Download Premier David Makhura Speech at the SMME

GAUTENG PREMIER DAVID MAKHURA SPEECH ON THE
OCCASION OF THE SMALL BUSINESS DEVELOPMENT INSTITUTE
(SBDI) DINNER.
21 OCTOBER 2014
Programme Director, Mr Andile Khumalo;
Minister of Small Business Development, Ms Lindiwe Zulu;
Our host from the IDC, Ms Khumo Morolo;
Our veteran and doyen of Black Business, Dr Richard Maponya;
President of the Black Business Council, Mr Sandile Zungu;
CEO of the Small Business Development Institute, Mr Xolani Qubeka;
CEOs and Representatives of Small Business Organisations;
Distinguished Guests
I would like to thank the Small Business Development Institute for
inviting me to this important dinner.
I am glad that you have been having exciting discussions at this historic
colloquium to frame challenges and develop a strategy for small
business development in our country.
The significance of the new Ministry of Small Business
Development
One of the important milestones of this 5th Administration is the
establishment of the new Ministry for Small Business Development.
The setting up of the Ministry by President Jacob Zuma signifies a
strategic change of emphasis and consolidates progress made over the
20 years, particularly in the 5 years on the transformation of the South
African economy. In small and co-operative enterprises there is a
sleeping giant that is sure to become the power engine of the future
growth of this economy.
Under the capable leadership of Minister Lindiwe Zulu, the champion of
small business, I am confident that this giant will now be awakened and
its presence will be felt everywhere.
We now have an opportunity through this new Ministry which has yet to
shape its own fully-fledged structure (but surely getting there), to ensure
that there is a single focal point for coordination and support (both
financial and non-financial) for small enterprises and co-ops. We have
opportunity to bring ever greater coherence within the sector.
Small, medium and micro enterprises have become the key drivers of
growth in most economies, established and emerging alike. There is
recognition everywhere in the world that conglomerates and big
monopoly companies are not the most desirable structure of an inclusive
economy.
One of the main structural problems of SA economy is the dominance of
big monopolies in key sectors of the economy, together with the
exclusion of the overwhelming majority of black people from meaningful
economic participation. These are the twin problems of our economy:
suppression of blacks to a continuing white economic domination and
subordination of the SMME sector to monopoly domination.
I strongly believe that our country has entered a new era wherein the
SMME sector will become the key driver of sustainable economic growth
and inclusion of the majority of blacks, women and youth.
Township economy and small business
In the context of our province, an important part of the SMME sector is
what we refer to as the township economy.
The notion of township economy is counter-intuitive. To some of you
who have studied economics at university, this may sound like a
conceptual misnomer. What is the township economy? Is there such a
thing?
The World Bank and the University of Johannesburg have recently been
paying close attention to the notion that townships are centres of
economic activity - production and distribution of goods and services and
generation of wealth.
According to the World Bank research, Diepsloot is a R2 billion
economy. Other studies suggests that Soweto is R12 billion economy.
We estimate that Gauteng townships contribute about R100 billion to the
province's R1 trilion economy. Townships generate significant wealth.
Historically, Townships where established as dormitories and reserves
where cheap black labour resided to service the white economy. They
were located on the periphery of the white towns and cities, far from
economic opportunities.
Over the years, black people turned townships into thriving cultural,
intellectual and economic centres of black excellence. It is in the
townships where a critical mass of black entrepreneurs emerged over
decades. They did so under difficult conditions of suppression and
victimisation by the apartheid state.
It is in the townships where South Africa's greatest black entrepreneurs
such as Ntate Richard Maponya emerged.
It is for this reason that we in Gauteng have added a new dimension to
small enterprise development. We say it is not just about small, micro
and medium enterprises in general, but about the spatial dimension of
these enterprises – the township enterprises.
As part of our strategy for radical economic transformation, we are
focusing on the revitalisation and mainstreaming of the township
enterprises. We want to provide necessary support to township
entrepreneurs so that they can grow. This will help to change the
structure of our economy - more black people and larger number of
SMMEs will assume centre stage.
There are several reasons why we are placing more emphasis than ever
before on the township economy.
First, the radical economic transformation we have called for means
confronting the persisting reality of poverty, unemployment and
inequality and economic exclusion of the majority of Gauteng
population from the mainstream economy.
It is in the townships that massive poverty, high unemployment and the
impact of deep inequality of the provincial economy are deeply felt and
from which 80 percent of Gauteng population (African, coloured and
indian) live.
Secondly, the townships, from the point of view of apartheid planners,
were designed to be dormitories in the same way as ‘homelands’ were
to be ‘labour reserves’. They were sources of cheap labour supply for
the apartheid economy. They were also located far away from economic
opportunities such that to work and make business is to travel long
hours to and from the township. This apartheid spatial reality remains so
today in many respects – whether we talk about old townships, or new
ones, formal or informal. We want spatial transformation in order to alter
the apartheid space economy and geography.
Thirdly, dormitory and labour reserves legacies are only one side of the
township – a side reminding us of the essence of apartheid. There is
another side, in which people have refused to be reduced to mere
suppliers of cheap labour and have for many decades turned the
township into vibrant economies – from minibus taxis that commutes
millions daily in Gauteng, to mechanics, vendors, burial societies,
stokvels, hair salons, shebeens and so on.
This is story of resilience and courage of many township entrepreneurs
who in the midst of poverty, have sought ways to survive and for many
years before the dawn of democracy survived state suppression,
marginalisation and even criminalisation by apartheid regime.
We believe that it is from the township economy that the collective
energies and potentialities for driving an inclusive, labour absorbing and
growing provincial economy can be unleashed.
The challenges township economy faces today
One of the main problems of the township economy is that only 25 % of
money generated in the townships is spent there. Township people
spend most of their money in towns and cities. So, this deprives the
township economy of its potential to grow and improve the quality of life
of township residents. There are many reasons for this.
Twenty years into our democracy township enterprises faces challenges
common to all SMMEs and co-ops such as such access funding,
markets, skills development and monopoly domination etc. etc. But for
the township enterprises these challenges are even more profound.
This includes specific township economy challenges.These challenges
came out strongly in the interactions we had with more than 65
townships involving more than 50,000 existing and aspirant township
entrepreneurs. They relate to:
 Lack of entrepreneurial and productive activity. The latest
study by the World Bank (2014) on South African township
economies (with special reference to Diepsloot) indicates that
When compared with non-township micro, small and medium
enterprises, the sector distribution of township enterprises is
preponderant with retail than non-township urban enterprises. indicating lack of productive activity. The same applies to
entrepreneurial activity, with township enterprises having lower
rates than non-township urban enterprises.
Hence it has become central to our plans for township
revitalisation to position townships as important sites of production
rather than merely trading things they do not produce.
 Poor understanding of the abilities and value of township
enterprises.
Township enterprises are not properly understood outside the
networks of those within the township economy.
Limited understanding has meant that many in policy making have
not considered township enterprises as a potential (but not only)
solution to a wide range of social and economic problems affecting
township communities. We have enterprise support providers
targeting township enterprises have often not been able to offer
appropriate advice. Finance providers have been able to insure
risk and provide appropriate lending to the township enterprises.
Mainstream businesses have not seen the potential for new
partnerships or supply linkages.
 Little hard evidence to demonstrate the impact and added
value of township enterprises.
At present, there is limited information on the size and growth of
the township enterprises; there are only few and isolated cases of
such information. Township enterprises, therefore, are largely
‘invisible’ and informal. This can make it difficult to plan and
provide appropriate Government support.
I expect that the Small Business Development Institute (SBDI) and
other research institutions to pay special attention for research on
the township economy, so that we better understand it size, spread
and strength.
.
 Limited account taken of the particular characteristics and
needs of township economy enterprises within an enabling
and supportive environment.
The particular characteristics of township enterprises – such as the
co-operative and solidarity practices and principles are not always
taken into account by existing financial, legal, and regulatory
frameworks, or in procurement activities.
Addressing the needs of the township economy which does not fit
neatly into mainstream private or public sector models, also poses
challenges for Government. This can mean that many townships
enterprises like spaza shops, burial societies and so on, do not
benefit from Government initiatives because they are largely unrecognised or supported to grow.
Key interventions
We want to contend that the critical drivers of growth in this
province will include township enterprises. In support of the NDP,
we are saying at least 30 percent of the Gauteng GDP (that is
R700-billion at today’s prices) in the next 15 years will be
accounted by township enterprises.
To succeed in overcoming the above challenges, we believe a
range of measures and interventions are necessary. Some of
these will be quickly visible – there are a number of small-scale,
low-key interventions that could be helpful. Large-scale changes
are also required but will obviously take longer to deliver. The
strategy therefore encompasses both practical, pragmatic and lowkey interventions as well as ambitious game changing
interventions.
Key partners in the delivery of the strategy will include national
government and its agencies, the provincial departments, local
government, range of players representing the township economy,
the corporate sector and other stakeholders
In respond to the challenges we want to focus on seven strategic
focus areas in which are our interventions will be directed. They
are:
 Ensuring appropriate legal and regulatory framework –
especially with regard to byelaws, licensing and permits,
most of which we designed with mainstream economy in
mind.

