Business

Friends & Friction: Small business is the lifeline of economy

2020-02-05 13:00

Think small. Small is hard; small is measurable. Bricks are small, but they make a multistorey house stand.

Small businesses are the foundation of worldwide economies.

The World Trade Organisation reports that small businesses account for 95% of business enterprise, up to 70% of employment and more than half of the global GDP.

In South Africa we have more than 16 million unemployed people, which is more than the combined populations of Zimbabwe and the Kingdom of Eswatini.

The solution to unemployment will not come from building megafactories. Besides, big factories are now highly mechanised beasts that employ only a few people.

Our solution will come from creating an environment that enables micro, small and medium-sized enterprises to thrive.

Finance Minister Tito Mboweni keeps talking about making structural changes to the economy.

The focus has mostly been on the ugly state-owned enterprise (SOE) monsters such as Eskom and SAA, and not on the termites that destroy the building from below.

All business problems look like they can be solved by throwing money at them, so when people have a business idea the first wall they see is lack of funding, whereas funding is actually the least of their problems

A good problem-solver has the ability to turn a deaf ear to the squeaky wheel. SOEs will always be a political quagmire.

A research report titled Bureaucrats in Business: The Economics and Politics of Government Ownership, published by the World Bank in 1995, explains that “reform entails political costs” and SOEs can easily be used to start internecine wars in a party as divided as the current ANC.

Yet if small business succeeds, and more people get employed, it becomes easier for government to divest itself of problematic SOEs.

For instance, no one complained when the state-owned steel company Iscor was privatised because the country was enjoying the post-apartheid celebration, which brought with it a fast-growing middle class that eventually doubled in size.

Our obsession with Jacob Zuma’s failed presidency blinds us to the real problems that are continuing to eat away the fabric of our country.

We are in this quagmire because of a thousand small cuts. Our situation is like that of a young boy who has to take a bath after a long day of playing in the grass.

Unaware of the many small cuts made by the grass, he thinks that taking a bath is painful and ends up hating it.

Again, let us think small and look at our country as a soccer team.

The department of small business development is the centre forward or striker, together with the department of arts and culture because without them there are no goals and without goals we do not win.

In any case, most artists are either freelancers or belong to production companies which fall into the small business category.

The arts make the world remember the country with fondness, as Trevor Noah and Zozibini Tunzi have demonstrated.

The World Trade Organisation reports that small businesses account for 95% of business enterprise, up to 70% of employment and more than half of the global GDP.

So what needs to be done to make small business succeed?

Firstly, government must stop trying to be the witch doctor who heals all perils.

The complex and dynamic nature of the business environment today makes it impossible for any one entity to have a monopoly on wisdom, so government shouldn’t even try.

Research done by the International Federation of Accountants has revealed that a simplified and small business regulatory framework enables business to prosper.

The second thrust is to consider access to human transportation and the internet as human rights, just like justice and health, respectively.

All business problems look like they can be solved by throwing money at them, so when people have a business idea the first wall they see is lack of funding, whereas funding is actually the least of their problems.

Many businesspeople get money but lose it as quickly as water sips into the desert sand. What they need to do first is invest their sweat and keep good records because the soul of a small business is its records.


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February 23 2020