Last weekend Durban had its annual small business indaba and exhibition and, as usual, thousands attended. This showpiece is among several held every year by cities and towns as they do their utmost to stimulate and sustain local economic activity.
While this is encouraging, the situation in the townships and rural areas needs more decisive interventions.
The reality is that black-owned small businesses in these areas have not taken off. In fact, foreigners have taken over these markets and even control sectors, such as hair dressing and value chains. This also applies in some urban areas. Thus, the intermittent explosions against foreigners will continue despite efforts by the government to pacify the situation.
Nobody wants this violence but, let us be frank with each other, locals are not merely going to sit in the corner and sulk. We thus need more targeted and robust interventions.
About five years ago, two ministers expressed concern at the situation. In 2011 Trade and Industry Minister Rob Davies set up a task team to review “the provision of support to small business and give it more hitting power“. He intimated that five out of seven small businesses in South Africa failed in their first year, compared with a 50 percent international failure rate.
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A year later, Economic Development Minister Ebrahim Patel pointed out that government spent at least R7.3 billion annually in support of small, medium and micro enterprises. He set up a ministerial advisory committee on how to improve the impact of government spending on small businesses.
It would be great to have these two reports, and several others by the Development Bank of Southern Africa, the CSIR and various government departments put on the table.
We need to ask ourselves why black small businesses in the townships and rural areas do not respond to government incentives. We cannot create the 11 million jobs envisaged in the National Development Plan without unleashing the potential in the townships and rural areas.
From where I sit, we need to confront some home truths head on. The most important home truth is that while our much vaunted 1994 democratic constitution and miracle extended political rights to all, it inadvertently entrenched the marginalisation of black people in the economy.
The elephant in the room is the “superstructure” which is, as Marxist philosophy rightly argues, the economic architecture we inherited. These neo-liberal and neo-classical policies in addition to the heavily concentrated private sector, perpetuate the past into the future.
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Needless to add, we are not talking absolutes. For the record, while Marxian analysis cannot be faulted; its proffered solution of nationalisation has failed and will never succeed. Today, tomorrow and next year.
Superstructure
To get back to my point, in view of the fact that the superstructure has its grip on economic activity in rural areas and townships, the immediate strategies to implement are:
- Local government must sit down with local business and devise strategies on trapping the spending power of the community in the said area. Most local communities have strategies of trapping money in the area. It must also be the case with our areas.
- Furthermore, local government must stop giving out licences for shopping malls without the appropriate conditions to strengthen local businesses. We are always told these malls bring shopping convenience and jobs, but little is said of the downside, which is continued decline. Shopping malls must buy at least 20 percent of their wares in the local community, as is happening in other countries. In Paris, it is difficult to develop a shopping centre in an area in which small businesses proliferate.
- Finally, and this ties in with the two above, local governments must create ecosystems in townships and rural areas. These ecosystems are self-contained supply and demand relationships in which locals buy from locals, and the government is a critical partner in these relationships.
Obviously, the proponents of free trade or economic freedom are wincing, but the reality is that unless drastic action is taken black small business, and thus black people, will always be on the periphery.
This is not what the struggle against apartheid was about. None know this better than our Afrikaner compatriots who, when they were in power, ensured that unemployment in the Afrikaner community was not even thought of.
They placed the interest of employing their people first before any market policy or dictum. With us it must be different, and we are told of open market policies that will ultimately trickle down.
Regulatory environment
Worse still, in our quest for affirmation, we also preach these market policies with greater gusto than the architects of neoliberalism. The talk today is on our regulatory environment. Yes, unnecessary regulations should be weeded out, but it does not follow that the marginalisation of black entrepreneurs will end.
The real problem, the superstructure, will continue. While we must continue with the small business exhibitions in various cities, let us also deal with the superstructure. The starting point is the three suggestions above, otherwise, we are wasting time. We will not have the small businesses that we desperately need to, among other things, provide jobs for our unemployed youth.
**Dr Thami Mazwai is special adviser to the Minister of Small Business but writes in his personal capacity.
BUSINESS REPORT