Small, Medium and Micro Enterprises (SMME) inhabit an important and strategic place in South Africa as they contribute

significantly to the countrys wealth and employment. They act as intermediary and final producers and also as consumers of various goods and services (CACCI,2003). This report aims to establish whether the New Growth Path (NGP) and Industrial Policy Action Plan (IPAP) are sufficient policy tools for the promotion and support of small businesses. Firstly, the relevance of small businesses as engines of growth is assessed along with an assessment of post-apartheid policies and structures to support small businesses. Empirical evidence is then used to evaluate the challenges and constraints limiting the growth of small businesses and from this, an ideal policy framework that would support small businesses is established. In light of such a policy, the New Growth Path and Industrial Policy Action Plan are finally evaluated in order to discover that current policy is indeed sufficient for the growth of small businesses. Since the formation of a new and democratic South Africa, the government has been determined to create an environment in which small businesses can prosper. Small businesses are at the forefront of economic development and they are specifically targeted for job creation as they are more labour intensive than larger firms and have lower capital costs associated with job creation. In addition, small businesses have several advantages over large-scale businesses because they can adapt far more easily to changing market and economic conditions (Kongolo,2010). It is thus imperative that government develops economic policies that recognise the potential that SMMEs have for the growth of our economy. To implement this commitment, various policies and economic structures were established from the period ranging from 1994 to 2005 (Toomey, 1998). Pre-NGP and IPAP economic policies for the support of small businesses included efforts made by Parliament in the establishment of the National Small Business Act in 1995. The act made provisions for the formation of various institutions such as Ntsika Enterprise Promotion Agency (NEPA) which would wholesale support services to SMMEs (Toomey, 1998). Other institutions that were established by the government, primarily through the Department of Trade and Industry, for the support of small businesses included the Centre for Small Business Promotion (CSBP), the Industrial Development Corporation (IDC) and the National Small Business Council (NSBC) which would serve the interests of small businesses within government at both the

provincial and national levels. Perhaps the most important institutions to be formed, however, are the Khula Enterprise Finance Limited (Khula) and the South African Micro-Finance Apex Fund (SAMAF). Both these institutions serve as government supported financial institutions that provide financial support to SMMEs (Toomey, 1998). It is clear that the promotion and support of small businesses has become an objective across government. Much so that the government continually revises its economic and industrial policies to cater for the needs of small businesses. The newest instalments of policies include the New Growth Path and Industrial Policy Action Plan which essentially target economic growth through inflation targeting, poverty alleviation and job creation. To assess whether these policy tools adequately support the development of small businesses, it is perhaps important to understand the challenges and limitations of small businesses that previous policy frameworks either overlooked or insufficiently dealt with. The South African Bus Operators Association (SABOA), in its annual conference on Empowerment opportunities for SMMEs defines an empowered SMME as one that has access to all resources required, exploits all opportunities grow and it operated by an

individual(s) who can optimise his/her abilities and has the knowledge and know how to manage and operate the business (SABOA, 2012). Most of the countrys SMMEs fall short of this definition and are plagued by further constraints such as an inability to obtain appropriate technology, restricted access to bank credit, limited access to international markets, and most importantly, finance (Abor, Qaurtey, 2010; Kongolo,2010). In addition, barriers to the establishment of new SMMEs include finance and the lengthy and off-putting registration procedures along with the laws and regulations that hinder the development of the SMME sector as a whole (Abor, Qaurtey, 2010). Now while such obstacles may be characteristic of any entrepreneur starting and growing a business (whether large or small), the negative effect they have on SMME growth is more profound. Much so that approximately 75% of new SMMEs in South Africa do not become established firms (Olawale, Garwe, 2010). Furthermore, while the government has made considerable efforts to promote and support SMMEs through various initiatives, most such enterprises are simply unaware of government efforts such as the Small Business Development Agency (SEDA) and Khula Finance Enterprise (Khula). Owners either lack the basic know-how to access information

about these initiatives (through the internet and other media) or are just not exposed to the information. Faced with the above challenges and constraints, it is evident that an ideal policy framework would be one that minimises the legal procedures of establishing and maintaining an SMME, exposes such enterprises to appropriate technology and foreign markets, and encourages investment thus creating an appropriate environment for SMMESs to thrive. Embedded in such a policy would be a means to improve the preparedness of SMMEs by providing sufficient training and increasing awareness of any government efforts and initiatives that support SMME growth. Funding would be made easily accessible and there would be ample information to educate entrepreneurs. It is important to juxtapose current overall policies with such an ideal framework in order to evaluate whether they are indeed the best policy instruments to nurture the growth of SMMEs. The New Growth Path (NGP) aims to address the core challenges to the South African economy being joblessness, poverty and inequality. Amongst its goals, is the creation of 5 million jobs by 2020. It aims to do this by means of both micro and macro economic policies that would create a favourable environment for the creation of jobs and alleviation of poverty (NGP, 2012). The first step is to identify industries and sectors where employment can be created on a large scale. This includes SMMEs identifiable in five job drivers being infrastructure, existing main economic sectors, new economies, social capital and public services, and regional development. This is described in the table below.

