SPEECH BY THE MINISTER OF SMALL BUSINESS DEVELOPMENT AT THE LAUNCH OF THE GORDON S INSTITUTE OF BUSINESS SCIENCE (GIBS) ENTERPRISE DEVELOPMENT ACADEMY

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1 SPEECH BY THE MINISTER OF SMALL BUSINESS DEVELOPMENT AT THE LAUNCH OF THE GORDON S INSTITUTE OF BUSINESS SCIENCE (GIBS) ENTERPRISE DEVELOPMENT ACADEMY 12 AUGUST 2014 Programme Director, Gauteng Premier, Mr David Makhura Executive Mayor City of Joburg Parks Tau Danish Ambassador, Rene Dinesen Doyen of black business, Dr Richard Maponya, Director of the Enterprise Development Academy, Miss Yogavelli Nambiar Dean of the Gordon Institute of Business Science, Professor Nick Binedell Distinguished guests, Ladies and gentlemen I am honoured and humbled to be delivering a keynote address at this momentous occasion. I also wish to take this opportunity to applaud Gordon s Institute of Business Science for this noble initiative. Let us make a solemn pledge that, collectively, we will do everything in our power to ensure that the Enterprise Development Academy goes down in history as one of the most radical interventions that tipped the scale towards creating an inclusive economy that benefits all. 1

2 Our government has made a commitment to set the country on a path of radical economic transformation in order to accelerate our onslaught on the triple challenge of poverty, inequality and unemployment. A consistent theme that runs throughout the ANC Manifesto, the State of the Nation Address and the National Development Plan is the urgent need to focus on decisive action to grow the economy and create employment. Our collective responsibility is to mobilise the whole of government and the nation s resources in pursuit of this goal as we enter our Second Phase of our Transition. Consistent with government s commitment to place the economy and job creation at the centre stage, the President established the Ministry for Small Business Development. We are clear that through this intervention, we will be able to unlock economic opportunities and thus achieve inclusive economic growth and sustainable employment, particularly for women, youth and people with people with disabilities. SMEs are expected to be central to South Africa s job creation efforts, in line with international trends. The National Development Plan states that about 90% of jobs will be created through small and expanding companies by We are convinced that if we are to make an impact on the job creation front, we have to invest in small and medium businesses because they are the key drivers of economic growth and job creation. The best investment we can make is in the area of skills development. We have no doubt that the much-needed economic growth and employment opportunities will come from a practical policy that enables small businesses to thrive and grow into profitable enterprises. 2

3 Our point of departure is that small businesses can be the backbones of any economy and the main driver of economic growth, poverty reduction and job creation. However, the sad reality is that South Africa has one of the lowest rates of entrepreneurship activities in the world. The Enterprise Development Academy we are launching today must assist us to build a nation of entrepreneurs. The Ministry of Small Business Development was established as part of a recognition of the important role this sector plays in contributing to the social and economic development of the country. In fullfilling our mandate, we will seek to promote a co-ordinated and integrated support across government spheres and institutions for SMMEs. We will pursue an aggressive entrepreneurship drive and create an enabling environment that will make it easy for South Africans, particularly the youth, to start and sustain their businesses. We will pay focused attention on providing effective support to small businesses. Our ultimate goal is to reduce obstacles to doing business wherever possible and to expand access to economic opportunities for historically excluded and vulnerable groups.. Our interventions will be in the area of: access to finance, business skill development, market access, competitiveness, easing the regulatory burden and advancing localisation, particularly leveraging on public procurement. Indeed, the country s high rate of unemployment and extreme inequality call for bold and far-sighted interventions. 3

