Over the past years, the South African economy has witnessed a year-on-year decline in economic growth and gross domestic product (GDP) growth. In the pre-COVID period in 2018, GDP growth had fallen to 0.8%, while in 2019, this fell to 0.2%, accompanied by a technical recession, and this is in comparison to the average GDP growth of 4.3% between 2000 and 2008. The economy shrank when COVID-19 hit the economy. To add to this burden, South Africa faced a civil disorder (July unrest) while on level three lockdown. The pressures of tighter COVID-19 lockdown restrictions, a spate of civil disorder, and several other headwinds contributed to real GDP slumping by 1,5%. During and pre-COVID, the SMME domain was characterized by, inter alia, low productivity and growth, low levels of innovation, excessive red tape, delayed payments, and exclusion from value chains.
SMMEs provide most job opportunities and contribute significantly to the South African economy. To resolve the current high unemployment rate, decrease inequalities and alleviate poverty, there is a need to create a sustainable and supportive environment that supports the growth, development, and sustainability of SMMEs. Thus, SMME development is critical in mitigating some of the economic challenges faced by the country.
With the current global crisis resulting from the war in Ukraine, lockdowns in China and supply-chain disruptions, stagflation is likely to hamper economic growth. In this case, a global recession will be hard to avoid. Hence, it is urgent to promote SMME development because SMMEs are an economy’s lifeblood and serve as the economy’s backbone. SMMEs, when given the right platform to operate in and are fully supported, not only can they keep the economy going, but they can also lead the way in innovation, thus promoting industrialization.
It is high time that the public and the private sectors join hands in supporting the growth, development, and sustainability of SMMEs. Gone are the days when corporates employ Enterprise and Supplier Development (ESD) strategies as a “box-ticking” exercise to gain compliance points quickly, but it is time to drive the impact of the ESD strategies in promoting SMME development. Sustainable economies require competitive, commercially viable enterprises connected to local and regional market opportunities, underlined by a focus on both the supply and demand sides and the creation of a partnership-driven enabling ecosystem for SMME development.
ESD is one of the most powerful mechanisms to support market access, capacity-building, revenue growth and sustainability for SMMEs. As an element of the broader B-BBEE legislative framework, it accounts for a significant proportion of the total spending on small business development services and financial support. As such, ESD strategies that focus on capacity-building and scaling of suppliers, supply chain access, and revenue generation for new entrants can have an enormous impact on mitigating the currently high failure rate of small businesses.
Enabling an environment that tends to support and develop SMMEs is crucial as local government, local industry, corporates, enabling partners, donors and provincial government should join forces in formulating ESD programmes that genuinely support SMMEs. These programmes should include scaling existing entrepreneurs through improving their competitiveness, nurturing entrepreneurial talent through activities such as mentoring, establishing a supportive partnership framework with SMMEs to enable success as well as aligning and re-designing small business structures if necessary to promote commercial viability and guarantee long-term strategic value add to the market.
It is important to note that it is not only the role of the government to promote SMME development, but both the government and the private sector should join forces. The private sector needs not only to focus on ESD from a compliance angle but on the impact of ESD programmes on SMME Development.
 See Industrial Development Corporation ‘Economic Trends: Key trends in the South African Economy’ Department of Research and Information, December 2013