Progress Made With Regard to the Implementation of the National Small Business Strategy for the 1997 Annual Review of the GEARCentre for Small Business Promotion (Department of Trade and Industry)


• Introduction
• Details of Institutions and Programs
  
  • Financial Support to SMMEs
  • Non-financial Support to SMMEs
• The Advocacy and Regulatory Environment
  • The National Small Business Council (NSBC)
  • The National Small Business Act (1996) and the Regulatory Review

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Progress Made With Regard to the Implementation of the National Small Business Strategy for the 1997 Annual Review of the GEAR
Centre for Small Business Promotion
(Department of Trade and Industry)

Introduction

The Growth, Employment and Redistribution Macroeconomics Strategy (GEAR) of 1996 identifies the development of small, medium and micro-enterprises (SMMEs) as a key element to the Government's strategy for employment creation and income generation. The GEAR outlines that a major effort will be made to operationalize and implement the policies outlined in the White Paper (1995), entitled the "National Strategy for the Promotion and Development of Small Business in South Africa".

The GEAR refers to relevant legislation and various programmes and institutions that have been established to give effect to the strategy. The institutions are as follows:

• The Centre for Small Business Promotion (CSBP) at the Department of Trade and Industry
• The Ntsika Enterprise Promotion Agency (Ntsika)
• Khula Enterprise Finance Limited (Khula)
• The National Small Business Council (NSBC)

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This report provides information on the above institutions, key programmes for the 1996/97 financial year and work that is being carried out in terms of improving the advocacy and regulatory environment. The report is confined to details of programmes that were operationalized by the implementation agencies since these are the key delivery agents.

Statistics on employment created as a result of programmes are not available as yet. The CSBP has, however, implemented a quarterly report system for the institutions that it funds. This system was implemented from the beginning of the 1997/98 financial year. The reports will provide details of jobs created, expansion of existing firms, the establishment of new enterprises and the number of people trained. This information will be provided according to race, gender and locality. These reports also include a breakdown of the amount of funds that are utilised for programmes and the amount of funding provided to service providers.

The White Paper identifies two broad objectives:-

1. the creation of an enabling institutional framework which increases access to both financial and non-financial support services for SMMEs, and
2. the creation of a legal and regulatory environment, that promotes the development of SMMEs.

The following progress has been made with regard to the implementation of the GEAR according to these objectives.

Details of Institutions and Programs

The institutions and programmes which have been established are summarized in the following table and outlined below.

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Financial Support to SMMEs

Khula Enterprise Finance (Khula)

Khula has been involved in implementing and designing financial products for SMMEs. These are as follows:

Credit Guarantees: Individual

The Individual Credit Guarantee Scheme is in operation and includes the Standard Scheme and the Emerging Entrepreneur Scheme: It is designed to assist existing small businesses with financing needs of up to R75,000. Khula guarantees up to 60% and 75% respectively of loans extended by banks to entrepreneurs.

The scheme is capitalised to an amount of R50 million. As of 1 March 1997, 136 loans were issued under the scheme. Based on estimates each loan sustains approximately 20 jobs resulting in an estimated 2,720 jobs.

Credit Guarantees: Institutional

This scheme issues guarantee loans to retail financial intermediaries (RFIS) for on-lending to SMMEs (all the major banks have signed agreements to participate in the programme). This scheme has not been launched as yet and is still in the conceptualization phase.

Credit Guarantees: Portfolio

This scheme provides guarantees for RFIS and banks who are involved with SMME portfolio loans for targeted sectors. It is a new product and funds are yet to be determined (agreements are currently under negotiation with the banks).

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Equity Fund

This fund provides capital for joint ventures, expansion, recapitalization or shareholder buyouts through the establishment of equity funds. Khula's equity product involves establishing equity funds in partnership with private sector investors for the different provinces. Due to the nature of equity financing, these funds tend to serve the equity financing needs of small to medium sized businesses.

The first financial Equity Fund was launched in Mpumalanga in July 1997. The fund has been capitalised through a partnership between Provincial Government, Khula, and the private sector.

Business Loans

Business Loans are loans between R1 million and R100 million to RFIS that have the capacity to become viable and which meet Khula's eligibility criteria. These loans are used to contribute towards the financing of the operations of the RFIS that have been funded thus far. The projected benefit is to finance 9,000 micro-enterprises through this programme.

In addition, capacity building support is provided to RFIS to assist them in training, person-power, systems development and/or upgrading.

Seed Loans

Seed Loans are interest free loans to new and existing RFIS which may be used to finance loan portfolios or to fund initial operational expenses. If the RFI achieves pre-agreed performance targets, Khula will consider converting the loan into a grant. Five million Rand have been disbursed thus far and 5 RFIS have been granted seed loans to fund their operations.

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Other Financing Programs

SBDC Limited

The Department retains a 20% share holding in the SBDC Limited. The SBDC makes loans available to small and medium-sized business. Between 25 March 1996 and 25 March 1997, the SBDC issued R 243 million in loans and promoted 17,427 employment opportunities (the average number of jobs facilitated or sustained by a loan is six).

