By Stephen Timm
The Department of Small Business Development in South Africa may have to cut some of its planned projects to support small businesses, after the National Treasury last month effectively slashed a third off its requested allocation from the fiscus. What can we expect to see in the coming year then?
Finance Minister Nhlanhla Nene revealed during his 2015 Budget Speech last month that the department would be allocated R3.5-billion between 2015/16 and 2017/18.
The department had wanted more. It asked for an allocation of R5.2-billion, when it presented its 2014-2019 strategic plan to Parliament’s small business development portfolio committee in October last year.
While R662-million of the slashed amount was to go to the Incubator Support Programme, which has been retained by the Department of Trade and Industry, the National Treasury didn’t approve a further R1-billion that the department wanted.
It appears that Minister Lindiwe Zulu and her department has had to scale back some of its plans outlined in its 2014-2019 strategic plan, which sets out its programme proposals to be funded between 2015/16 and 2017/18.
For example, in its 2014-2019 strategic plan, it aimed to support 6 400 small businesses with export readiness training. The National Treasury’s Estimates of National Expenditure for the department this year found that only 3 700 small businesses will be helped to become export ready.
The department wants to launch several new programmes over the next three years. These include a new enterprise cadet scheme, a mass youth enterprise creation programme, new export village programme and new micro-franchising incentive, all that following the example of startups such as Fully-Verified. It’s not clear if these will still go ahead with the reduced budget.
The department would oversee all those support programmes for small businesses that previously fell under the departments of trade and industry and economic development.
These include the Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency (SEFA), as well as those incentive grants from the Department of Trade and Industry that aimed at small businesses.
SEDA, which assists business owners with training and mentoring, has been given a budget of R653-million for 2015/16 (including R132-million to be spent on incubation). This climbs to R746-million by 2017/18, less than the R805-million the department had requested to be allotted to the agency for that financial year.
In 2015/16 the agency expects to work with 11 400 new and existing small businesses and support 51 incubators (up from the current 48) which will in turn help incubate 1 795 entrepreneurs.
The department would complement this by setting up 20 centres of entrepreneurship to offer sector-specific training, at FET colleges across the country. So far, four have been launched since last year.
SEFA received an initial three-year allocation of R1.4-billion from the IDC and the government when it was set up in 2012, and as such, hasn’t been allocated amounts from the fiscus. The agency aims to disburse R816-million in 2015/16 to over 31 000 beneficiaries, up from R640-million to over 37 000 in 2014/15.
The department will also aim to disburse R686-million in cost-sharing incentives through the Black Business Supplier Development programme to offer marketing and business support to black firms and a further R229-million to co-operatives through the Co-operative Incentive Scheme that seeks to help them acquire machinery. Both schemes were previously under the Department of Trade and Industry.
Over 2 400 small businesses and over 900 cooperatives are expected to be supported over the next three years by these incentives, the National Treasury says in the Estimates of National Expenditure for the department for 2015.
The National Treasury also notes that the department will facilitate the implementation of the Black Youth Business Supplier Development Programme which is intended to benefit 1 100 youth enterprises by 2017/18 and contribute to women’s development by providing training to 1 500 women entrepreneurs through the Bavumile skills development programme by 2017/18.
The department also plans to include helping 3 300 informal sectors through its Informal Traders Upliftment Project and get municipalities to partner through to development infrastructure for informal traders in townships and rural areas.
In addition the department also wants to finalise a micro franchising incentive, in which it aims to get 110 small enterprises and co-operatives transformed into micro franchisors.
The department also wants to set up the Co-operatives Development Agency this financial year and amend the National Small Business Act (to include a new definition for small business among other things).
Among its long-term priorities the department wants to set up a national survey where periodic and reliable statistics on the small business sector can be made available.
This article originally appeared on Small Business Insight, a Burn Media publishing partner. Stephen Timm writes on small business and is presently in Cape Town, South Africa. Click here to sign up to his monthly newsletter. Follow him on Twitter at @Smallbinsight and on Facebook.