Ramaphosa’s big promises for small businesses

In his latest State of the Nation Address (SONA), President Cyril Ramaphosa vowed to cut the red tape holding small, micro, and medium-sized enterprises (SMMEs) back. However, he promised the same thing in previous SONAs.

According to the International Finance Corporation, SMEs create between 70% and 95% of new employment opportunities in emerging economies.

However, South Africa has one of the highest business failure rates in the world, and the potential impact of SMMEs in South Africa has been held back by red tape, including regulatory impediments and bureaucracy. 

In his 2022 address, Ramaphosa said he would undertake “far-reaching measures to unleash the potential of small businesses, micro-businesses and informal businesses”.

One measure was establishing the red tape reduction (RTR) team in the Presidency. It was established in 2022 and given a R4 million budget to identify regulatory impediments South African businesses face.

On Thursday night, Ramaphosa provided an update on the work that has been done to simplify the regulations surrounding SMMEs.

“The red tape reduction team in the Presidency under Sipho Nkosi has been working with various departments to make it easier to do business,” said Ramaphosa.

“It has taken a collaborative approach, working with departments and agencies in areas such as the mining rights system, tourism transport operator licenses, visas and work permits, early childhood development and the informal sector.”

The Parliamentary Monitoring Group (PGM) said the team identified almost 100 potential red tape issues in 2022. It made tourism travel permits, the mining and prospecting rights licensing system, and work permits and visa administration its key focus areas.

The PGM added that the team’s progress was held back by a lack of funding, a lack of administrative capacity, and the fact that they had no permanent structure. 

In a meeting with the department of small business development, Nkosi said that the team “did not have powers currently, but they were in negotiations to see what they could do with their limited powers”.

Business Leadership South Africa said that they were “pleasantly surprised” to hear about the RTR team’s progress since there has been “little communication” on this important project. 

“BLSA, therefore, welcomes this announcement and urges expedited implementation.”

The president also mentioned that, in 2023, they would finalise the amendments to the Businesses Act that he mentioned last year, which would “reduce regulatory impediments for SMMEs and co-operatives and make it easier for entrepreneurs to start businesses”.

In addition, Ramaphosa said he planned to provide R1.4 billion in financing to over 90,000 entrepreneurs through the Small Enterprise Finance Agency (SEFA). 

“Government, in partnership with the SA SME Fund, is working to establish a R10 billion fund to support SMME growth. Government is looking at the possibility of providing R2.5 billion for the fund and for the balance of R7.5 billion to be raised from the private sector,” Ramaphosa said.