Source: Natrass, N , 2011

To this extent, the New Growth Path acknowledges the importance of SMMEs in creating jobs. In addressing the challenges faced by new SMMEs, the NGP plans a reduction in red tape and bureaucratic delays. The framework also addresses challenges faced by existing enterprises including an improvement in general education in order to ensure that the entrepreneurs are competent and have the necessary skills to manage and operate a business (NGP, 2012). It also aims to review the training system for technical skills. The Human Resource Development Strategy for South Africa aims for an improvement in workplace skills which would largely benefit small businesses. New commitments are made by government in order to aid small businesses. It aims to pay small business suppliers within 30 days with consequences for government departments that fail to do so. A technology policy has also been put in place to help small enterprises adapt to technology. With respect to Information and Communications technology (ICT) skills, the NGP aims to ensure that all public servants receive ICT training. Finance has also been made accessible to small enterprises by continued work with Khula, Samaf and the IDC. Mr Ebrahim Patel, Minister of Economic Development revealed that the Economic Development Department (EED) had received a budget allocation of R594.5 million. Of this amount, R219 million would be re-distributed to small business funding through transfers to Khula and Samaf. Furthermore, in an address made at the Extended Public Committee meeting of the National Assembly on 12 April 2011, Mr Patel further revealed that Khula and Samaf would deploy a further R381 million and the Industrial Development Corporation (owned by the Government) would distribute a further R2.2 Billion to support small and micro businesses (Internet 1). The Industrial Policy Action Plan 2 also outlines a few changes and propositions that will ease business operations for small and medium enterprises. These include plans to lower input costs through the removal or lowering of numerous import tariffs to allow for the attainment of low cost manufacturing inputs not produced in adequate quantities in South Africa (IPAP, 2010). One of the main propositions of IPAP is the industrial clustering of various SMME sectors. Clusters are to be formed by enterprises that are in the same geographic area and that manufacture the same or complementary products. The economic rationale for establishing such clusters is that they will allow SMMEs to reap the rewards of economies of scale due to increased size, the sharing of information and infrastructure and the mentoring of lower tiers

of supply by higher tiers. Abor and Qaurtey also suggests that clustering may be a solution to financial constraints and access to credit. By forming clusters, the enterprises will be large enough to obtain loans as financial institutions believe that peer pressure from members in the cluster often reduces the risk of non-payment (Abor, Qaurtey, 2010). Although overall policy in the form of the NGP and IPAP seemingly represent an ideal policy to promote SMME growth, the policy instruments are not void of a few flaws and shortcomings. Nattrass asks for more details and clarification as to how the New Growth Path and Industrial Action Policy will meet their objectives. The sentiment is that the NGP and IPAP are merely visions rather than a plan of action. Nattrass further critiques the NGP in that it does not provide an actual economic model for how, for example, job creation is to be achieved (Nattrass, 2011). Indeed, the policy document loosely says that most of the projected new jobs will come from the private sector but does not elaborate or substantiate how this will be achieved apart from identifying the 5 job drivers from which this is to be achieved. Another concern has been that the current overall policy essentially focuses more on the constraints that hinder small business growth rather than investigating the conditions under which small businesses grow. The removal of these constraints is undoubtedly crucial but, however, not necessarily sufficient for the growth of small businesses. Furthermore, contrary to the general consensus that small businesses are a vehicle for job creation, there is a pool of literature that suggests that small businesses destroy more jobs than they create due to their high mortality rates. It is thus important that government research the factors that allow small businesses to grow and scale up they support with respect to managerial skills. Exempt from these minor flaws and lack of clear, precise detail the New Growth Path and Industrial Action Policy Plan are possible game changing policies. In its annual review of the policies, the government need only provide more detail as to the means by which it aims to implement its strategies. Furthermore, further research needs to be made to determine not only the constraints which hinder SMME success, but the factors which promote success.

Bibliography 1. ABOR, QUARTEY. 2010. Issues in SME Development in Ghana and South Africa International Research Journal of Finance and Economics

2. CACCI. 2003. CACCI Recommendations on SME Development for Submission to the APEC Business Advisory Council (ABAC) in 2003

3. KONGOLO. 2010. Job creation versus job shedding and the role of SMEs in economic development African Journal of Business Management Vol. 4(11)

4. OLAWALE, GARWE. 2010. Obstacles to the growth of new SMEs in South Africa: A principal component analysis approach African Journal of Business Management Vol. 4(5)

5. SABOA. 2012. EMPOWWERMENT OPPORTUITIES FOR SMMEs Url: www.saboa.co.za

6. NGP.2012. THE NEW GROWTH PATH: THE FRAMEWORK URL: http://www.info.gov.za/view/DownloadFileAction?id=135748 7. IPAP.2010. 2010/11 2012/13 Industrial Policy Action Plan URL: http://www.info.gov.za/view/DownloadFileAction?id=117330

8. TOOMEY. 1998. SOUTH AFRICAN SMALL BUSINESS GROWTH THROUGH INTERFIRM LINKAGES 9. NATTRASS. 2011. The new growth path: Game changing vision or cop-out? S Afr J Sci. 2011