Solutions For The Future Of SMMEs in South Africa

Jul 9

Solutions For The Future Of SMMEs in South Africa

In almost all the messages, strategies and press conferences we have seen in these tough times of a global pandemic, one thing is clear in the world of SMMEs- some animals are more equal than others. We listened with excitement as the powers that be made announcements and plans for assistance to small businesses. There was going to be a relief fund for SMMEs. Industry players breathed a sigh of relief in potentially averting disaster. However, sentiments also turned to fear of being left out for the underprivileged and usually, but not always, black owned small and micro businesses.

Most of this article draws on observations from this race group. I was on the phone and in my social media space sharing the good news after learning about the changes government was putting in place. For those who know me, my work, research and solutions are always centred in the SMME space. It is no surprise then that I had many start-up entrepreneurs, and some established ones call me to discuss what this pandemic, legislation and responses meant and how I thought this would work?

Since the 7th of April 2020 when the Minister of Small Business, Ms Khumbudzo Ntshavheni, announced the implications of the Disaster Management Act, 2002 (Act No. 57 of 2002) for SMMEs, it has been a roller coaster experience for most SMMEs and more so for the Small and Micro businesses (DSBD, 2020).
Solutions For The Future Of SMMEs. 

One thing COVID-19 has done is to expedite change in the SMME sector as a whole. It has made the gaps clearly visible and it has allowed the powers that be to change research and strategies towards the construction of an SMME industry that is robust, and sustainable. We may not all agree on what the solutions are, but a good start is considering different options and weighing them up. Below are some suggestions given the current situation, which could help businesses and government in carving out the SMME path post COVID-19.
1. INNOVATION: It cannot be denied that SMMEs who constantly are innovative will survive post COVID-19. Innovation should no longer be a subheading that simply exists in business plan documents and never practiced. This means for a business to truly exist and be sustainable it has to adapt to the ethos of entrepreneurship which embraces change and the need for innovation to forge forward. Failure to do so by SMMEs will lead to their demise. Bail outs will not always be available for everyone but that should not have to spell out the end. The call for more innovation driven organisations also suggests that there is a need to use a multidisciplinary outlook to societal problems, and include and/or work with creative industries where need be.

2. GLOCALISATION AND LOCAL CONTENT MANUFACTURING: These two strategies are going to ensure that economic activity is increased within the borders of the country. Government has to make it mandatory for a percentage of the manufacturing of goods sold in South Africa to be made in partnership with South African based businesses. This could be passing certain supply chain activities to South Africa. Quality controls would have to be strengthened as part of the agreements between international businesses and their local manufacturing partners, this is not impossible. Industries that do not exist would have to be developed by investing in knowledge building and infrastructure.

3. ESD and BIG BUSINESS: The Enterprise Supply Development (ESD) like all other BBBEE solutions has been met with resistance. So far, in most instances, ESD has presented training after training, year after year with no supplier role realisation. All of this happens whilst big corporate earns BBBEE points they are after. The ESD recipient in the meantime becomes frustrated as they at times have to put certain activities of their business on hold to fulfil the requirements of the ESD programme. You find that many end up dropping out as they do not see how it helps. The training is commendable, however, DSBD must consider the inclusion of a mandatory minimal supply benefit for those in the programme. This means corporates need to invite into their programmes SMMEs that fit their business model. There should be stipulated years to spend on the ESD programmes allowing the recipient to graduate and compete as a fully-fledged supplier.

4. VIRTUAL TEAMS: The use of Virtual Teams, is going to have to be the new normal for most businesses. During the COVID-19 Pandemic we are seeing many businesses continue working without employees going into the office. Physical infrastructure and resources are becoming a thing of the past for some. Where there is no need to have a physical office there should be no physical office. Before COVID-19 hit there was a slow rise in virtual PA’s, and functional managers. There is credence in reviewing your organisation’s structure to see what can be done remotely.

5. BUSINESS COMPLIANCE: Small and micro businesses as well as creative industry businesses need to ensure they begin to comply with the different requirements legislated for businesses. Even when not necessarily required for some, being compliant comes in handy. However, having said that, this speaks to government to urgently review their compliance systems for businesses. These need to be streamlined. There is also a need to look at how they can benefit from the informal industry worth billions, which is not taxed (except for VAT) and will most likely never be taxable using the tax models we know.

6. ECONOMIC INDICATORS FOR the INFORMAL SECTOR: Economic decisions and strategies are concluded on what we know forms part of the calculations. In truth, the economic indicators we use are flawed. They completely ignore the consumer whose grocery shopping is from this sector and undermine the micro trader who fulfils this demand. We have comfortably accepted that we simply ignore them and the billions they carry in our calculations.

7. COOPERATION and CONSORTIUMS: In 2019 a student of mine, a colleague and I published work that delved into the understanding of the success of foreign owned Spaza shops in the townships. One of the factors that were found that set these Spaza shops in a higher level of performance than their local counterparts was their ability to work together. They were able to take advantage of opportunity costs, as they were bulk buying and solving problems as a unit (Lamb, Kunene, Dyili, 2019).

8. TRAINING AND DEVELOPMENT: This should go beyond ‘how to write a business plan’; training needs to be changed completely. Outcomes of the training programmes that are offered should translate into actual plans and strategies, with business compliance completion forming part of the training programmes. Innovative, creative thinking has to be socialised as early as Grade R to ensure it almost becomes innate in how our society reasons in their decision-making processes, especially during a crisis. Failure to do this will almost guarantee that in 100 years’ time, when humanity faces a pandemic forcing closure of businesses, we will still have a society that seeks government to help them because their own models are not robust, adaptable or responsive to the environment and are not sustainable.

9.TENDERPRENEURS: These individuals as defined above should be given the opportunity and training to turn their ventures into legitimate small business entities. All 8 suggestions above should form part of their re-engineering strategy now and post COVID-19.

As long as corruption and crime are not dealt with and consequences are not felt by the wrong-doers, the MMEs will always be stagnant. Growth will be reserved for those who are on the inside track and well connected.

Not all businesses will come out on the other side of COVID-19, which is a fact we must accept. Only those businesses willing to accept change and make the necessary adjustments will prevail. As long as the bottom half of Small businesses and the Micro businesses are grouped together, and blanket decisions are made for them, they will always trail behind and their worth never truly attained. The existence of MMEs boosts the economy immensely and the country cannot afford to lose them.
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