business Linkages programme • Rollout the red tape reduction programme including the agency turnaround

31. THANK YOU