Godongwana says growth of SMEs critical to stimulating sluggish economy

Reiterates government’s commitment to reducing red tape in business and positioning SA as the inter-regional trade engine.
Enoch Godongwana wants enterprises to have more space to grow. Image: Elmond Jiyane/GCIS

Finance Minister Enoch Godongwana says supporting small- and medium-sized enterprises (SMEs) by minimising factors constraining their growth is critical to building a dynamic and resilient enterprise sector as well as stimulating economic growth.

Godongwana was speaking at the release of the Southern Africa – Towards Inclusive Economic Development (SA-TIED) special report on Thursday, held in partnership with Business Day Dialogues.

“SMMEs are a critical part of this, because they generate employment, adapt [with] more flexibility to the changing economic environment and channel their funds back into local communities,” the minister said.

Godongwana added that for SMEs to realise their potential and play their role of stimulating economic activity effectively, barriers constraining their growth need to be reduced.

This ultimately reiterates his predecessor Tito Mboweni’s reform plan, Operation Vulindlela, which commits to addressing major structural economic issues.

“There’s that discussion now in Operation Vulindlela which looks at the reduction of red tape to ensure that the small- and medium enterprises, [have less] regulation on them and they can be allowed space to grow,” Godongwana said.

Read: Godongwana commits to reforms and removing red tape to boost economy

To foster a robust and resilient economy, there needs to be a recalibration of “policy measures which support greater access to private sector finance, particularly for SMEs,” and an increase of support for research and development that will contribute to improving productivity gains.

These are some of the recommendations SA-TIED’s special report on transforming the country’s economy made with respect to achieving the minister’s economic goals.

Coordination of policies

Despite his utterances, the minister acknowledges that there is no silver bullet that can solve South Africa’s economic challenges overnight. He says several interventions have to be coordinated to build a robust economy, adding that the country’s economic policies need to work together to ensure success.

“It’s clear that historical low levels of growth in the domestic economy reflecting several structural challenges are inadequate to address our developmental challenges.

“Macro-economic policy alone cannot address these poor long-term growth trends. However, efficient fiscal monetary policy plays a critical role in addressing the high levels of income inequality.”

In line with this, the finance minister added that South Africa’s economic policy cannot only focus on looking inwards to facilitate growth, but must also look to facilitating and agitating economic activity on the continent and with neighbouring countries.

Fostering regional growth

“The integration of markets in Africa is central to economic development, not only in South Africa, but on the continent as a hole.

“Trade is central to the economic growth of all of us. There’s potential for SA to become an engine for inter-regional trade and industrial development by linking other Southern African countries to the value chain,” Godongwana said.

To facilitate this regional economic activity, one of the report’s recommendations is to reinvest in the operations of the country’s special economic zones (SEZs).

“SEZs in the Eastern Cape, South Africa, are latent drivers of growth and employment that can be better harnessed by improving infrastructure and local supplier capabilities,” the report noted.

“Other SEZs in Southern Africa require the addition of capable business service provision, streamlined regulations and procedures, coherent incentive structures, and organisation around strategic anchor industries to kickstart the formation of agglomeration economies.”

Support from the World Bank

To support these economic ambitions, the South African government has received financial support from the World Bank in the form of a R11.4 billion ($750 million) loan.

Last week, the World Bank approved the country’s loan request to help address the socio-economic impact of Covid-19 which has seen SA recording over three million infections to date.

Read: World Bank approves R11.4bn loan to support SA’s Covid-19 recovery

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This is quite a basic issue. It is not rocket science. The current constrained economic activity, with the resulting low GDP growth rate, the anemic tax collection, and the high unemployment rate is the symptom of the failed dogma of the governing Tripartite Alliance.

Here we have a communist workers union, a socialist political party, and the SA Communist Party, working together to implement their shortsighted and populist policies, that have failed dismally in every nation that has tried it. The Tripartite Alliance is trying to reinvent the wheel, and at this stage, they have managed to come up with a square cement block.

The Special Economic Zones do better, simply because the Tripartite Alliance has no “jurisdiction” to implement their policies there. The SEZs are “special” because the ANC is kept out. The success of SEZs proves the failure of the ANC. We can turn the entire country into an SEZ if we simply vote a coalition of the DA, FF+, Action SA, UDM, and IFP into power.

The fact that the economy is not growing at 5% to 7% per year, and actually contracts in terms of GDP per capita, is the direct result of the mindset of voters. The voters support extractive redistributive policies and not pro-growth policies. They demand jobs while they vote for unemployment. They demand a living wage while they parasitize the wage generator. They demand a better life for all and then they consume their own future with BEE laws. They demand free education, water, electricity, sanitation, a higher social grant, and NHI, while they tax the entrepreneurs to death who can provide it.

The market mechanism, with the sanctity of property rights and the supremacy of the rule of law, free of government intervention and political meddling can provide everything they need. Economic growth is a western, capitalist concept. Collectivists, when left to their own devices, can only extract, extort, parasitize and redistribute the means of production.

The only question is – for how long can democracy and the constitution survive in a collectivist society?

Yip, the Ruling Party talk a good story on obvious matters, that they have had time to get others to prepare for, and come up with long winded rhetoric and solutions !! But they cannot implement, sustain, and maintain LUTHU, because that requires mettle, will and competency, which, well, has never been there!!! Viva LUTHU(li) House!

“Despite his utterances, the minister acknowledges that there is no silver bullet that can solve South Africa’s economic challenges overnight. He says several interventions have to be coordinated to build a robust economy, adding that the country’s economic policies need to work together to ensure success.”

Absolutely correct! If there were a silver bullet, it would have been stolen and sold for scrap by now.

But in the last 30 years, the communist and trade union influence in the economy has brought us close to a failed state. So like duh! Stop interfering in what you have no ability or competence in and SA may eventually turn the corner.

End of comments.

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