SME's R3.5bn funds should also benefit scale-up businesses

Cape Town – The Finance Ministry should be commended for allocating R3.5bn in support of small business, however, the funds should also benefit “scale-up” businesses to unlock their high-growth potential which could boost the South African economy, according to Heather Lowe, head of enterprise development at FNB Business.

“South Africa needs to start prioritising scale-up business to create the economic growth momentum necessary for job creation. Our best and realistic chance of accelerating job creation depends on creating an enabling ecosystem for scale-up business because they have the highest-growth potential,” she said.

Finance Minister Nhlanhla Nene allocated Small Business Development Minister Lindiwe Zulu R3.5bn in his 2015/16 Budget speech in the National Assembly on Wednesday in a bid to boost entrepreneurship in a country with an unemployment rate of over 24%.

“Over the MTEF [medium term expenditure framework] period, Minister Zulu’s new department will spend R3.5bn on mentoring and training support to small businesses,” said Nene.

Zulu told Fin24 outside parliament: “The amount of money that the minister [Nene] announced today... I’m adding another R20m to it, because R20m is sitting somewhere else."

READ: Exciting times for small business - Zulu

Scale-up

A scale-up report published in the United Kingdom in November 2014 describes a “scale-up” as an enterprise with average annualised growth in employees or turnover greater than 20% per annum over a three year period, and with more than 10 employees at the beginning of the observation period.

“SA may not necessarily have a significant pool of scale-up businesses, but we need to start analysing national databases to identify such companies," said Lowe. "Some of the businesses may not immediately be scalable, but their potential to grow beyond our borders should be good criteria to invest in their growth.

“Enhanced support for scale-ups should not necessarily mean that start-ups should be ignored; however, an equitable amount of resources should be made available, so that the country can generate momentum in creating jobs,” she concluded.