By: Anna Majavu
The government started the year with lofty promises of a new R10 billion SMME fund and a new funding policy for small businesses and co-operatives, but these have turned out to be damp squibs, with small enterprises unable to access any money. President Cyril Ramaphosa announced the fund in his State of the Nation Address nearly three months ago, describing it as “a great fund that our SMMEs will be able to tap into”. But the fund has never been mentioned again and his spokesperson, Vincent Magwenya, told Vutivi News that it was still being set up.
Magwenya said the Presidency could not provide any timelines for when SMMEs could begin applying for money from the fund. “The fund is over a period of time. It requires a matching of funds between the government and the private sector,” he added. Approached for comment, Small Business Development Department spokesperson McIntosh Polela said his department was “not part of the conversation” about the fund and referred Vutivi News back to the Presidency.
The delay has been lambasted by economic experts, with political economist Prof. Patrick Bond of the University of Johannesburg saying it reflected the government’s “impotence” when it came to the funding of small businesses. “A good reflection of state impotence when it comes to finance, was the (Covid-19) R200 billion loan guarantee offered to the banks, which was less than 10% subscribed since banks were so hostile to small, desperate borrowers. This impotence is a political choice, not an economic necessity, of course,” Bond added.
Bond, who authored the 1998 White Paper on Small Business Financing, said the new funding policy approved by Cabinet was likely to be ineffective as it would probably ignore the crippling effects of high-interest rates on SMMEs. “The crucial question is the interest rate – and whether it can be subsidised, especially given the Reserve Bank’s extremist high-interest policies, and the overall neoliberal hostility to interest rate subsidies,” Bond told Vutivi News.
In March this year, the Cabinet said it had approved a new SMMEs and Cooperatives Funding Policy, and that it would release it for public comment. But the new draft policy has not been seen since. Earl-Djehuti //Kabbo Erasmus, co-operatives expert and economics lecturer at Cape Town’s Tertiary School in Business Administration (Tsiba), said the delay in releasing the policy was very “concerning”. The Covid-19 pandemic had left SMMEs and co-operatives in financial distress, with the expectation that government would step in and rescue them.
The after-effects of the pandemic, including disrupted supply chains and reduced demand for goods and services, may limit the ability of SMMEs and co-operatives to take advantage of any funding and support services provided by the policy, Erasmus added. He said that when the policy was finally released, the “government will need to ensure that adequate resources are allocated to implement the policy and that these resources are used efficiently and effectively”.
Erasmus said the policy would need to meet the special needs of businesses and co-operatives in rural and marginalised communities and ensure that coordination between the Small Enterprise Development Agency and Small Enterprise Finance Agency did not become a “challenge”. The San and Khoi communities, in particular, were still waiting for economic redress after centuries of “historic marginalisation and exclusion they have faced in the South African economy”, and wanted to know if the new SMME and co-op funding policy would “level the playing fields and enable them to participate more fully in the country’s economic development”, he said.