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SA's small businesses will lead the country to growth

Nov 29 2015 19:00
Dudu Msomi

Johannesburg - Internationally, statistics are indicating that big companies destroy jobs, while entrepreneurs and small companies are net job creators as they pursue growth.

The perception that South African corporates are sitting on cash and are reticent to invest in this economy, and that there is leakage in the financial system leading to billions being sent offshore, is of grave concern.

If local capital does not have confidence in this country, we cannot expect much foreign direct investment.

Both government and business need to seriously engage on how they can play their respective roles in enhancing the enabling conditions for domestic capital to be scaled up to drive South Africa’s economic growth.

There is a perception in some quarters that South Africa is a “Formula 1” of creating regulation that borders, in some instances, on overregulation.

The challenge is to be agile enough to correct the unintended consequences that are stifling transformation and growth when they are revealed.

South African economic policies tend to be skewed on dividing the little there is without adequately creating the conditions and skilfully identifying the right multipliers that can expand and grow the economy in the long term.

The energy is spent on ensuring that the 7% or so part of the population that is white capital does not “get away with things”, whether it is free education, tax breaks or savings benefits and, in the process, penalising most South Africans.

On various platforms, business people are beginning to admit there is a need to confront their own prejudices and lack of risk-taking, which is stunting progress when one assesses the transformation gains – or lack thereof.

The broad-based BEE legislation has been bastardised and manipulated at every turn, making the BEE Scorecard a numbers game with no sustainable changes made in the companies or to the economy.

The ownership pillar is treated opportunistically to ingratiate into the ruling party by targeting specific personalities, or those that business thinks would make influential associations.

Companies also incorporate broad-based equity partners into their ranks, knowing full well that they will be passive and their value not felt. These actions further stunt the growth of these entities.

At management levels, 21 years on, respectable progress has not been made. In fact, in some instances, there have been reversals in terms of black and female gains made in the late 1990s to the early 2000s.

Most black people and women in management occupy supporting roles that are not really taken as seriously as the profit and loss roles.

This means businesses are not tapping adequately into the diverse skills and knowledge that inspire creativity and innovation, and that accelerate growth.

The enterprise development pillar of the code has been so neglected that the legislation had to be reworked.

Where so-called arrangements do exist between established big business and emerging companies, the enterprise is kept on a leash and creativity is reined in, lest it become a formidable competitor.

Big business has more access to government and the resources to get a hearing to influence and shape policy. But we know the growth we need will not come out of big business.

The government also needs to resolve contradictions between legislation and implementation, such as in the case of the Preferential Procurement Policy Framework Act, which is evident in the skewed government procurement spend in multinationals at the expense of the very local businesses they say they want to enable to grow.

The government’s role is to create the enabling environment and it should focus on providing support to business owners who are then able to grow their enterprises and thus create jobs.

Maybe it is time for the radical restructuring of the Presidential Business Working Group to be infused with entrepreneurs and small business leaders who are hungry, creative and innovative to unearth job-creating solutions for our country.

Our challenges are vast and diverse, and require people with the right mind-set to solve them.

Appreciating that for-profit companies are not established for charity, but to truly transform and grow the South African economy, we need business people who walk the healthy balance of seeking and creating wealth while also trying to leave this world a little better off than they found it.

If we don’t, we are not going to turn the tide.

Msomi is CEO of Busara Leadership Partners

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