Transcript Unlocking the Potential of SMME`s

Unlocking the Potential of
SMME’s
Brigette Petersen, Chief Director: Corporate Services,
Department of Small Business Development
ECONOMIC OUTLOOK
Global growth slowed to a six-year low
in 2015 and the outlook in 2016
remains subdued
• 2016 and 2017 global
growth forecasts revised
down in April
o -0.2 percentage points in
2016
o -0.1 percentage points in
2017
• Downward revisions more
pronounced in emerging
markets, especially Brazil,
Russia, Africa
Source: IMF
Recent economic releases point
to a weak 1st half of 2016
Jan
Feb
Mar
Apr
CPI inflation (%, y/y)
6.2
7.0
6.3
6.2
PPI inflation (%, y/y)
7.6
8.1
7.1
7.0
Manufacturing production (%, y/y)
-2.5
2.3
-2.4
2.9
Mining production (%, y/y)
-6.0
-8.3
-17.8
-6.9
Retail sales (%, y/y)
3.6
4.0
2.9
1.5
Wholesale sales (%, y/y)
-4.8
1.2
-2.0
5.7
Trade balance (R bn)
-19.7
-1.5
2.0
0.4
Private credit extension (%, y/y)
8.5
9.0
8.7
7.1
Household credit extension (%,y/y)
4.6
4.8
4.6
2.3
Barclays PMI (Index, neutral=50)
43.5
47.1
50.5
54.9
RMB/BER Business Confidence
(Index)
FNB/BER Consumer Confidence
(Index)
36
-9
32
South Africa’s growth
potential is currently weak,
estimated at around 0.6%
and forecasted to peak at
around 1% in 2017
•
Mining and manufacturing
production performed weakly
in 2016 Q1
•
Business confidence
weakened in 2016 Q2
SA growth anaemic, GDP excluding
mining and manufacturing has been
declining
12
10
Percentage change (q/q)
8
6
4
2
0
GDP
GDP excluding Mining
and Manufacturing
• Services sector
supported growth, as
we have innovated in SA
and into the continent.
Finance, trade and
telecommunications
providing support
-2
-4
-6
-8
• Policy interventions
need to support shifting
economic structure, i.e.
broadband, tourism etc.
Services sectors have provided
cushioning
Its resilience has
supported growth,
particularly from the
finance and trade
sectors
The manufacturing
sector has remained flat
since 2014. Some
subsectors did well (e.g.
food and bev, autos)
The mining sector
rebounded in 2015 after
the labour unrest
Source: Stats SA, National Treasury calculations
Our focus should be on areas of
high impact and supportive
reforms
Sector multipliers1
Agriculture, forestry and fishing
Domestic output
multiplier
1.7
Employment
multiplier effect
4.9
Mining and quarrying
1.4
1.6
Manufacturing
1.4
2.6
Electricity, gas and water
1.6
1.4
Construction
1.9
4.9
Wholesale, retail and motor trade;
catering
and
accommodation
Transport,
storage and communication
1.6
5.3
1.6
2.9
Finance, real estate and business
services
Community, social and personal services
1.7
3.1
1.5
4.1
1. Note that this does not include the effects of higher employment on consumption
and therefore growth; it assumes there are no supply constraints in the economy.
Subsector multipliers may vary considerably.
Source: National Treasury based on Statistics South Africa 2012 supply and use tables
• Take cognisance of
sectors with high
potential for job creation
and benefits for the rest
of the economy
• The Nine-Point Plan
focuses on high-impact
interventions such as
alleviating critical
infrastructure
bottlenecks
POTENTIAL OF SMME’S
Amid the Current Economic
Outlook
• … the SMME sector, inclusive of informal, rural
and township enterprises, remain a beacon of
hope:
• enormous untapped potential to boost
economic growth and job creation, and
• economic activity of necessity for millions of
citizens (particularly the marginalised) who are
trapped in poverty and excluded from the
mainstream economy.
Amid the Current Economic
Outlook
• Policy shifts and drastic measures to cushion
the generally labour intensive, highemployment generating SMME sector, to
survive this period.