Promoting productive activities – through emphasis on
manufacturing of consumer items and promoting
production of everything that can be produced in and
around a township space.

Infrastructure support and clustered enterprise
development – through establishment of industrial parks ,
business parks and economic hubs as well as street-level
enterprise nodes ( of vilakazi type), and promote of
community-owned shops at retail and wholesale levels
involving spaza shops.

Financing and investing in the township economy through recapitalization of our provincial funding agency
(GEP), consideration of the state-owned bank and
promotion of co-op banking and co-op insurance and a
solidarity fund. We will also look at possibility of the
Township Economy Bond.

Access to markets and procurement – through effective
use of the state buying power to procure goods and
services from township enterprises.
 Entrepreneurship development - through among others,
promoting all forms of entrepreneurship, including social
entrepreneurship. It is includes deliberate selection and
identification of entrepreneurs in Township Economy
Revitalisation Projects.
 Indigenous knowledge systems – reclaiming our
traditional methods of production of food and medicine,
supported by quality standards authorities and others.
Conclusion
I want conclude by saying that small business and cooperative
enterprises are not looking for handouts but they need a helping
hand from a government that cares. They need support from a
government that is responsive.
Only the ANC-led government knows and understands where black
small businesses come from. Only the ANC has a plan to address the
needs of township enterprises and cooperatives.
It is only when we take care of small business that we can transform the
structure of our economy and mainstream black entrepreneurs.
We are looking forward to work closely with Minister Lindiwe Sulu and
organised small business to move SA and Gauteng forward.
I thank you.