447. South Africa has progressively shifted away from dependence on primary resource production and commodity-based industries to open up to international trade and to building capacity in some knowledge-intensive industries.
448. The Ministry of Small Business Development was established in 2014 marking a turning point in history of MSME's and Co-operatives development in South Africa, demonstrating Government's commitment to place MSME's and Co-operatives at the centre of economic growth and job creation.
449. In the context of economic growth, MSMEs play an important role as levers for economic development. Research undertaken in this respect highlights the fact that generally, an active MSME sector creates opportunities resulting in higher volumes of production, employment, entrepreneurial talents and increases in export of goods and services. Furthermore, it is noted that, in addition to being a lever for increasing economic growth, MSMEs can eventually grow into larger firms that are able to contribute to increased employment opportunities as they evolve through the business cycle.
450. The term MSME covers widely different types of firms. Everything is included, from fragile zero growth micro-firms (normally employing up to a couple of workers generating subsistence level revenues) to fast growing medium sized firms with up to 250 employees. The role these firms play for the developing economy and the challenges they face are often completely different. Micro firms often struggle with fluctuating revenues, red tape complexity, and lack of knowledge and relevant competencies. For medium sized firms, access to sufficient amounts of risk capital, access to technology and access to stable electricity supply may be more of a challenge.
451. South African organizations are classified as 'small' when they have fewer than 50 employees and 'medium' when they have fewer than 200 employees (or fewer than 100 for agricultural organizations). Only 25% of new MSMEs created in South Africa survive the first two years of operation. As in most countries across the world, MSMEs play a critical role in economic contribution and employment. MSMEs are estimated to contribute 46% of the total economic activity and 84% of private employment in South Africa. Research shows that 68% of all workers in South Africa are employed by small businesses employing fewer than 50 people.
452. Innovation in MSMEs lags that involves large enterprises, MSMEs face significant challenges in this context. MSMEs tend to have limited resources (financial, human, and physical) and fewer systematic management capabilities. Their market penetration is restricted due to the size of their organizations, while securing and enforcing IP is challenging due to the costs involved. A lack of basic business management and risk management system is also relevant in this regard. MSMEs are thus vulnerable when they enter into commercialization relationships.
453. The Department of Trade and Industry (DTI) supports the export process for MSMEs which is driven from a sectoral perspective, and sector strategies offer the framework within which exports are encouraged and incentivized. The DTI focuses on promoting sectors of the economy that have shown the greatest growth potential and marketability.
454. In partnership with Provincial Investment Promotion Agencies (PIPAs) and Export Promotion Agencies, the DTI promotes investment and export activities in targeted markets. It has teams operating from regional offices around the world providing market intelligence and identifying opportunities for South African companies, as well as sector specialists offering advice on export processes and procedures.
455. Export-oriented companies have, in partnership with the DTI, organized themselves into so-called Export Councils, which target specific markets. These assist exporters in reaching their targets, and specifically enable small businesses in any sector to access DTI support structures.
456. The DTI also provides incentives to exporters – with a special focus on small, medium and micro enterprises (SMMEs) and black economic empowerment (BEE) exporters – through the Export Marketing and Investment Assistance (EMIA) scheme.
457. I would like to quote just one example of a small business that has been able through support access foreign markets and this company is called PlayPump™.
458. The story of this company is essentially that the idea was first dreamt up by an engineer and borehole-driller, Mr. Ronnie Stuiver. As he traveled the country drilling wells, and saw fascinated children would crowd round him – most with boundless energy and few outlets for play. He devised a merry-go-round attached to a simple pump. When children spin the merry-go-round, the attached pump pulls water from the ground. His company later developed and patented the PlayPump™ water system. The word PlayPump™ is registered as a trademark throughout the world, and has been installed in disadvantaged communities across the African continent.
459. Many developing countries with moderate research activities suffer from an innovation void because they fail to bridge the gap between knowledge generation and knowledge application. The story of PlayPump™ depicts how a small initiative can be very effective in bridging the gap to bring basic technology to communities and thus transform the lives of millions of people.