SOUTH Africa’s efforts to promote small business and create jobs are not succeeding, and a ministry and academy should be created for the sector, Prof Dilip Garach, of Garach & Garach Financial Advisory Services, said on Wednesday.
Mr Garach said at a function of the Sanlam/Business Partners Entrepreneur of the Year Competition that the government ministry should be created because Finance Minister Pravin Gordhan and Trade and Industry Minister Rob Davies did not have enough time to deal with a sector that had the best potential to tackle unemployment in South Africa.
Mr Garach said the youth wage subsidy was likely to result in companies employing fewer older workers in favour of younger workers, the African National Congress’s proposed job seekers’ grant was likely to be abused by its recipients, and while the government’s jobs fund had enjoyed some successes, it entailed extraordinary red tape to access the financing.
Mr Garach said the impact of small business on growing unemployment was indicated by gross domestic product (GDP) growth in Uganda, China and India, which averaged 9%-10% between 2001 and 2011, while South Africa’s was 2.5%.
Of these countries, Uganda had the lowest unemployment rate, at 3%-4%, and the highest percentage of entrepreneurs versus its population, at 27%-28%.
China and India’s percentage of entrepreneurs was 13% and 15% respectively, while for South Africa the figure was only 2.3%.
"Government can’t create sustainable jobs," Mr Garach said.
There needed be a "radical change" in the way the government stimulated the development of small businesses, he said.
Christo Botes, executive director of Sanlam/Business Partners Entrepreneurs of the Year Competition said 45%-50% of South Africa’s GDP was derived from small business, and the aim of the National Development Plan was that by 2030, small business should account for 90% of all new jobs created.
He said there were only 1.5-million small businesses in South Africa, and 1-million of those employed fewer than five people each.
Mr Botes said a culture of entrepreneurship needed to be fostered in South Africa, to replace the culture of relying on a job for financial survival.
Mr Garach said the cost and red tape associated with doing business in South Africa needed to be simplified and reduced.
It took six months to register a business, he said, while registering for value-added tax (VAT) was a "nightmare" that involved a face-to-face interview and "silly questions". Similarly, the red tape associated with registering with the Unemployment Insurance Fund, for pay as you earn tax (Paye), income tax and the workman’s compensation fund was immense.
He said there were also invariably penalties and interest to pay if the growing number of government forms were not completed.
Entrepreneurs then also work with complex labour laws and with the trade unions.
Dealing with other taxes such as the proposed National Health Insurance and local government taxes were additional administrative burdens.
There were also complicated black empowerment and employment equity issues that needed to be dealt with, Mr Garach said.
He said the administrative cost of doing business needed to be reduced, and the tax and business registration system needed to be simplified for entrepreneurs.
A school of entrepreneurs should be established, there should be incentives for entrepreneurs and the labour market should be liberalised for the small business sector, he said.