The above institutions ensure that financial support reaches SMMEs. Non-financial support is provided by Ntsika.

Non-financial Support to SMMEs

The Ntsika Enterprise Promotion Agency (Ntsika)

Programs and activities implemented by the following divisions are outlined below:

Business Development Services

This programme entails the development of a national grid of Local Business Service Centres (LBSCs) that provide business development services in the form of:-

• business counselling ranging from pre-start-up, launch, survival to business growth development;
• business management training including personnel and entrepreneurial development, functional skills such as book-keeping and marketing, and training which relates to management development;
• referral and sign posting including information on business opportunities, financial support, other network services and regulatory issues.

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Technical and managerial support has been made available to LBSCs to build their capacity.

To date 27 centres have been accredited throughout the country. These LBSCs have received funding, and further funding was distributed to 35 service providers who offer services but are only partially accredited as LBSCs.

Marketing and Business Linkages Division

For the previous financial year, this division focused on government procurement and the following activities were implemented:

• A national survey on government procurement was conducted to identify the needs of SMMEs in terms of tendering and compile information on tendering procedures.
• Some of this information was used to compile tender advice booklets. Two booklets entitled "Markets in the State Sector: Procurement Guidelines for SMMEs and Service Providers" and the "BASIC Steps to Tendering for SMMEs" have been published, with a view to increasing access to information on the government procurement system.
• The Enterprise Africa exhibition brought SMMEs, government departments, parastatals and large corporations together for a local trade exhibition to facilitate business linkages.
• A network of Tender Advice Centres (TACs), which are existing service providers, that assist SMMEs with advice on tendering for government contracts was established. Twelve TACs have been equipped and trained. A capacity building strategy has been developed to ensure that the staff are well trained and that the long term capacity of the TACs to develop effective services is developed.

In addition, Ntsika has been preparing a programme to enhance the international competitiveness of SMMEs which will build the capacity of 300 enterprises. This will improve their overall competitiveness in terms

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of exporting and inward investment. A comprehensive work plan has been developed for this programme which will commence in the 1997/98 financial year. The programme is supported by the EU and an amount of ECU 8,907 million has been allocated to the programme.

Management and Entrepreneurial Training Division (MED)

This division has provided the following services:

• Training and organizational capacity building of service providers such as NGOs, business chambers, etc.: Sixty trainers and 30 councillors from LBSCs, service providers and technical colleges have been trained.
• Training of information officers: Thirty information officers have been trained.
• Business start-up courses: Courses and workshops have been run with FEBDEV, IBEC, and the Micro-Business Chamber.

In addition, the MED Special Projects Unit is responsible for the following programmes that have been implemented:

• Technopreneur programme which provides accredited skills training for technikon or technical college students in the technical course of their choice: This is backed up with a course in entrepreneurial training which will prepare the trainee for starting up and running an enterprise. Ninety trainees completed the course at the Atteridgeville Technikon and 30 new enterprises were started.
• Funding to universities to support small business development: The university units conduct research and provide support services such as management training courses for entrepreneurs.
• Schools programme: This programme is designed to increase awareness and build an entrepreneurial spirit amongst school pupils. Teachers from 61 schools in Gauteng and the Western Cape were trained.

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The Targeted Assistance Unit

This unit funds specific organizations and programmes which support disabled, women, youth and rural owned enterprises.

The unit has provided funding for the following organizations:

• National Crafts Association and Eastern Cape Rural Industries;
• Disabled People South Africa;
• Rural Women's Movement;
• School Leavers Opportunity Training.

Policy and Research Division

The following core research and implementation strategies in support of the National Strategy have been provided:

• National small business data was collated in the Annual Review (1997).
• A programme has been designed for the establishment of Manufacturing Advisory Centres (MACs). Pilots will be launched in East London and Durban in September 1997.

It is critical that SMMEs thrive in an environment where they are able to advocate their needs and where government legislation does not have an adverse impact on the sector. For this reason, work is being carried out to address the advocacy and regulatory environment.

The Advocacy and Regulatory Environment

The National Small Business Council (NSBC)

The NSBC has been mandated for three primary functions:

1. ensuring that small businesses have a representative voice and therefore acting as a lobbying and advocacy body;

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2. the development of business chambers which is co-ordinated by the Chamber Development Programme;
3. policy and research as it relates to the needs of the SMME sector.

During the first nine months the NSBC concentrated on establishing nine elected Provincial Small Business Councils (PSBCs) during the previous financial year. It is expected that the bulk of the delivery by the NSBC will take place this financial year.

The National Small Business Act (1996) and the Regulatory Review

The National Small Business Act (NSBA) was passed by Parliament in November 1996 and was promulgated by the State President on 20 June 1997. The Act provides for the following:

• a comprehensive definition of SMMEs;
• the formal establishment of Ntsika and the NSBC as statutory bodies;
• a mechanism to evaluate the impact of all existing and proposed legislation on the SMME sector. This includes the development of proposed reforms and new legislation.

As a means to evaluate legislation, the CSBP is in the process of establishing a Regulatory Review Task Team which will commence its work this financial year.