SA must double number of incubators to support small firms - Davies

(Image: GCIS)

Speaking to SANews following a media briefing on the ISBC conference, which will bring small business policymakers together on 15 -18 September at the Sandton Convention Centre, Davies detailed various initiatives the government was involved in to improve support to the country's small businesses.

He said that even though on paper South Africa had very good small business policies that were in keeping with many higher performing economies, these policies had not proved as effective as they should have been.

However, he said despite this, business incubation had been identified by his department as one of the most effective ways to support small businesses, as it offered new small enterprises a sheltered environment, certain technology which they could have access to and helped business owners develop new skills.

Yet in comparison to other countries, South Africa didn't have enough business incubators, said Davies, who pointed out that the department aimed to at least double this in the next few years, which would bring the number of incubators to 60.

Currently, the Small Enterprise Development Agency (Seda) has just over 30 incubators under the Seda Technology Programme.

Davies pointed out that the department's emphasis at present is on increasing the number of incubators over the kind of support these offered and to whom, but that eventually government would look at the quality of these incubators, and ask what kind of incubation it wanted to support.

Looking to whom to incubate

Commenting on a July report by Trade and Industrial Policy Strategies (TIPS) - titled "How the state and private sector can partner to boost support to SMEs: Lessons from Chile & Malaysia" - which argued that South Africa needed incubators that were more selective about the kinds of entrepreneurs they supported if the country was to create more jobs, Davies said the department was currently looking at ways to pick capable entrepreneurs to incubate.

What the country needed was not large numbers of low quality businesses, which were constantly reliant on capital injections from the government, but rather a few high quality firms active in the productive economy, he said.

To this end, Davies said government needed to balance the support it provided between the few high-growth firms that created many jobs and drove economic growth, with the large number of survivalist businesses - but with the balance in favour of more productive entrepreneurs.

The relationship between big and small companies in South Africa also needed to change.

"I think that in South Africa, we have had a relationship of marginalisation between big and small companies historically and there has been very little change, some here and there but not enough," he said.

However, he said the amended Black Economic Empowerment (BEE) codes, which were put out for comment last week, aimed to remedy these problems by placing more emphasis on big firms developing black suppliers.

Commenting on repeated calls for the country's labour laws to be simplified, Davies said he didn't believe the solution to South Africa's economic problems lay in doing away with labour legislation.

"I think you have this view... that the panacea to all South Africa's problems is that we must just liberalise labour laws, remove rights of people, undermine collective bargaining...

"Well I think probably in light of Marikana, that those that have this as a propositional should rethink (this) because weak unions and inadequate protection of workers, I don't think, is a recipe for any kind of stability and growth and performance in this country," he said.

However, Davies conceded that on a case-by-case basis and through a negotiated process, there may be some changes that may need to be made in some places.

He said the kind of bargain that could be struck is that which is contained in last year's Skills Accord, where business undertook to train more people in return for a concession from labour that allowed those involved in such programmes to be regarded as trainees and not employees under the Labour Relations Act.

'A hiding to nowhere'

"That's the kind of bargain that can be struck," he said, "but the idea that we can drive through the sort of move towards a labour market which is characterised by less protection, less collective bargaining, is a hiding to nowhere in South Africa."

A number of countries, including the US, Brazil, Japan and most recently India, have passed laws to set aside a certain percentage of state procurement for small businesses and Davies said the South African government was also looking into this area.

In 2007, the Cabinet approved a proposal from the department to set aside 85% of government procurement of 10 goods and services for small businesses, but this was later turned down by the National Treasury over concern that the proposal was unconstitutional as it constituted a set-aside.

Davies, however, stressed that there was a need to scrutinise what goods and services were listed in any set-aside to avoid fronting by small firms that simply buy the goods from large companies or import these from overseas and add a premium.

What was essential was that any set-aside support productive capabilities of small firms, he said.

Turning to details of the ISBC 2012, Davies said it was the first time the event - which was first held in 1974 in Hawaii - would be held on the African continent.

Over 1000 delegates are expected at the congress, with speakers coming from a range of countries - including among others Japan, Malaysia, India the UK and France.

Davies said the conference would provide a platform for policymakers to share ideas and best practices, when it came to boosting support to both survivalist micro enterprises and nurturing more high-growth firms.

The conference, which would also include training workshops for entrepreneurs, is being hosted in partnership with the City of Johannesburg, Nafcoc, Fabcos, the Small Enterprise Finance Agency (Sefa), Seda, the Industrial Development Corporation (IDC), MTN, Absa and Shanduka Black Umbrellas.