Trade and Industry Minister Rob Davies is out of touch with the reality of entrepreneurship.
The proof: the newly proposed Business Licensing Bill.
The Bill underlines the lack of understanding of the challenges small and medium sized businesses (SMEs) face and how destructive bureaucracy is.
I really do not see the sense in the new Bill, except to show how clueless the department and its minister are.
I hope Davies read the latest edition of the Global Entrepreneurship Monitor (GEM) report, which analysed the health of entrepreneurship in various countries. The South African chapter makes for dreadful reading and shows that fewer and fewer South Africans are interested in starting and/or running a business.
The survey shows that fewer than eight out of every 100 South Africans plan to be entrepreneurs. This rate is one of the worst in the world.
I trust that a copy of the National Development Plan lies next to Davies’ bed and that he frequently familiarises himself with the document’s goals. One of these is massive job creation. The most important tool to achieve this is via SME development. In fact, the NDP states that 90% of the required jobs needs to be created by SMEs.
This would leave him in a bit of a conundrum. Maybe he should take note of a few ideas that could influence the apparent authoritarian nature of policy formation in his department. Davies will also do well to learn from the experience of many of his colleagues in cabinet, and at state-owned enterprises.
Government can create an entrepreneurship environment by doing less
However unintuitive this may sound, it is the truth. Most governments in the world are not efficient, and the South African one even less so. The reality is that an inefficient government cannot regulate innovation and entrepreneurship. It’s like oil and water – they just don’t mix.
Increased regulation and government participation in a free economy harms entrepreneurial development. Yes, capitalism will create rich entrepreneurs. But, this system also creates many more jobs than any other system on earth.
You do not eradicate the problem of children being taught in the shade of trees by cutting down the trees. You solve it by building classrooms, or better still, you give the community the tools to build it themselves. This way, government does less, and more gets done.
The same principle applies to job creation. Create an environment where small businesses can flourish and the jobs will come.
The Licensing Bill adds another layer of bureaucracy to the small business environment. If the Bill is aimed at improving compliance with the law, why doesn’t Davies visit colleague Nathi Mthethwa’s office? Surely the police should enforce the laws of the country?
He could also chat to Dina Pule, Minister of Communication, about how successful the Rica registration process for cellphone users has been. And to Finance Minister Pravin Gordhan, and Mthethwa (again), about how successful Fica registration of bank accounts is at fighting crime.
Improving the efficiency of government agencies, and declare war on corruption
Davies should look at the quality of the civil service, especially the services it renders to businesses. I wonder whether he has stood in a queue at his local municipality to query a water and lights bill? Or tried to phone the municipality/Eskom when there is a power outage. When last did he apply for registration at a DTI office?
The proposed new law will force entrepreneurs into these time-wasting queues.
Maybe Davies should visit another one of his colleagues, Richard Baloyi, Minister of Cooperative Governance and Traditional Affairs, to enquire about efficiency levels of local government, especially in rural areas.
Davies should also ask him why local governments cannot just consistently pay service providers within 30 days, and what service levels business owners can expect if the Business License Bill is enacted.
While he is there, he could also ask Baloyi about tender fraud and corruption, two fairly common practices at local government level. He should ask Baloyi whether there would be support within the ANC for a new Bill that would make all government tenders totally transparent?
A Bill like this will ensure that the details of all bidders and the eventual winner of a tender is put on the internet for all to see. The full details of the winning company’s directors and shareholders must be on the site, as well as comprehensive details of the government officials who awarded the tender.
This will do much more for SME development than the License Bill.
Incentives for job creation
Despite the massive unemployment problem in South Africa, there is not one single incentive for businesses to employ additional employees. There is support for businesses to grow and indirectly employ more people. But, the focus remains on growth first and maybe more employment second.
The red tape and militant labour pool is enough to scare anyone away from hiring more staff.
Minister, you don’t have to reinvent the wheel. Incentivise businesses to employ more people: provide businesses with tangible tax rebates when they employ additional employees.
Make it easier for business to hire and fire employees. I can hear the grunt from Davies and labour unions, but it will create more jobs.
Government needs to be innovative (yes, I know it is a contradiction) to help change the mindset of business owners from trying to cut jobs, to creating them.
Maybe the minister should look at what Eskom is doing. This state-owned entity subsidises normal households to replace light bulbs with energy saving ones, installs solar geysers and even assists businesses to cut their electricity usage. Eskom does this to reduce the demand for electricity – its core problem. It is a really good incentive program as it saves Eskom clients money.
Government should employ entrepreneurs to create jobs
A communist and a labour union doyen respectively run the DTI and the department of economic development. This in itself is a major problem, as these individuals are not entrepreneurs and may not be the ideal individuals to formulate policies to boost entrepreneurship. The proposed Business License Bill is only one example.
Maybe Tokyo Sexwale, Patrice Motsepe or Cyril Ramaphosa should be ‘deployed’ to these departments.
SA needs ministers of job creation and small business
I still cannot understand why South Africa has one of the largest cabinets in the world, but we don’t have a minister for job creation, or small business for that matter.
The actions of the treasury, DTI and economic development departments prove that there is little understanding of entrepreneurship and private sector job creation.
These departments may interact with the large corporates, but they really haven’t a clue what is happening on the ground.
I repeat: South Africa needs a minister of job creation and small business. One of its key functions should be to research the financial impact of any piece of legislation from any department on SMEs.
New Zealand has such a department and it works very well.