Budget vote speech - Economic Development

Speech by Toby Chance MP

Economic Development budget vote

Old Assembly Chamber

Parliament

22^nd July 2014

DSBD must make more funding available for small businesses

Chairperson, Honourable Members and visitors in the gallery, good morning, sawobona, goeie more.

In 1994, after years of economic isolation, Anglo American Corporation controlled 44% of JSE-listed companies and the top five corporates controlled 84%.

Since then the structure of our economy has changed dramatically. But the concentration of the main economic levers in the hands of a few large companies remains a concern.

 The Davis Tax Committee report released last week refers to SARS statistics revealing that in the 2011 tax year, 481 companies paid 64% of corporation tax while 165 000 companies paid 36%.

The report refers to the “missing middle”, or entrepreneurial businesses with growth potential. These businesses, according to the NDP, must create 90% of the 11 million jobs we need between now and 2030.

But, Chairperson, the Davis report laments the fact that total early-stage entrepreneurial activity rates in South Africa are about half of what is reported in other developing countries.

It goes on to say: ”regulatory compliance is costly for small firms while the benefits of compliance are insignificant.”

What is to be done about this?

The newly created Department of Small Business Development now has a chance to show the government is serious about cutting compliance costs and red tape. I noted in the minister’s statement yesterday that she is initiating a review of regulations related to small businesses and cooperatives, which is encouraging.

Turning to SEFA, as custodian of this agency the Department of Economic Development has failed to scale up the provision of financial assistance to the level required to massively grow the missing middle of small and medium enterprises.

Its total lending in the 2013 financial year was R440 million, just 78% of its target. This compares to total credit extension by the four big banks of R2,5 trillion in 2013 – that is 6,250 times SEFA’s lending!

The new Minister, Lindiwe Zulu, needs to take a hard look at how Sefa can be made more effective. 

The State of the Nation address called for radical economic transformation through the implementation of the National Development Plan. Here are three suggestions for the Minister.

First, follow Brazil’s example by announcing a 40% reduction in interest rates on government loans to small businesses and co-operatives.

Second, re-capitalise the guarantee indemnity scheme, as clearly Sefa on its own has limited capacity to deal with pent-up demand for funding from small businesses and cooperatives.

Third, lean on Labour Minister Mildred Oliphant to reform the labour legislation which has a chilling effect on job creation.

Now, let me turn to some of the comments made by my honourable colleagues on the other side of the house.

The so-called Second Phase of the transition is a smokescreen obscuring the fact that government policy in the past five years has not delivered the promised growth.

Does the Minister seriously expect us to believe that in the past 20 years government was busy with other matters and has suddenly woken up to the need to grow the economy?

Its argument is threadbare.

The second phase of the transition is a desperate attempt by the ANC to buy off its allies in Cosatu and the SACP.

The ANC can’t decide between the NDP and the NDR. I was staggered to read in the conclusion of the Committee’s report about the Department’s, and I quote, “continuous effort to enhance the fight towards a national democratic revolution by applying radical economic transformation”. Not a single mention of the NDP! The cat is well and truly out of the bag.

If the ANC is confused, is it any wonder the country is so exasperated?

What is particularly appalling is that this was not in the committee’s draft report, but was inserted after the committee met to deliberate the report. Such sleight of hand by the ANC will not go unnoticed by the DA, Chairperson.

Until the ANC chooses emphatically between these two ideologies, the country will continue to drift and business confidence with drain away, with negative consequences for job creation and economic growth.

When I challenged the Minister in Committee earlier this month on this point he attempted to dismiss it a petty politicking.

Minister, I state here today in Parliament that you and your colleagues in Cosatu and the SACP are holding the country to ransom. We have had enough.

No amount of dissembling and smooth talk from you will convince us otherwise.

I thank you.