SMEs in South Africa - a big challenge

SMEs in South Africa - a big challenge. One of the biggest threats to SME development in South Africa is the BBBEE legislation. Why do I say this, especially as I believe the BBBEE legislation to be generally fair and reasonably well thought out?

As a consultant operating in this arena, I am aware that the bulk of businesses are actively attempting to comply with the BBBEE legislation. However, the efforts of the business community in this regard are being destroyed by the South African Government, the same people who created the legislation in the first place. How?

By not forcing government departments at national, provincial and local government level to comply with their own legislation. Government has not changed the legislation that applies to their own procurement activities (Public Preferential Procurement Framework Act PPPFA)to reflect the BBBEE requirements which they legislated into place, and we are now 3 years down the road.

This has allowed insignificant people with their own personal agendas to create their own policies in each department at every level. The nett result is a system that is unfair and directly in contravention of the spirit and the law related to BBBEE.

The South African Government created a tool to try and re-align the economy so as to remove previous racial biases, but their failure to complete the job properly is an indictment of their lack of true commitment to economic development through the use of SMEs.

I am aware of many businesses who have spent large sums of money in complying with the BBBEE legislation, and have made a significant difference in the community as intended, and yet they remain excluded from business opportunities purely on the basis of their race. This not only applies to White entrepreneurs but also to Indian and Coloured entrepreneurs.

The Government must either accept that their lack of action will soon lead to businesses refusing to comply as the system is not applied correctly and fairly, with a major loss to the communities they operate in as a result, or they must fully implement their legislation. Failure to do so will continue to create opportunities for corruption as is so often the case right now, with incompetent and over-priced suppliers often getting the business. This is resulting in massive overspending on purchases by government which is in turn contributing to ongoing inflation and lack of delivery by government, as budgets run short. Many White and Indian businessmen now only go to compulsory tender meetings to meet the Black business people who will get the business. When the tender is issued they then get the business at the same profit margins as they would normally make, except that the order is channeled through a Black business. These Black individual are merely adding a level of intermediary costs and not adding any value. So no development is occurring. Emails are often received from black individuals offering to sell their orders. They are in effect making themselves to be no more than a front, in direct contravention of government's intent.

If the South African Government is serious about economic development, all things must be created equal. Right now being Black is enough to get the business. Other race groups may have skills, better pricing, and be established businesses with large staff numbers (often Black), and they invest heavily in skills, socio-economic and enterprise development among other things, and yet they do not get the business. This cannot lead to economic development and growth, and can only lead to where we generally are, in a pool of corruption that destroys our economy as another layer of cost is added with no value add and no organisational development.

Our fragile economy needs to ensure Black entrepreneurial activity, and the BBBEE legislation was intended to do just that. However, the failure of Government to implement this thoroughly and as planned, has and will continue to result in tenders being given to friends, family and bribers, because it can safely be written off as BEE.

It will be interesting to see what the new Jacob Zuma government does, considering his statement that he wants to see BBBEE grow in the SME sector and no longer in the corporate sector.

ALL South Africans want to see the country prosper and are fully aware that it requires everyone to prosper. We need BBBEE to work properly so we can all benefit.