SACP+GS+Dr+Blade+Nzimande,+Address+to+SOBEC,+18+April+2006



=Broaden Black Empowerment:=

//Address to Soweto Small Business Executive Council: 18 April 2006//

 * Blade Nzimande, General Secretary, SACP**


 * 1.0** **Introduction**

Thank you for extending your invitation to us on such an important occasion for the Soweto Small Business Executive Council. Efforts by an organisation like yours are very central in growing and developing our economy, creating jobs and eradicating poverty.

Small and micro enterprises of various forms have played a crucial role in South African society since the advent of capitalism in the 19th century. The forcible removal of black people from the land and their becoming migrant labourers in the mines and later the manufacturing and other sectors of our economy caused major social dislocation and impoverishment of black South Africans. It was in this context that small and micro enterprises emerged - including co-operatives in the form of stokvels and burial societies.

These activities have grown in recent times given the scale of unemployment and poverty in our country. It is our belief as the SACP that unless small and micro enterprises in our townships and rural villages are strengthened, the promise of a better life for all will not be realised. It is also important that our people should not simply wait for government to provide opportunities but should mobilise resources in their hands to realise this better life for all.


 * 2 The macro-environment for Small and Micro Enterprises**

Since 1994 a number of policies and laws have been passed to create a better climate for the success of small and micro enterprises. However, not enough progress has been achieved on the ground due to a number of concrete obstacles.


 * //2.1 Broad-based Black Economic Empowerment//**

The passage of the Black Economic Empowerment Act, and a number of transformation charters have created an environment through which SMEs can perform better. However the single biggest problem with the model of BEE that has evolved thus far is that it has tended to focus more on big ownership deals for black people without focusing on the growth and development of, especially, black small and micro enterprises.

The SACP has for instance been campaigning for access to affordable finance and credit for the workers, the poor, small and micro enterprises over the last six years. We have indeed notched some important victories in this regard. The Financial Sector Charter process makes banking available to the estimated 13 million South Africans previously excluded from the system, but we need further interventions to make small business banking affordable. And that means not only affordable transaction charges, but also affordable credit.


 * //2.2 Access to financial services//**

The Financial Sector Charter commits financial institutions to investing R5bn in for loans for small black businesses between 2004 and 2008. This target will be reviewed in 2008 to determine what amount should be made available for investing in the second five-year term of the Charter, between 2009 and 2014 – probably at least another R5 billion, if not more.

I am sure many of you were not even aware of this breakthrough in making finance available for black SMEs. If I were to ask how many of you have been informed by your bank managers that this money is now available for investing in small black businesses, there would be very few hands going up.

This poses a challenge to both of us – you as black business people and us in our campaign to make the financial sector serve the real needs of all our people.

The challenge is to make sure that this R5 billion in loans is well-known, that it is well used and reaches the businesses that need it and that can use it effectively to create jobs and end poverty.

Our challenge is to make sure financial institutions actually invest these amounts and that they invest them in viable, sustainable small black businesses at rates of interest that these enterprises can afford.

The Charter Council is at present in the process of setting standards which will govern how these black SME loans can be granted. These standards will, for example, determine the affordability of SME loans – what rate of interest can banks and other financiers charge? What kind of loans qualify - what features must they have, and so on.

And we as the Community Constituency in that Council would welcome your inputs in determining what these standards should be. Your voice as black business people should be heard in these decision-making forums. You can count on us as your allies in this regard; together we need to mobilise to ensure that small business does have access to this already committed finance. For us this will be truly broad based BEE.


 * //2.3 The National Credit Act//**

Through the SACP-led financial sector campaign we have also seen the passage of the National Credit Act by Parliament last year. This is a very important piece of legislation for SMEs, and it includes, amongst other things, the regulation of the Credit Bureaux through legislation for the first time ever in our country.

Through this Act, government will develop regulations around provision of credit. It is important that the voice of SMEs is heard in this regard. Government must finalise these regulations within the next twelve months, and we need to work together in ensuring that these regulations are favourable to small and micro enterprises.

One of the key struggles we have to wage together is that of ensuring that cost of credit and interest rates are capped such that they are affordable to the workers, the poor, small and micro enterprises. For instance it is proposed by government that some types of credit for low-income earners must be capped at 48% and for low-cost housing at 21%. We are opposed to this as we believe that we are entrenching a two-tier interest rate regime, a cheaper rate for the rich and an exploitative rate for the poor. In fact, it should be the other way round. We are entrenching the very “two economies” we say we want to do away with.

We also wish to call upon you to join us in the struggle for a once-off credit amnesty for all those blacklisted by the Credit Bureaux. The SACP-led Financial Sector Campaign Coalition is preparing for pickets and demonstrations soon to push for this demand. Your organisation should be part of this.

The reason for calling for an amnesty is that many of your members and the SME sector in general would not benefit from many of the policy and legislative measures aimed at supporting your sector.


 * //2.4 Developmental local government//**

It is very important for SME organisations to take direct interest in local government affairs. We have a national policy and legislative framework for SMEs, but the problem is that these have not adequately translated into comprehensive local strategies to promote and support small and micro enterprises.

For example it is of no use to have national legislation on co-operatives, which we now have, but without a local strategy on building and supporting co-operatives by both communities and local government. Our government is committed to developmental local government which aims to support creation of jobs and other means for sustainable livelihoods. The challenge is to ensure that each and every municipality, in its Integrated Development Plan, has a clear local strategy to support small and micro enterprises, including co-operatives.

