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Small Business, Poverty and Inequality in South Africa

Ebrahim-Khalil Hassen

5 August 2015

http://zapreneur.com

ekhassen@gmail.com

Presented at: Understanding and Engaging with Poverty and Inequality in South Africa 3—7 August 2015, Cape Milner Hotel Cape Town

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What do Clem Sunter and Julius Malema have in common?

One million new small business? Five million jobs by 2020? More Employers = More Jobs

National Development Plan Takes a Similar Approach

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South Africa is one most difficult place in the world to survive in business

South Africa’s Established Ownership Rate for 2014 is 2,68%. Out of a sample of 69 countries, we rank at 67.

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So how do we create many small businesses, in an

economy with such low survival rates for businesses?

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Three Major Intervention AreasVenture capital role through DFI’sIntermediary role in linking markets Deeper tax relief for small businesses Procurement set asides

Shift Resources

Introduce land holding agreements for small holder farmers Deeply contested intervention, but holds big potential to reduce poverty and extend markets

Markets in Traditional Authority Areas

Possible routes through tax systems – incentivise big companies Procurement system, but will have smaller impacts Address value chainsSupporting the ‘integration economy’ – build new value chains in the knowledge economy. Creating and allocating funds to franchising and other systems.

Change Market Relations

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Can Small Business Reforms Reduce Poverty and Inequality?

Is an initial redistributive efforts needed before markets become enablers of mobility?

Who benefits from current government programmes?

National Development Plan does not have a plan for small business development, although it is seen as crucial to reducing employment.

Agency vs. structure- Small Business ministry (so far) focussed vey much on agency

Understanding the distinction between earned and inherited wealth(Pikkety)

People want secure employment, not insecure ownership (Banerjee and Duflo

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South Africa Looking Forward A case can be made for a wider and bigger structural reforms focussed on small

business Will it create a million new small businesses?

Unclear if the unofficial target will be reached However, the reform process increases participation and widens ownership Potentially offers route for employment growth in a low-growth economy

Small business interventions important, but need to be conceived as part of a wider developmental plan.