• Unemployment is the primary catalyst for
starting an informal business (STATS SA)
Comparison of tax revenue
collected from large companies
and SMMEs
In the
2015/16 tax
year the
contribution
of SMMEs to
PAYE, Skills
Developmen
t Levy and
Corporate
Income Tax
was greater
than that of
larger
companies
Proportion of employers and jobs by
employer size from PAYE
reconciliation (2013-2015 tax years)
100%
90%
6%
6%
6%
15%
15%
15%
20%
20%
20%
80%
70%
> 100 jobs
60%
50%
26-100 jobs
24%
24%
11-25 jobs
24%
40%
2-4 jobs
1 job
30%
20%
5-10 jobs
25%
24%
24%
11%
11%
10%
2013
2014
2015
10%
0%
More than half
of all employers
(54%)
submitting PAYE
returns employ
10 or fewer
employees
Why SMMEs should be a pillar in the
Nine-Point Plan…
Comparative Analysis
COUNTRY
REPRESENTATION EMPLOYMENT
ECONOMIC VALUE
UNITED
KINGDOM
99% of
businesses
60% of
employees
Gross Value add:
49.8% to Economy
GERMANY
99% of
businesses
99% of
businesses
68.9% of
employees
84% of the
workforce
52% of Economic
output
74% of sales
98% of
businesses
47 % of the
workforce
42% contribution
to GDP
PEOPLE’S REPUBLIC
OF CHINA
SOUTH AFRICA
Excludes listed corporates and foreign companies
13
Why SMMEs should be a pillar in the
Nine-Point Plan (Cont.)…
Case Study – European Union
SMEs are important because:
SMEs
Large
58% of total turnover =
€14.000 billion/a
14
Why SMMEs should be a pillar in the
Nine-Point Plan (Cont.)…
Case Study – European Union
o Recognised definition of “SMEs”
o Supportive Legislation – Small Business Act with a set of
politically binding principles (adopted in 2008, reviewed
in 2011)
– the “Think Small First” principle
– 10 principles for implementation at European and national
level and a set of policy actions to implement them
(legislative, non-legislative, exchange good practice)
o Governance and Effective M & E
OBJECTIVES, ASPIRATIONS AND
CHALLENGES
Apex identifies Small Business as
a catalyst for inclusive growth
POLICY ALIGNMENT
National Development Plan
(NDP)
▪ Inclusive growth
▪ Support for small businesses
▪
▪
▪
▪
through better coordination of
relevant agencies, development
finance institutions and public and
private incubators
Commitment to public & private
sector procurement approaches
A more efficient and competitive
infrastructure
By 2030, create 90% of the 11m jobs
60-70% of GDP generated by SMMEs
New Growth Path
(NGP)

Inclusive growth

economic sectors, targeting
more labour-absorbing
activities across economic
sectors
Fostering rural development
promoting
small business
and entrepreneurship;
Eliminating red-tape
Medium-Term Strategic
Framework (MTSF)
▪ Growth of sustainable rural enterprises
 Improve job creation in

▪
▪
and industries characterised by Strong
rural-urban linkages; Increased
investment in agro-processing; Trade
development; Access to markets; and
Financial services– resulting in rural job
creation”
Decent employment through inclusive
growth - 1 million new jobs in rural
economy by 2030
Vibrant, equitable, sustainable rural
communities contributing towards
food security
2019 Impact / Transformation
Indicators
• 450 000 new active enterprises:
o Redressing the uneven ownership of the economy
• 1.3 million additional jobs in pursuit of:
o NDP target: SMMEs contribute 90% of the 11 million jobs
by 2030
o The aspiration to achieve radical economic transformationreducing inequality, poverty and unemployment
• Inclusive Growth:
o Increase the contribution of SMMEs to the GDP from 42%
to 45%
o ICT Sector currently contributes 3% to GDP and in 2019 ?
