Remarks by President Cyril Ramaphosa at the SMME Programme of the Second South Africa Investment Conference, University of Johannesburg, Soweto, 7 November 2019
Ladies and Gentlemen,
I would like to welcome you to Soweto, a name that is known around the world, a place of such extraordinary history.
For its famous inhabitants, for its prominence in the anti-apartheid struggle, and for being one of the most culturally, musically and artistically innovative and diverse townships in South Africa.
It is also the only place in the world where two Nobel Peace Prize winners lived on the same street.
I am of course referring to President Nelson Mandela and Archbishop Desmond Tutu, whose homes on Vilakazi Street are not too far from here.
What Soweto is also well known for is its thriving small business sector.
In Soweto and indeed in many other townships of our country, the landscape of commercial activity is being fundamentally transformed by the growing importance of small, medium and micro enterprises to local economies.
The origins of this extraordinary entrepreneurial activism can be traced back to the days of apartheid when black South Africans could not obtain goods and services in the same places as their white counterparts, and over the years, it has become developed, diverse and sophisticated.
One needs only to go just a short distance from here, to the Bara Taxi Rank, to see first-hand a buzzing hive of entrepreneurial activity.
There are street hair and grooming salons, food caravans and pavement restaurants, fashion outlets, wholesalers, small supermarkets, clothes stores, internet cafes and phone repair kiosks, and many more.
For us, townships have always represented the heartbeat of a thriving economy, which grew against all odds.
The time is upon us to re-ignite the township economy for the purpose of growing an inclusive economy.
Earlier in the year, I announced the establishment of the Township Entrepreneurship Fund, which is aimed at stimulating the township economy and creating dynamic markets in high opportunity sectors.
The details of the fund are being finalised by the Minister of Small Business Development.
Small businesses provide goods and services, and are vital drivers of economic activity.
They also provide employment opportunities and sources of livelihood to hundreds of thousands of people who, for a variety of reasons, have slipped through the employment net.
With the local and global economy under pressure, it is small enterprises that present the greatest potential.
But despite SMMEs being fundamental to the growth of our economy they are often overlooked when it comes to both government planning and investment.
As we conclude the second South Africa Investment Conference and forge ahead with plans to raise R1.2 trillion in new domestic and foreign investment over five years we must consider how to better showcase the investment potential of our SMMEs.
At the same time, we must look at what needs to be done to promote and encourage the entrepreneurial spirit and an entrepreneurial culture.
I have long said that entrepreneurial skills should be included in the basic education curriculum.
Far too often our citizens are risk averse when it comes to entrepreneurship, preferring the so-called comfort of gainful employment to the perceived insecurity that comes with self-employment.
Ultimately, we want to transform that paradigm, and nurture a generation of job creators as opposed to job seekers.
International experience, especially in other developing countries, shows us that economic growth is sustained through small businesses.
In our many engagements with the sector, mainly through the Department of Small Business Development, concerns have been raised by SMME owners and operators around access to financing, late payment for services rendered to government, a high regulatory burden, lack of access to information, economic infrastructure and rising fuel and utility costs among other things.
These challenges severely impact the viability of SMMEs and even force some out of business.
As I said in the State of the Nation Address earlier this year, it is government’s priority to give greater support to the SMME sector.
Working with social partners, we remain committed to improving the legal and regulatory environment, ensuring access to markets and finance, skills training, and access to quality infrastructure for SMMEs, especially in townships and rural areas.
Under the soon to be finalised Public Procurement Bill, organs of state will be required to sub-contract SMMEs to a minimum of 30% of the value of the contract for contracts that are above R30 million.
Whoever receives a tender must sub-contract a minimum of 30% of the value of the contract to SMMEs that are at least 51% black owned.
Government will strengthen monitoring and compliance through the Office of the Chief Procurement Officer.
Compliance with the 30-day payment period plays a key role in ensuring the operational sustainability of SMMEs.
Therefore, organs of state will be closely monitored on their compliance with the 30-day payment period and any non-compliance is viewed as financial misconduct and will be dealt with accordingly.
Public procurement is being used to promote local production.
SMMEs will benefit from designated products when they participate in public procurement systems.
The tax regime for SMMEs is being simplified.
An example of this is the requirement for annual rather than biannual tax returns. Grants received by SMMEs are also tax exempt.
Enhancements have also been made to the venture capital company tax regime to encourage investment in small businesses and junior mining companies.
Another measure to support SMMEs is in the form of the Competition Amendment Act.
Once it comes into operation, it will increase access to the economy for small, medium and black-owned businesses.
To improve access to information and bring economic infrastructure support closer to township and rural based enterprises, we are expanding incubators and digital hubs to townships and rural areas.
We are also ensuring that small businesses benefit from spatial interventions like industrial parks, business centres and special economic zones.
Many of our provinces are coming up with innovative support mechanisms.
For example, the Johannesburg Development Agency has upgraded the infrastructure in the downtown fashion district area and has attracted SMMEs in clothing wholesale, retail and manufacturing.
The global economy is transforming and going green and digital.
While big business is finding ways to adapt, our SMMEs are shifting ground with creative innovative businesses.
This year alone, one of the start-ups in the renewable energy sector – Lamo Solar – has just completed a solar-PV mini-grid that has electrified 70 households in Upper Blinkwater in the Eastern Cape.
This project implemented with the support of the Eastern Cape provincial government and the German development agency, GIZ, has given access to electricity to households who are 90% dependent on social grants at a rate cheaper than that of Eskom.
To recover the cost, Lamo Solar has partnered with the Raymond Mhlaba Municipality, which sells prepaid solar electricity vouchers to the households connected on the grid.
Because they are not an independent power producer, they have had to find a way around that challenge.
Believe me, they are not alone and they are changing the game.
Many, if not most, small and medium businesses already make use of technology products in their businesses, and actually making tech their businesses.
Every day, our SMMEs are demonstrating out-of-the-box thinking in business skills.
This must be matched by similar out-of-the-box thinking in SMME funding at a time when we have to scale up support, but with limited and even less resources.
We need to offer confidence to investors to want to put their capital in our SMMEs by growing the sector and improving its viability.
We would like to issue a call to our friends from the global investor community to support SMMEs when it comes to procuring goods and services as part of the projects that will result from the commitments made at the Investment Conference.
Through working together, in true partnership, we can develop the SMME sector to become the real engine of growth and employment in our economy.
I thank you.
Issued by the Presidency of the Republic of South Africa