Building a Nation of Entrepreneurs

This is the fourth post in my series on the DA's Working for Change, Working for Jobs campaign.

A copy of the DA's plan “Building a Nation of Entrepreneurs” can be downloaded here.
To view a video of these proposals, see here.

Countries with growing economies and decreasing unemployment levels have all unleashed the entrepreneurial spirit of their citizens. We believe that South Africa’s failure to grow the economy and create jobs is, in part, a failure to cultivate a nation of entrepreneurs.

Instead of harnessing the potential of citizens to start their own businesses, the ANC has strangled people’s entrepreneurial spirit in never-ending red tape and bureaucracy. The DA wants to set our nation’s entrepreneurial spirit free by making it easy for people to start their own businesses so they can create jobs for others.

The third in a series of five thematic plans in the Growth and Jobs series, this plan sets out how – if elected to national government – the DA would create an environment in which small, medium and micro enterprises (SMMEs) can take root and thrive.

This is because small businesses are the drivers of job creation. In the United States, SMMEs have created 80% of new jobs over the last 10 years, and form 98% of all employer firms. In India, the figure is 90%. In Ghana, it is estimated that 92% of all the businesses in the country are small businesses, and they contribute about 70% to the national GDP.

In South Africa, small firms with fewer than 50 workers account for 68% of employment.  The 40 members of the recently launched Entrepreneurs’ Organisation in Cape Town collectively employ nearly 1 500 people and do around R1 billion in sales per year. The average age of Cape Town members of this organisation is 34.

These young entrepreneurs are succeeding in spite of national government, not because of it. If the ANC took small business development seriously, there would be many more young entrepreneurs creating jobs all over the country.

Let’s look at the facts.

South Africa ranks 44th in the world for ‘ease of starting a business’. It takes 19 days and 5 procedures to start a business enterprise in South Africa. In New Zealand, it would take 1 procedure and 1 day. The World Economic Forum ranks us 112th in terms of the “Burden of Government Regulation” and 114th in terms of “Favouritism in decisions of government officials”. This has the effect of protecting a small group of large private and public firms against competition from small and emerging businesses.

We have to make it easier for small businesses to flourish in South Africa. The DA’s plan to build a nation of entrepreneurs can be summarised as follows:

1. Starting a small business – reducing the time, bureaucratic complexity and red tape involved in starting a business The DA will do this by:

• Establishing business registration one-stop-shops;
• Implementing Regulatory Impact Assessments to gauge costs, benefits and risks of all new legislation;
• Reducing regulatory burdens on SMMEs by changing the definition of “designated employers” in the Employment Equity Act to ‘a person who employs 200 or more employees’;
• Replacing the complex and expensive property registration process (which includes acquiring a rates clearance certificate, a transfer duty receipt from SARS, and physically lodging a title deed, and requires extensive consultations with conveyancers) with a cost-effective, streamlined, two-step model that requires (i) obtaining a Land Information Memorandum; and (ii) registering the Title Deed; and
• Introducing time limits for building authorisation.

The DA in the Western Cape Government understands that one of the most important burdens faced by entrepreneurs is excessive red tape. Our administration is tackling this head-on through its “Red Tape to Red Carpet” initiative, which identifies and removes unnecessary red tape in the province and streamlines government processes. The administration is also in talks with Singapore to bring world-class e-government to the Western Cape to improve efficiency even further.

2. Running a small business – financing a start-up business and encouraging its sustained financial viability through cash-flow assistance and corporate tax reform. The DA will do this by:

• Establishing a National Venture Capital Fund to provide investment capital to start-ups and early-stage businesses;
• Setting up a national entrepreneurship competition for 18 to 30 year olds that will pay a cash prize each year to an individual or group of individuals responsible for developing a winning business plan;
• Introducing a cash-flow assistance programme for small businesses; and
• Reducing corporate tax rates to make South Africa a more attractive place for both local and international businesses.

3. Growing a small business – giving entrepreneurs the wherewithal (expertise and resources) to expand their businesses and compete with established businesses.The DA will do this by:

• Implementing a Business Voucher for small businesses that can be exchanged for a business skills, management, financial skills or relevant technical programme at an accredited business skills provider; and
• Strengthening the competition authorities, increasing their budget and introducing measures to limit political interference in their activities.

The ANC has cultivated a business environment that is anti-small business and favours politically connected big businesses over the rest. Instead of encouraging the emergence of new entrepreneurs, the ANC has created a class of tenderpreneurs – people who work purely to get big state contracts based on their connections in government. The old cliché of it not being “what you know” but “who you know” has never been truer.

The entrepreneurial spirit of South Africans is being crushed by red tape and bureaucracy. It is time to help our young entrepreneurs to start and grow their businesses. If elected to national government, the DA would reward those who innovate and take risks so they can be the job creators of tomorrow.