4 March 2020

BUSA President Sipho Pityana urges greater role for SMEs in economic growth

BUSA President Sipho Pityana has called for greater attention to be paid to the plight of small and medium businesses – including paying them on time – to ensure they are able to drive economic growth.

“Not paying SMEs on time is a violation of the rules of fair trade,” he told the Black Business Council’s summit in Johannesburg today. “Imagine successfully delivering goods or services and then being slowly starved to death due to delayed payment.

“Both governments and corporations must pull up their socks in this regard.”

Pityana referenced a recent World Economic Forum survey of 260 entrepreneurs across 20 African countries, including South Africa, which indicates that red tape and poor payment practices are key factors standing in the way of SMEs scaling up and operating across Africa’s borders.

“The research is telling us that most respondents are yearning for more dedicated SME funding programmes, easier procurement processes, and the faster payment of invoices.

“The SMEs are also calling for more transparent funding options, easier access to mentors, more networking events, business skills training and easier access to support programs.

“We will need to do better in turning exciting ideas into strong commercial products and services — and this requires investment in skilling our people. We must strive to build an Africa that lives on the digital frontier.”

Pityana – who also co-chairs the regional stewardship council for WEF’s Africa Growth Programme (AGP) — said Africa could achieve a lot more if all of stakeholders acted in concert to create jobs.

The AGP has set a target of 100-million SMEs and startups by 2025. “It is in all our interests to have a thriving small business sector: more people get employed, the market gets bigger, incomes grow, poverty reduces, social cohesion is enhanced. “We will all have to work together to enable an inclusive and diverse business environment, equipping the next generation with the tools to make a meaningful impact on Africa’s future and the future of the world.” Pityana said it was “common cause” that SMEs contribute significantly to economic development and are associated with discovering new markets and exploiting them to their advantage.

“Likewise, SMEs are the heart of founding new ventures and a source of income and employment for millions of Africans,” he said. “This means SMEs are central to wealth creation by stimulating demand for goods, investment and trade.

“Africa has an estimated population of more than 1,3 billion that’s growing at over 2% annually in most countries, with more than 50% of the people in many countries below the age of 25. This population has a growing need for the services, jobs and economic growth provided by locally based SMEs. “It is encouraging that in Ghana, for example, SMEs account for 70% of GDP while employing 49% of the labour force; and in Kenya it contributes 50% to GDP and employs 80% of the labour force. In the OECD countries, over 90% of businesses are SMEs, employing between 60% and 70% of the working population and contributing roughly two thirds to GDP. In our emerging market peers including Brazil and India, small businesses are the backbone of the economy. “All of this tells us we need to transcend the thinking that small enterprises exist only to be part of the supply chains of larger businesses. We should enable high growth small businesses to be disruptors that will create whole new industries and jobs. These are the next generation of corporations.

“A thriving, dynamic and growing small business sector is a critical component of an inclusive economy. We also need to specifically ensure the successful integration of women-owned businesses in Africa’s high growth agenda.”

Pityana announced that as part of the build-up to the September WEF Africa 2020, the regional stewardship council would bring stakeholders together to enable specific interventions to address the challenges that SMEs and startups are facing that are preventing them from growing and creating jobs.

Sipho Mila Pityana (President)

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