A new ministry for small business? Now we are getting somewhere. Perhaps.

ANC Secretary General Gwede Mantashe has floated the idea of a new ministry for small business in the government to be formed after the May elections. Under the headline "Mantashe stokes hopes for small business ministry", Business Day reported Mantashe raising the matter at a SA Chamber of Commerce and Industry business breakfast in Johannesburg. This follows his first mention of the idea back in February. If the ANC is serious, the question then is, can they make the new ministry effective?

Postscript - a former Dragon on the BBC's popular Dragons Den agrees with me - check this out.
Small business development is a highly vexed issue that goes hand in hand with job creation, clearly South Africa's most important economic imperative. Without the first, the argument goes, we do not get the second, because large companies are unlikely to create many new jobs and the government payroll is already bloated. All the political parties have made small business development a major plank of their manifestos but the DA has gone into the most detail with ten pages of recommendations contained in our economic policy document.

Mantashe gave an inkling of why an ANC-run small business ministry will face an uphill struggle by mentioning cadre deployment when outlining the potential of municipalities to support small business. Mantashe and his ANC comrades cannot escape their fixation with appointing party loyalists to key jobs, vastly reducing the pool of potential candidates.

(For a more detailed argument against cadre deployment read my earlier post on The Agony of Ignorance)

Let's examine what a ministry for small business would look like. First, it would need a minister and probably two deputy ministers. Where are they to come from, but from elected ANC MPs? Judging from Jacob Zuma's appointment of Rob Davies and Ebrahim Patel, both die-hard communists, as ministers of trade and industry and economic development in his current administration, we might despair of seeing worthier candidates for the new ministry. Are there any likely ANC MPs who have the business experience to be able to understand, and empathise with the people their ministry is meant to assist?

Then the ministry would have to be staffed up, we would expect with capable and business-savvy (with a nod to Nedbank's Eugene) professionals experienced in the world of business. What is the track record of departments and agencies tasked with small business development? Pretty dire. For example the Small Business Development Agency, SEDA, has spent much of its allocated budgets on salaries and overheads rather than assisting small businesses in tangible ways. It is staffed in the main by bureaucrats with little or no understanding of business, so how can you expect them to perform?

Last Thursday I attended the Primedia Broadcasting economic policy debate hosted by Talk Radio 702 and got into conversation with Pavlo Phitidis on this subject. Pablo runs Aurik Business Accelerator and is the regular Thursday guest on Bruce Whitfield's The Money Show, when small business is the topic. We shared our common view that there is a deep gulf of understanding within the ANC as far as business goes, especially small business. One of his bug-bears is that small businesses have to pay SARS VAT on invoicing rather than on receiving payment from a customer. This means they have to fund the 14% out of current cashflows, and particularly with government invoices can take months to be paid. But SARS will not budge because they know their VAT receipts would lag because so many debtors delay paying invoices, some for up to 6 months.

Would the DA do something about this? You bet we would!

The debate was interesting for what it revealed about the differences in policy between the DA, ANC and EFF (represented by Tim Harris, Qedani Mahlangu and Dali Mpofu). Only Tim managed to convey a coherent set of proposals, while Qedani (who has a habit of rabbiting on) had a hard time dealing with the boos and catcalls after she said there was no leadership crisis in the ANC. Dali revealed the incoherence of EFF policy by explaining that his party would drive economic growth by putting money in people's pockets so they could spend, and the money would come from the proceeds of the forced expropriation of land, banks and mines. As most economic commentators have pointed out this would bankrupt the country in three years at most.

One question from the floor came from Black Like Me founder Herman Mashaba, now chairman of the Free Market Foundation who are fighting the iniquitous labour laws that are strangling so many small businesses in South Africa. This gave Tim an opportunity to create some distance between DA policies on labour laws and the ANC's, which inexplicably many media pundits claim to be indistinguishable from one another.

We outlined some of our policy positions today at an event in Dube, Soweto organised by the DA Youth, where its leader Mbali Ntuli handed over a voucher for a training course to a small business owner. James Lorimer MP and I met this young man, Themba Ndlovu, ten days ago after Mmusi Maimane's visit to Jabavu to highlight our policy on title deeds. We'd just come out of a meeting with some party activists and got into conversation with Themba, who approached us from his car wash across the road. He saw our DA t-shirts and wanted to show his support.

"I've had it with the ANC" he complained. "Too many promises and no delivery. I've told my friends I'm voting for the DA, they have a better plan and understand small business."

A few days later I got a call from the DA head office asking for a deserving recipient of a training course funded by the DA to promote the launch of our small business policy. Themba immediately came to mind, and a week later there we were, at his car wash, with the media in tow - Business Day, SAPA and Jozi FM among them. Mbali explained to them why the DA was better placed to run the new ministry for small business, citing the example of the NYDA's being packed with cadres with few skills or experience, where salaries for employees far outstrip expenditure on effective SMME programmes. She did a commendable job and I look forward to seeing the reports in the press tomorrow.  (An article appeared in Business Day on April 10th here.)

For a small business ministry to work, it needs good political leadership, experienced departmental support and well thought out policies. Crucial, also, is a clear delineation of its mandate so that other departments - particularly Treasury, DTI and DED, do not encroach on its territory. As the DA advocates in our policy documents, the DED should actually be disbanded and could usefully be replaced by the Dept Small Business.

Add to that open and imaginative discussions with all stakeholders - business owners, unions, other relevant departments (including SARS) and practitioners in the field of business acceleration, incubation and mentorship. A new forum for discussion should be established (which I hope is not Nedlac because it's dominated by entrenched corporate and union interests who are often unsympathetic to small business) so that issues can be aired and debated before being drafted into green and white papers.

And, perhaps most importantly, it needs practical solutions for small businesses to be able to implement now, not two or three years down the line after interminable consultations. Suggestions from the DA include a single point of entry for setting up a small business so that registration is simplified and fast-tracked. Currently it can take up to 9 months for a new business to be issued with a VAT number, forcing these businesses to forfeit 14% of their income. This can be devastating to a start up trying to compete with more established players.

If the ANC is serious about stimulating entrepreneurship and helping small business through a new ministry, it needs to follow Nelson Mandela's example in continuing with FW de Klerk's appointment of Derek Keys as Finance Minister in our first democratic administration - someone respected in the world of business who can win the trust of the major players immediately and hit the ground running.

Come the end of May, all will be revealed. But don't hold your breath.