An important area in which we need to co-operate is that of ensuring that each and every municipality, in its integrated development plan, set aside procurement targets from small and micro enterprises. We need to engage our councillors and councils on this as a matter of urgency.

As part of the strategy to engage local government, though this matter is relevant for all levels of government, is the development of small and micro enterprises to be able to provide services directly. So far most black SMEs act as ‘middlemen’ supplying goods that are produced by big corporations. They therefore act as instruments for continued profiteering by big corporations, instead of manufacturing many of the products. ASGISA is also important in ensuring that we develop the manufacturing capacity of black-owned SMEs to create jobs in our own areas.

An important platform through which we can ensure that developmental local government prioritises small and micro enterprises, is the ANC’s commitment in its 2006 local government election manifesto to convene local growth and development summits. We need to ensure that indeed these are convened and issues affecting small, micro and co-operative enterprises are prioritised.


 * //2.5 Skills development for small and micro enterprises//**

The SACP is concerned that the Sector Education and Training Authorities (SETAs) have not adequately prioritised skills development for SMEs. We need to ensure that every SETA has a concrete strategy to support SMEs in its own sector. SETAs are not going to do this on their own unless they are specifically engaged on these matters. We are ready to act together in this regard, also involving organised labour, to ensure that resources for skills development are also directed towards small and micro enterprises.

ASGISA places a lot of emphasis on skills development in our economy, including SMEs. We are however still concerned that ASGISA’s emphasis in this regard is still too biased towards the mainstream capitalist economy and not enough on small and micro enterprises. The establishment of the Joint Initiative on Priority Skills Acquisition (JIPSA), is a welcome initiative to fast-track and identify priority skills. You need to devise a strategy of ensuring that your voice is heard and you are part of this initiative.


 * //2.6 Accelerated and Shared Growth Initiative for South Africa (ASGISA)//**

I am only raising ASGISA now, though I have made a lot of references to it, not because it is not an important platform for micro enterprises, but because we feel it is a necessary but not sufficient response to our economic challenges. It nevertheless provides an important space that small and micro enterprises need to engage.

This programme, whose emphasis is shared growth for our country, needs to be engaged so that shared growth also centrally includes small and micro enterprises. We firmly believe that for ASGISA to be successful it will have to prioritise job creation, poverty eradication through, amongst other things, addressing the interests and needs of small and micro enterprises.

For instance ASGISA commits itself to moving small and micro enterprises into manufacturing, in addition to retail and services. It even identifies the task of strengthening these enterprises to benefit from the 2010 World Cup to be held in our country. The challenge for your organisation is also to come up with concrete projects and suggestions to achieve these objectives.

Much is being said and written about AsgiSA, and especially about cutting the cost of doing business in South Africa so that this so-called growth can be “shared” and “accelerated”. But I want to question how much attention is being paid to the cost of doing business for small, black South African businesses – businesses like your own. I want to touch on two of many costs which we urgently need to address if we are really serious about reducing the high costs of doing business.

These are the cost of telecommunications and the cost of banking. For small, black businesses these costs can make the difference between success and failure.

In today’s newspapers, we have confirmation that the cost of telephone calls - both fixed and cellphone calls - is among the highest in the world. Out of 14 countries surveyed, the cost of Telkom national telephone calls in South Africa is the highest of the major world economies with which we do business – four times high than in Sweden and higher than developed countries like Britain and the United States. That fact alone is a serious indictment against the telecommunications and privatisation policies adopted over the past 12 years of our democracy.
 * Cost of telecommunications**

Despite claims to the contrary the massive profits made in this industry do not go to improving access by the poor. They are repatriated overseas to American and other investors; they go back into the coffers of the Public Investment Commissioners (PIC) or to paying huge bonuses to executives.

The burden these astronomical prices places on small business is every bit as heavy – if not heavier - than the burden on big business.

The attention of the media and the authorities might be on the cost of large enterprises paying millions to Telkom, but the cost for small black business means many cannot afford Telkom landlines to run their businesses. The cost of having a telephone is often more than small businesses pay for rent of premises – something is very wrong with this picture and it requires urgent attention.

The other cost which hampers many small businesses, and which keeps them from expanding and developing, is the high cost of banking in South Africa.
 * Cost of banking**

Government-commissioned reports over the past few years show that competition in banking in South Africa is low and that bank charges are high. The two go hand in hand and government should intervene to make sure bank charges are affordable to all South Africans. We need a banking system that makes bank charges affordable to the majority of our people - including those of our people starting or running small businesses.

3.0 **Some specific additional challenges** 3.1 It is important that small and micro enterprises are organised such that their voice is heard directly. We are concerned that at the moment your interests and organisations largely act as adjuncts to chambers of commerce and business representing big business

3.2 I am glad to note that amongst your objectives is that of promoting collaboration amongst small-micro entrepreneurs. This is a matter that is very important as we do need to pull together resources in our communities, including bulk buying for spaza shops, pooling our resources in stokvels and burial societies. These are massive resources which can be used to galvanise local economic development in a manner that benefits yourselves and communities.

3.3 Lastly, but not the least, is the importance of your organisation becoming part of the Financial Sector Campaign Coalition, so that we can together advance the interests of the workers, the poor, small and micro enterprises.

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