4 The National Development Plan sets an ambitious aim to treble the size of the economy by 2030, a daunting challenge that will require our collective contribution. Meeting the NDP s growth target of 5.4 % for the next 16 years would not only guarantee South Africa s material prosperity, but would be an elevating and inspiring narrative for the country an optimistic new story, as the NDP phrases it. As the NDP makes clear, getting South Africa onto a high-growth trajectory demands that we fundamentally change our game plan and place small businesses and co-operatives at the centre of our war against poverty, inequality and unemployment. Developing a strong and growing SME community is a cornerstone of the NDP s vision. Let us pause and reflect for a moment on these disturbing and unpalatable statistics: Youth unemployment constitutes 73% of the total unemployment in the country. Employment of young people aged between 18 and 24 years has fallen by more than 20% since December The long-term solution to the nation s unemployment crisis is to create a nation of entrepreneurs and not a nation of job-seekers. Empowering young people is not an option, but a national imperative. South Africa is a youthful country. The majority of its population is young. The youth (14-35years) constitute 41.2% (20.5 million) of our total population. When we look at the demographics, and include children between the ages of 1 13 years in the equation, then 77.6% of the South African population is between 1 34 years old. 4

5 This reality challenges the whole of government, civil society and the private sector to redouble our collective effort to ensure that our future leaders are sufficiently empowered to approach the future with confidence. Similarly, we must challenge young people of today to seize the opportunities created by our democracy in order to create a better life for themselves and their fellow compatriots. Given the current state of youth unemployment in our country, the question is not whether we should encourage our young people to look in the direction of entrepreneurship, but rather, can we afford not to? The youth have limitless potential to own successful enterprises and employ people, despite monumental obstacles that stand on their way. My Ministry is alive to the challenges and the need to act with speed and more energy to address these challenges. I call on all our young people to seize opportunities created by the 1994 democratic breakthrough. Acquiring the much-needed skills will enable young people to occupy the front trenches in the reconstruction and development of our country. They will become a force for progressive change and radical economic transformation. Young people must be empowered to occupy their rightful place as change agents, rather than being mere spectators in the unfolding story of economic emancipation in our country. 5

6 We remain concerned that small businesses have an exceedingly high failure rate, and the majority of the casualties are women-owned businesses. Researchers tell us that the failure rate for new businesses is almost 80% in the first year, and only about half of those who survive remain in business for the next five years. We are confident that the Academy will help to reverse this trend through appropriate research, quality teaching and a relevant curriculum that responds to the needs of the small business sector. Part of the challenge as noted by the academic and research fraternity is the lack of empirical information about South Africa s SMEs. This empirical information will be critical if we are to effectively discharge our mandate to assist the establishment, growth and sustainability of SMEs and cooperatives. I am confident that the Gordon s Institute of Business Science has been grappling with these issues for some time. Ladies and Gentlemen, understanding SMEs, cooperatives and the policy decisions aimed at growing this sector requires credible evidence and robust monitoring and evaluation. We want policy responses that are informed by evidence rather than interventions that are based on assumptions. We need your expert advice particularly in the area of regulation, policies, programmes and support mechanisms to advance entrepreneurship. We need you to help us monitor the impact of our policies and programmes particularly on black people, women, people with disabilities and youth. 6

7 I invite the Gordon s Institute of Business Science to work with my new department as we seek to find lasting solutions to the many challenges that confront us. You must help us answer some of the complex questions facing us. You must place your expertise at the nation s disposal and assist us to develop appropriate interventions that respond effectively and adequately to the needs of the small business and co-operative sectors. We are painfully aware that fostering a culture of entrepreneurship is not something that blossoms over a short period of time. It takes a long time to develop and flourish. In other words, if we create awareness today about entrepreneurship as well as train others to start a business venture, it does not mean tomorrow all these people would start and run successful enterprises. We must also be mindful that not every person is destined to become an entrepreneur. I remain convinced that, as a nation, we need to teach entrepreneurship education from primary school level right through higher education institutions. This will enable our citizens to consider starting a business as an option instead of a mindset of looking for a job after finishing high school or graduating at a higher education institution. Government has been rolling out the incubation programme which seeks to develop, grow and sustain small businesses through the procurement and skills transfer support from big businesses. We would like to encourage this institution to participate in this programme. Our experience tells us that the incubation programme succeeds if linked to knowledge-based institutions that provide technical and empirical knowledge housed in these institutions. 7

8 Let me say this in conclusion: The solution to our unemployment problem does not lie in teaching our children how to draft CVs and letters of application for employment. The answer lies in empowering our children to start and manage their own businesses! Together, we carry a responsibility to promote and enhance a culture of entrepreneurship in society. We cannot afford to delegate this task to future generations. I thank you 8

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