Entrepreneur and Small Business Support: National Context

  • The Department of Small Business Development (DSBD) has a total medium-term (2018/19–2021/22) budget of R8.1 billion, R5.9 billion (73%) of which is allocated to operations of the Small Enterprise Development Agency (SEDA) and for the administering of the small business and innovation fund by the Small Enterprise Finance Agency. DSBD’s budget is expected to increase at an average annual rate of 24%, from R1.5 billion in 2018/19, to R2.9 billion in 2021/22.

  • The treasury in 2019 allocated R23.2 billion for job creation and labour affairs and R481.6 million towards SEDA to expand its small business incubation programme.

  • A 2018 study by the Small Business Institute found that there are about 250 000 SMMEs in South Africa, accounting for 98.5% of formal firms in the economy, but for just 28% of formal jobs in the economy.

Guidelines for Effective Funding in Entrepreneur and Small Business Support

  • Establishing business hubs that focus on a single sector or type of product line can be very effective. Through these hubs, resources can be pooled, innovation encouraged, skills transferred, information exchanged and a platform for networking provided by pulling entrepreneurs into each other’s orbits.

  •  Incubator and entrepreneurial programmes with a higher entry threshold generally have better outcomes. However, this marginalises entrepreneurs with limited education, experience and resources.

  •  Banks tend to view SMMEs as risks, rather than opportunities. Cash flow is often a problem, so funders can play a role in offering favourable terms, such as shorter settlement terms and providing access to partners who may be able to offer discounts. Funders can also work with enterprise development colleagues to leverage their ability to remove barriers to accessing finance and resources.

  •  Large companies are beginning to realise that making small businesses part of their supplier base is more than corporate social responsibility – it is good business. SMMEs can be more flexible in providing innovative products and services to meet corporate needs. They can also be quicker and more responsive in delivering services locally, which can save on costs. Their knowledge of local markets can be extremely valuable for large companies trying to enter new markets.

National Directives for Entrepreneur and Small Business Support

Broad-Based Black Economic Empowerment (BBBEE) Strategy, 2003
This strategy was promulgated to help advance South Africa’s economic transformation. It is a necessary
government intervention to address the systematic exclusion of the majority of South Africans from full
participation in the economy. Recommended interventions include facilitating a significant increase in the
number of black-empowered and black-engendered enterprises. This strategy is further complemented
by the BBBEE Codes (including the revised BBBEE Codes) and various sector Codes that government has
since gazetted to help empower black communities and small businesses. These Codes include enterprise
development as one of the key pillars.
The Integrated Small Business Development Strategy in South Africa (2004–2014), 2003
Recognising the role of small businesses in job creation and economic empowerment, this strategy aimed
to promote entrepreneurship, more competitive small businesses, and to unlock the potential of SMMEs
through the creation of better business environments that help accelerate growth.
Cooperatives Development Policy for South Africa, 2004
South Africa faced challenges with increasing the number and variety of viable economic enterprises. It
was therefore imperative for the government’s economic policy to promote the development of emerging
economic enterprises and to diversify the ownership, size and geographic location of those enterprises. To
this end, this policy deals with the promotion and support of emerging cooperative enterprises, including
small, medium, micro and survivalist cooperative enterprises. The policy complements SMME policies, as
well as the BBBEE strategy, by facilitating the creation of a viable self-sustaining cooperative movement
that can contribute to the creation of jobs, income generation and resource mobilisation, thereby
enhancing sustainable human development in South Africa.
Youth Enterprise Development Strategy (2013–2023), 2013
This policy provides support for young entrepreneurs, with the objective of creating and managing
sustainable and efficient businesses that are capable of providing decent permanent jobs. Interventions
include mentorship and coaching; business incubation; business infrastructure support; linkages
to procurement opportunities; entrepreneurship awards, promotion and awareness; and the youth
entrepreneurship collateral fund. Government acknowledges that enhancing youth economic participation
cannot be achieved by its efforts alone, but is a shared responsibility that calls for a partnership with the
private sector and broader civil society. Enterprise and supplier development requirements stipulated in
the BBBEE Codes have propelled private sector involvement through various interventions, particularly
business incubation, linkages to procurement opportunities, and mentorship and coaching.