Document: How South Africa Can Boost Support To Small Businesses: Lessons From Brazil And India

In its efforts to craft a new economic growth path and assist small businesses, South Africa could do well to look to emerging economies such as Brazil and India, which have attracted much attention in their recent efforts to create greater and more equitable economic growth. There is much South Africa can learn from these two countries, with gross domestic product (GDP) growth in India edging towards 10% a year and with Brazil ranked as one of most entrepreneurial countries in the world according to the 2009 Global Entrepreneurship Monitor (Gem) Report. 

Policymakers, consultants, bureaucrats and all those that serve small businesses in South Africa have become increasingly aware that more needs to be done to support small businesses if the country is to address widening inequality and persistent poverty as well as unemployment and job losses. It is also crucial to build a society that can create wealth more effectively, particularly with South Africa heading towards a dangerous dependency on state benefits with the number of social grant beneficiaries having risen sevenfold in just 10 years, from two million in 1999 to 14 million in 2009.

The promotion of small businesses is one way the government could tackle South Africa’s current and future economic challenges. In particular, the growth of small businesses could help reduce the population’s dependence on state-funded grants, while boosting job creation and creating equitable growth. However, numerous factors such as a lack of business and financial management skills impede the growth or setting up small enterprises. In the meantime serious developmental opportunities are being foregone: according to researchers Finmark Trust’s Finscope 2010 survey, small businesses could
create 2.5 million jobs by 2020. Added to this Finmark believes that the government could take about 500 000 people off social grant schemes if it supported small businesses more actively.