Small Business

Topics: Small business, Economics, Business Pages: 10 (3060 words) Published: May 20, 2013
Implemented late 2010, the New Growth Path (NGP) focuses primarily on employment creation as its pinnacle crux, with the vision of 5 million jobs being created by 2020 (New Growth Path, 2010:8). Analogous to its predecessors (RDP, GEAR and AsgiSA), the NGP sets out multiple ambitious targets, much to the scepticism of many economic debates. This essay will prove to contend that the NGP and its ancillary initiatives will substantially support the development of small business, and consequently aid in economic growth and job-creation. Firstly, a background of the small business sector will be provided in order to assert the relevance of the sector as a key driver of the economy. Then an analysis of the micro- and macro-economic policies will be provided, focusing primarily on the effect the policies have on small business. International comparisons will also be made, with the case of Brazil, a key BRICS member. Finally, alleged drawbacks of the NGP will be rebutted; some with the aid of the projected rand-dollar exchange rate vis-á-vis the minimal effectiveness of the NGP.

2. Background
Small business in South Africa is incorporated in the collective category: Small, Micro and Medium Enterprises (SMME) (Ntsika, 1999:16). The SMME sector in South Africa comprises a significant contribution to both economic growth and employment. The sector currently boasts a 30% contribution to national GDP (Herrington, 2007). It also accounts for 73% GDP in the community, social and personal services category, and a prominent contribution (approximately 60%) to agricultural, trade and construction industries (Herbst, 2001:111). Furthermore, small business contributes 61% of total national employment (Herbst, 2001:112).1

Strong evidence certainly suggests of the potential influence that small business has on the success of the NGP. To date, it has been argued that small businesses are not adequately playing their expected role in the economy (Agupusi, 2007). This is due to a number of constraints, viz. policies which do not sufficiently deal with the semi-formal and informal business sectors, and the restrained capital allocations given by government institutions such as the Khula Fund and the Industrial Development Corporation (IDC) (Agupusi, 2007). With the revision of these drawbacks under the NGP, small businesses now certainly have an increased potential to be a greater engine for economic growth and employment creation. 3. NGP Policies: Micro- and Macr0-environment

In order to establish the strength of the NGP, it is necessary to study the various micro- and macro-environment policies which form the basis of the policy document. The fundamental policies include (but not limited to): competition, infrastructure, trade, procurement, financing and tax relief.

1 Estimates are subject to variation due to poor SMME data collection prior to year 2000. See Ntsika (1999:61) Entry No: 105
Undergraduate Page 3 of 11
3.1 Competition
The first identifiable manner in which the NGP proves to favour SMME-generated economic and employment growth is through its competition policy. In the president’s State of the Nation Address (2012), strong attention was directed to policy developments with a high domestic focus. Much to the benefit of SMMEs, the NGP has adopted a more pro-active stance by reiterating the need for a stronger domestic competition policy. The promotion of fair competition, including more stringent laws and financial consequences against anticompetition, is inherent to the success of small business (Etro, 2007a). The NGP’s adapted2 competition policy signals a greater effort to prevent price fixing, market division and collusive tendering, which often marginalises small businesses out of markets (Alexander, 2004:136).

One can further find indications of the success potential of the policy: Kampel’s (2004) 3 recommendations of the dire need to improve on the effectiveness of the prior competition policy, in relation to its time- and...

Bibliography: Berger, A. 2006. A More Complete Conceptual Framework for SME Finance. Journal of banking
& finance pp
Cant M, Ligthelm A. 2003. Problems Experienced By Small Businesses in South Africa. [Online].
Demirguc-Kunt, A., Maksimovic, V., Beck, T. & Laeven, L. 2006. The determinant of
financing obstacles
Government Printer, 2010
Available: [1 April 2012]
Gordhan, 2012
Herbst, J. 2001. Small Business Environment in South Africa. Working Paper. University of
International Finance Corporation (IFC). 2006. A dianostic study on Access to Finance for
women entrepreneurs
Kampel, K. 2006. The Role of South African Competition Law in Supporting SMEs. [Online].
Levy, B. 1996. Industrial SMEs in South Africa. Informal Discussion Papers on Aspects of the South
African Economy No
Ligthelm, A. & Cant, M. 2002. Business success factors of SMEs.Pretoria: University of
South Africa.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Business Proposal Essay
  • Small and Medium Enterprise in Bangladesh Research Paper
  • Small Business and Market Materialism Uber Essay
  • Small and Medium Scale Enterprise Essay
  • Small Scale Industries Essay
  • Small and Medium Scale Mining Essay
  • small scale industry Essay

Become a StudyMode Member

Sign Up - It's Free