New business development


Boosting small businesses

As large enterprises have restructured and downsized small, medium and micro enterprises (SMMEs) have come to play an increasingly important role in South Africa's economy and development. The sector has grown significantly. In 1996, around 19% of those employed were in the informal sector of the economy. By 1999 this had risen to 26%. The government has therefore targeted the SMME sector as an economic empowerment vehicle for previously disadvantaged people. As a result, SMMEs have received significant attention and investment, ranging from the establishment of state-initiated projects to supportive legislation, a variety of funding institutions and government incentives through the Department of Trade and Industry (DTI). The National Small Business Act, passed in 1996, helped to establish many of the supportive structures now in place. According to Towards a Ten Year Review, a discussion document reviewing the impact of the government's policies since 1994, there were 2.3 million people who owned at least one Value Added Tax (VAT) unregistered company. Of these, only 338 000 owners had employees, a total of 734 000. These number may raise the question of the job creation potential of these enteprises, but it also demonstrates the level of self-employment, a large portion of which may be survivalist. Data on small and medium enterprises suggests that these enterprises contribute aboyut half of totl employment, more than 30% of total gross domestic product. Also, one outr of five units exported is produced in the small and medium sector in South Africa. Department of Trade and Industry

Government initiatives, facilitated by the DTI and associated organisations, include the Centre for Small Business Promotion (CSBP), Ntsika Enterprise Promotion Agency and Khula Enterprise Finance. The CSBP implements and administers the aims of the national strategy, which includes job creation. The DTI has recently signed an agreement with the European Union which will see the EU donating R550m to start a risk capital fund for SMMEs. The fund will be administered by the Industrial Development Corporation (IDC) and the European Investment Bank, and 90 enterprises will benefit. The IDC allocates 75% of new business loans to SMMEs. The SA Women's Entrepreneur Network was rolled out countrywide in 2002, alongside manufacturing advisory centres in all provinces. Non-governmental organisations include the Small Enterprise Foundation, which has a microcredit programme aimed at micro-enterprises, and the Tshomisano credit programme, targeting women. Ntsika

Ntsika provides non-financial support services to the SMME sector, tackling issues like management development, marketing and business development services. The agency also helps with research and inter-business linkages. Khula

Khula offers financial support mechanisms to the sector. The financial products include loans, the national credit guarantee system, grants and institutional capacity building. Khula has also launched its own micro-lending scheme, KhulaStart, an entry-level programme that provides loans to first-time borrowers in the survivalist sub-component of the SMME sector. The organisation has recently launched the Khula Technology Transfer Fund to facilitate access to local and international technology. In addition, a new fund is being set up to serve businesses in Gauteng, North West Province and the Free State. A similar fund already exists for businesses in the Northern, Eastern and Western Cape, as well as in Mpumalanga, Limpopo and KwaZulu-Natal. BRAIN

The DTI has launched a comprehensive online initiative known as BRAIN (Business Referral and Information Network), offering basic information and essential service links to entrepreneurs. The BRAIN website includes information about the government’s incentives and SMME support agencies, as well as links to business centres throughout the country. FRAIN The Franchise Advice and Information Network (FRAIN) strives to supply high quality information and support services to individuals and small business (SMMEs) to ensure growth and improvement of new and existing franchise businesses in South Africa. FRAIN is a support project of the DTI. It is implemented by Namac (National Co-ordinating Office for Manufacturing Advisory Centres), with assistance from the Council for Scientific and Industrial Research (CSIR). Namac Trust The National Co-ordinating Office for Manufacturing Advisroy Centres (Namac) is an SMME support agency within the DTI. It is widely recognised as one of the most successful SMME development and support agencies in South Africa. Namac has developed an extensive delivery structure across South Africa that serves as a channel for the application of new tools, information, products and projects, thus enabling the effective delivery of solutions aimed at SMMEs. The emphasis is on Historically Disadvantaged Individuals' (HDI) businesses. Business Partners Limited

In 1998, the Small Business Development Corporation (SBDC) was transformed into Business Partners Limited. The organisation shifted its focus onto small and medium enterprises, increasing its project involvement to a R150 000 minimum and a R15-million maximum. Business Partners set aside R277.7-million for investment in SMMEs last year. The organisation has invested R4.6-billion in emerging businesses in the past 20 years, directly influencing the creation of 500 000 jobs. Tourism Enterprise Programme

The Tourism Enterprise Programme (TEP) falls within the policy-vehicle of the government's Tourism Action Plan (TAP). As such, it represents a component of a larger and longer-term strategy to both attract and effectively cater for the expected growth in domestic and international tourism. The TEP is funded by the Business Trust and implemented by ECIAfrica. The main objectives of the programme are to encourage and facilitate the growth and expansion of small and medium enterprises in the tourism economy, resulting in job creation and revenue generating opportunities. Primary emphasis is placed on historically disadvantaged entrepreneurs and enterprises. For example, at the World Parks Congress the TEP was instrumental in facilitated deals which provided employment for its beneficiaries. Sources: South Africa Business Guidebook, 2002-2003 and Towards a Ten Year Review
Did you know
The SMME sector contributes 42% to GDP. Approximately half of all people in formal employment are employed by SMMEs. 80% of the Department of Trade and Industry's R91m budget for enterprise and industry development is spent on SMMEs. Ntsika receives R35m of this money, while Khula receives R20m. Source: South Africa Business Guidebook, 2002/2003

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