18
Obstacles to Overcome
Policy and Regulatory Environment
Public Sector Procurement Programme
Access To Finance and Non-financial support
Targeted Support for Enterprises In Townships And
Rural Areas
Building Access To Markets
19
Context: SMME's in South
Africa
Data suggests the existence of some 2.15m privately
owned businesses in SA are SMEs:
Medium Businesses
150 000
Small Businesses
450 000
Micro Businesses
1.3m
Start-ups
250 000
20
Context: SMME's in South
Africa
• In total, these businesses employ 7.3 million people
o Formal and formalising businesses account for 4.9m
o Informal sector make up the remaining 2.4m
• SMEs generates +42% of GDP, although estimates vary:
o 10%-15% of this contribution is from the informal sector
o ICT Sector contributes + 3% to GDP
• More than 18 000 new SME’s submitted tax returns for first
time in 2014/15 financial year
21
Context: ICT inhibitors for
SMME's in South Africa
Low uptake due to
accessibility,
affordability, skills
Limited innovation
for local needs /
circumstances
Minimal capacity
development:
Technology Incubators,
R & D, Training &
development, Funding
Lack of coordination
and integration of Govt
Services e.g. business
registration; Tender
process/criteria
Disparity (Urban,
Metro, Rural, SemiRural)
22
OPPORTUNITIES
Opportunities for ICT
• e-Government / e-Services
• Improved Collaboration for
innovation
• Build capacity – incubators for
local innovation
• Facilitate business through
affordable services / systems i.e.
Business in a box, mobile apps
Think smart and put down the right building blocks…
24
Opportunities for ICT
(Cont.)
• 30% public sector procurement from
SMMEs and cooperatives. Public
sector should identify goods, services
and indicate required standards.
• Incubation collaboration to support
SMMEs in critical areas, example
customised solutions for the public
sector.
Think smart and put down the right building blocks…
25
Opportunities for ICT
(Cont.)
• Increased support to growth oriented small enterprises
through incubation. SEDA currently supports SMMEs in five
ICT incubators.
– Graduate of the incubation programme - Mr Sbu Shabalala is
founder of Adapt IT and 150th richest person in South Africa.
– Another incubatees, iTMaster has grown operations from
KwaZulu Natal to Gauteng, Western Cape and Limpopo.
Accredited on SITA supplier list, partnerships with Vodacom
and currently employs 110 people.
Think smart and put down the right building blocks…
26
Opportunities for ICT
(Cont.)
• Opportunity for research from universities and
science councils - commercialisation
• Improved funding coordination for wider
disbursement (Systems Integration)
• The National Gazelles programme has prioritised
ICT as one of its ten sectors. During the first intake,
5 of the 40 are from the ICT sector.
Think smart and put down the right building blocks…
27
Opportunities for ICT
Example
Rural / Semi
Urban
Urban /
Metro
Limited Coverage
/Access
More than 95%
Coverage
28
Opportunities for ICT
Example
• Most developed telecoms network in Africa 99.9% digital network (includes wireless and
satellite communications)
• ICT Sector - most advance skills in Africa for
mobile software (APPS) and electronic
banking services
How do we use the available technology and skills to
grow/facilitate market access for SMME’s including those in the
ICT Sector?
29
IN CONCLUSION…
The Road Ahead…
• The National Development Plan: Vision 2030
expressed the aspiration that by 2030:
o“we are traders, we are inventors, we are
workers, we create companies, we set up
stalls . . . we make things out of our homes.
We create objects of value. We invest and
reap good returns for our efforts.”
The Road Ahead…
• The National Development Plan: Vision 2030
expressed the aspiration that by 2030:
oEconomic growth would be at 5% growth
per annum, that between 60-70% of GDP
would be generated by small businesses;
and, 11 million new jobs, 90% of which
would be generated by small businesses.
High Impact Indicators
GROWTH TARGET : Annual increase in the contribution to GDP from (Current) 42% to 45% in 2019
CURRENT
STATUS (NOV-15)
2019
TARGET
Absolute
Contribution
of SMMEs to
GDP: R1.77tr
Absolute
Contribution
of SMMEs to
GDP: R2.10tr
No. of Active
SMMEs &
/Start-up
Rate: 2.1m/13%
No. of Active
SMMEs &
Start-up Rate
2.5m/16%
Total jobs in
SMMEs:
7.33m
Total jobs in
SMMEs:
8.69m
CHALLENGES
KEY INTERVENTIONS
1. Capacity to meet
demand
2. Funding not
developmental
3. Limited market
access
4. Targeted support
for sectors
5. Absence of
informal sector
policies
1. Public Procurement
Policy/Legislative
review
2. Access to Finance
3. Building market
access
4. Township and rural
Enterprises
strategy
5. Red-tape reduction
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Small Business^is Big Business
34
THANK YOU
Brigette Petersen, [email protected], Mobile: 082 657 8225