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As unemployment hits record high, more support is needed for SMMEs

SMMEs, especially women-owned businesses, can play a critical role in South Africa’s economic stability if they have access to adequate funding opportunities – University of the Western Cape Chancellor, Archbishop Thabo Makgoba.

South Africa is at a crossroads, grappling with a shrinking economy, severe job losses and serious credit agency downgrades, said University of the Western Cape Chancellor, Archbishop Thabo Makgoba. Furthermore, the unemployment rate has hit a record high of 34.4%, according to StatsSA’s labour-force survey for the second quarter of the year, released yesterday.

Makgoba painted a bleak picture of South Africa’s economy during last week’s Roundtable for Economic Development, “Towards innovative ways of financing micro-enterprises”, hosted by UWC as part of a series of Women’s month events.

“More people are dependent on the State than ever recorded in the history of South Africa. Far too many live on grants and are not able to fend for themselves.” He added that the unrest seen in parts of KwaZulu-Natal and Gauteng in July were cause for concern. “Recent social and political upheavals can be seen not only as economic sabotage but as the undertones of a rip current that can easily pull the country into ongoing economic instability.”

He said one way to address rising unemployment is by encouraging universities, government and other institutions to produce a generation of job-makers, and not job-seekers. “An entrepreneurial spirit needs to be woven from primary school to varsity. It needs to be nurtured throughout the learning and educational experience. Only then can we develop the economic potential of our people, not only to cushion the worst of the impacts of the Covid-19 pandemic and the financial crisis on livelihoods, but to help ensure a swifter recovery for the broader economy.”

Makgoba added: “It is well documented that small businesses are the lifeblood of the South African economy, and strong SMMEs will lead to greater security for the country’s workforce across all sectors, and job growth in the private sector.” Makgoba highlighted the particular challenges encountered by women. “Women have always been the backbone of our economy, in the sense that no matter what men have achieved or failed to achieve, it has always been the women who have had to find a way to put food on the table.” Although adaptable and skilled, they however need to overcome institutional and cultural obstacles to take their economic activity to new levels, he said.

Professor Michelle Esau, Dean of the Economic and Management Sciences (EMS) Faculty, said that according to the World Bank, Africa is the only region where women entrepreneurs outnumber their male counterparts. Yet, they still grapple with access to finance. “They also juggle multiple responsibilities, and often have to stay at home to care for their families,” she said. Add Covid-19 and unrest into the mix, and we have a country where women struggle with access to economic activity, said UWC Rector and Vice-Chancellor, Professor Tyrone Pretorious. StatsSA reported that in the first quarter of 2020 and 2021, more than four in every 10 young women were neither employed nor in education or involved in a trade. Meanwhile, more than 56% of women were discouraged from taking part in the labour market.

South Africa has upwards of four million small businesses making a significant contribution to the economy, said Professor Matthew Ocran, Deputy Dean of Academic Affairs at the Faculty of EMS. StatsSA posits that formal small businesses add about R2.9 trillion to state coffers. This means that 25c of every Rand generated by business in South Africa comes from the small business sector, said Prof Ocran. Professor Vivienne Lawack, UWC’s DVC: Academic, said: “Notwithstanding the wide acknowledgement of SMMEs’ importance, there are still difficulties that need to be addressed, such as informality, low productivity and limited access to finance.” Prof Lawack said her research shows that there is a trade-off between financial inclusion as a policy imperative and financial integrity, with the scales tipping in favour of financial integrity. “If this is the case in financial inclusion in general, it is even more so for women-owned enterprises.”

Erica Nell, Head of Private Debt: Sanlam Investments, highlighted the importance of improving access to funding. “We are not doing enough to advance SMME funding for women.” Joshua Wolmarans, Director of Enterprise Development, Department of Economic Development and Tourism in the Western Cape Government, agreed, saying that this was a critical issue for women who also lacked the networking opportunities enjoyed by their male counterparts. The provincial government therefore focuses on supporting women-owned businesses, and has made gender a criteria for SMME support, he said. A better alignment of organisations offering financial and other support to SMMEs would improve their access to funding. He also called for greater inclusiveness in entrepreneurship.

Kevin Chaplin, Managing Director of the Amy Foundation and the SA Ubuntu Foundation, highlighted the importance of having a focused business plan when applying for funding; be it from banks, corporate institutions or via crowdfunding. Without adequate access to markets to sell their services and goods, SMMEs will continue to struggle to secure funding, concluded David Mparutsa, General Manager: Absa Bank.

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