Is it still possible to create a Small Business Economy in this country?

In my Professional Opinion

By Dr. Ivor Blumenthal

The Mayor-elect of Johannesburg, Herman Mashaba has campaigned on a ticket squarely focused on the creation of a Small Business Culture, capable of generating thousands of new jobs. The problem is that in Gauteng in-particular, but equally in the Western Cape where the DA governs, we have a Capital Intensive economy, focused on the use of technology primarily in the provision of services and very definitely waning in the areas of manufacturing and beneficiation. Is it, therefore, possible for Herman Mashaba to break the back of an ever-increasing decrease in the number of small businesses in play, and the rampant increase in the number of retrenchments and employee rationalisations going on in today’s workplaces?  

The primary role players of National Government which are entrusted to work with Local Government in this endeavor are the Departments of Trade and Industry, the Departments of Labour and Public Works and very definitely the Department of Finance. Politics aside, it should be that irrespective of which Political Party governs a Province, these National Departments should be working together in-concert to present every Province with a bouquet of opportunities designed to kick-start a waning National Economy. They are, however, not doing so. Importantly in the Western Cape, these Departments seem to be doing everything they can to sabotage the progress of that Province in having access to and the utilisation of funding controlled by the national fiscus, or being involved in national strategic plans designed for growth and development.

What should a Local Government focus on, were it to seriously want to do something to create a labor-based economy in an environment which is service and capital pervasive? More importantly, the question should be re-phrased. In the areas which are controlled by Local Government, and possible in-terms of that Local Governments mandate, what can be done? I say this because much of the campaigning which preceded the Local Government Elections provided false promise to voters that Local Governments could deliver on Provincial and National Government competencies.

If the holy grail of Job Creation lies in Small Business creation, then that is where a Local Government must begin to plan. The fact is, however, that a forward-thinking Local Government should never ignore its pre-existing Business Base as part of the solution in this endeavor. There is a school of thought which believes that many more jobs are potentially in the making amongst Medium and Large Business operations than in small emerging ones.

Whatever the science in this alchemy, these are some of the things that a Local Government may be wise in considering.

Focusing on what is within the control of our Local Governments, it is true that Local Governments own property and land. They own the ability to change policy on Rates and Taxes, which will be explored later in this article. They own the responsibility for the provision of services, water, and power to the Rate Payer which includes the option to introduce alternative energy into their wards. They own some of the Roads and waterways within their geographical scope. They own the enabling environment which is pervasive for services, some of which have been taken by the Private Sector but could be shared by the Public Sector equally. As an example of this last point, Broadband is now considered to be a Human Right in many countries around the world and in that endeavor it is Local Government which is seen as the great enabler of that right. What Local Governments also own is the responsibility to ensure a clean, healthy and safe working and living environment for everyone living in a Ward.

Taken together, these factors all add up to wasted opportunities for a clear-thinking Local Government to capitalize on opportunities in every one of these spheres to spur the creation of new businesses, increasing the capacity of existing businesses and understanding that a good Local Government is an Enabler rather than necessarily an Operator.

Local Governments are entitled. Way beyond what they have actually received historically, that entitlement is to a share of what every Government Department is allocated by the National Treasury, funds National Treasury manage on-behalf of the Fiscus. The problem has been that whereas the people are the dog, and the greatest representation of the people is at Local Government level, it is the tail, that small, insignificant, massively over-entitled tier of Government which controls the purse-strings and disseminates funding on the basis of political patronage rather than where such funding can best be used. That, however, is a Political Party tussle which we do not need to get into in this article.

A good Local Government operation will use its Rates and Taxes base effectively, to incentivise many objectives in an economic empowerment strategy. As a few examples, there was a time when the establishment of businesses in rural areas in a Province was incentivized directly with Rates and Tax holidays combined with National relaxation in fiscal taxation. In every province, there are Rural areas which require heavy investment and new business ventures. Give those Entrepreneurs Rates Relief. Tax Relief. Actual financial incentives by-way of Grants to employ people and retain them in decent work. Create hubs for services which are privatised and able to create decent and sustainable jobs and cancel their contracts if they don’t. Privatise Essential Services and reward the companies responsible on the basis of performance and not patronage. Heavily incentivise a labor-intensive strategy and not a capital intensive one. Award Tenders on the basis of Labour Intensive projections and give no weighting to solutions which are so technologically-driven that one Engineer can replace 20 laborers. That does not mean that Capital-Intensive, technologically driven businesses will not be celebrated but they should not be incentivised with scarce financial and other resources. The secret is to embrace technology by privatising the provision of centralised scarce services such as CAD Centres, 3-D Centres, Plan-Submission Centres, Innovation Hubs, etc. and by allowing Rate Payers and their Staff to use these centers at discounted rates, but only in-so-far as they are a means to an end, that end being Human Job Creation and not technology for the sake of technology, instead.  

It is said that Print is dead, that manufacturing furniture should be done by Computer Numeric Controlled robotics and not people, that the laying of paving should be automated and that the painting of houses should be by robots. This is one way to go. But, and this is the thing, it need not be the case exclusively. There are opportunities in a thriving economy to create Industries which are complementary because they are planned and quality assured. It only becomes so when we become lazy to think and susceptible to bribes, corruption and interference from individuals who are not public-hearted or spirited.