Budget debate speech in Parliament

Today at 5 pm, the Extended Public Committee on Small Business Development sat in the National Assembly to hear the debate on the Department's budget. I was the third speaker, after Minister Zulu and Committee Chair Ruth Bhengu.

Here is my speech below:

Speech by

Toby Chance MP

DA Shadow Minister of Small Business Development

Extended Public Committee

20^th May 2015

Minister Zulu needs to wake up and defend her job-creating ministry

Chairperson,

Last year I spoke of the fairy tale formation of the Department of Small Business Development and likened the Honourable Zulu to Cinderella.

If she took the DA’s advice Minister Zulu could rid herself of the ugly step-sisters Rob Davies and Ebrahim Patel and become the first business-friendly minister in President Zuma’s cabinet.

A year later, the Department is yet to be weaned from the suffocating grip of the DTI and Economic Development.

At two recent portfolio committee meetings, Minister Zulu expressed her frustration at having inherited a department not towing the line.

I admire her frank assessment of the challenges she faces.

Added to admiration, I must admit, is a tinge of sympathy.

For Minister Zulu, it turns out, is the Sleeping Beauty.

After being pricked by Cosatu’s poisonous needle for daring to suggest labour reform could lead to job creation, her communist cabinet colleagues have lulled her into a deep sleep from which she is struggling to wake up.

Meanwhile a forest of regulations, red tape and job-destroying legislation is choking the Zuma kingdom, blocking it from the outside world and obscuring the economic devastation it is wreaking.

For Minister Zulu to be asleep on the job is a grave disappointment.

The NDP, supposedly government policy, calls for 11 million new jobs by 2030, with 90% coming from small business.

If the ANC took the NDP seriously it would put the Department of Small Business Development at the centre of its economic policy.

But, Chairperson, a senior official from Seda, which consumes 80% of the department’s budget, recently told our Committee the first 10 years of its existence had been, and I quote, “indefensible”.

Its incubation programme expects to create only 5 000 jobs over the next three years.

Why? - Because the DTI, where it was housed, was and still is culturally inimical to small business development.

Meanwhile Sefa, which the department inherited from Minister Patel, spends R1,60 for every Rand it generates in revenue.

At this rate, the department will fail dismally to make an impact and be seen to be costly and irrelevant.

Chairperson, I have long said Minister Zulu could adopt a narrow view of her mandate, or an expansive one and champion the root and branch reforms our economy so desperately needs.

On its own, her department can have little impact because it does not control the levers of the economy.

She relies on so-called transversal agreements to influence other departments. But after a year in office we have not seen a single transversal agreement.

If only Minister Zulu could show the same spirited belligerence towards the enemies of economic reform as she shows towards her political opponents in this House, we would be a lot better off!

Wake up, Minister, wake up!

Our energetic and likeable portfolio committee chair, the Honourable Bhengu, meanwhile, and her ANC colleagues dream of a socialist utopia overflowing with co-operatives.

This conveniently ignores the fact that 90% of the co-ops set up with grant funding from the DTi have failed.

For South Africa to become the engine, and not the laggard, in sub-Saharan entrepreneurship and small business development we must get our priorities right.

We must balance identifying and supporting high-growth businesses which can create large numbers of jobs, with support for 5 million informal micro businesses.

The Endeavour Jobs Calculator estimates 49 000 SMEs growing at an annual rate of 20% can create 11 million jobs by 2030. By contrast, we would need 8.2 million small and micro enterprises to create the same number of jobs.

Chairperson, to find the right balance we should prioritize five things:

First, innovation.

South Africa is full of inventors and innovators. I recently met Coenie van Blerk, an engineer from Bedfordview with a patented device for generating electricity using turbines inserted into the water pipes running under our streets.

Not only could this alleviate our electricity shortage, it could create up to 30 000 jobs, becoming one of the high-growth companies, or gazelles, I referred to earlier.

But only if the invention is commercialised and penetrates export markets. The Department should be finding ways of making this easier and cheaper.

Wake up, Minister, wake up!

Second, support our township and rural economies. 70% of South Africans live here but due to apartheid’s spatial engineering their contribution to GDP is negligible.

The Minister is well aware of my campaign to get Sefa to account for the appalling state of the Gauteng Township Industrial Parks. But so far we have seen precious little action.

The DA would set up Opportunity Centres in all townships and rural areas, one-stop-shops for business licencing, financial and non-financial support and training.

Third, we need a different approach to financing small businesses. Government must withdraw from direct lending and establish a national venture capital fund managed by private sector professionals but with ministerial oversight. 

The Minister should merge Seda and Sefa and re-structure the new entity along the lines of Britain’s Business Bank. This should include a Start-Up Loans facility with incentives for angel investors and mentors who are vital for nurturing entrepreneurial ventures.

Fourth, we must ramp up efforts to instil an entrepreneurial mind-set in our youth.

Our total entrepreneurial activity rate must rise from its derisory 6% to levels approaching 15-20% if we are to achieve our job creation targets by 2030.

To help achieve this, Minister Zulu must put her weight behind the Human Resource Development Council’s report on entrepreneurship in schools.

Wake up, Minister, wake up!

Finally, the Minister can have an immediate impact if she persuades the Presidency to invoke the 1987 Temporary Removal of Restrictions on Economic Activities Amendment Act.

This Act gives the President sweeping powers to chop down the forest of regulations, red tape and market-unfriendly legislation the Zuma kingdom refuses to recognise is throttling business and job creation.

Chairperson,

The Department of Small Business Development was formed to much fanfare in small business circles a year ago. To date its impact has been virtually invisible.

Minister Zulu, wake up, and take charge of your department without delay.