Buy local, from small business should be a collective effort

JOHANNESBURG - The Insert by Proudly SA’s chief executive, Eustace Mashimbye (Business Report Opinion&Analysis, April 10) laments the high failure rate of SMMEs and rightly identifies market access as the solution.

It goes on to mention Proudly SA’s efforts to drive market access for SMMEs.

 The high failure rate mentioned (67 percent by the SMME’s fourth year) indicates that more is needed. The ultimate performance indicator is the unemployment rate. At 26.7 percent we are in a national crisis. Seventeen million people depend on social grants and about 9 million are unemployed.

Human beings have the unfortunate capability of acclimatizing to almost any environment. Joblessness and consequent dependence on the charity of state and private donors have come to be accepted as normal. But it is grossly abnormal.

Another potentially self-defeating tendency is the inability to see how an individual’s actions contribute to a macro-level problem and eventually come back to impact them individually. Everyday symptoms include low voter turnout, willingness to offer a bribe to traffic officers, littering, etc. As South Africans, we seem blind to the economic impact of buying foreign-made products at the expense of locally-produced goods. We are similarly apparently blind to the detrimental impact of buying from a large corporate entity rather than a small local business.

SMMEs employ 60 percent of our labor and contribute about a third of our GDP. In China, they employ 90 percent of labor, contribute 60 percent to the GDP, and are responsible for nearly 99 percent of new jobs. Donald Trump’s recent attempts to alter the US trade balance with China show just how effectively China has managed to force business in and with their country in the Chinese favor. This has generated market access opportunities for Chinese companies while erecting barriers to foreign-produced products. I am not advocating protectionism, but the ultimate performance indicator, the unemployment rate, points to a resounding success for China at 3.9 percent. The US jobless rate itself is 4.1 percent. Yet the two are still fiercely fighting hard to create and retain jobs!


South Africa’s National Development Plan (NDP) targets a 6 percent unemployment rate by 2030. To be on target, we should have been at around 16percent by now. We are 10 years behind schedule, and this should result in national panic sobered with a review of the NPD and its implementation strategy.

But it is your problem and you are the cause. It results in you paying one of the highest personal tax rates in the world, and having to roll up your window at traffic lights to signal an approaching beggar to move on to the next car. Something as simple as checking the source when buying fruit and veggies at a supermarket, or better yet, at a local spaza shop, is an act that will lower your income tax rate, and VAT, and eventually improve your quality of life.

Proudly SA has not been able to effectively change the national psyche to buy local and small businesses. To be fair, they cannot do it by themselves.

Such a campaign should also be directed at the government in general and corporate SA. The 30 percent target set by the B-BBEE Codes of Good Practice is simply not enough. We should be aiming for 60 percent.

Mashimbye notes that Proudly SA intervenes once SMME development has taken place from various incubators and development entities. His organization comes in at the tail-end of the process. With all due respect, this is an incorrect approach. Proudly SA should come in at the beginning of the process.

Putting SMMEs through three years of development and then hoping to find market opportunities afterward has been the norm locally. It has clearly had very little “return on (a lot of) run-around”.

Sadly, it has resulted in tens of millions of wasted development funds. Without a clear market opportunity directing development interventions, we have a confused mess, heavy on unnecessary training and exhibitions, but very low on impact.

The truth is that black SMME owners have development and training fatigue.

Karabo Mashugane is the chief executive of 20/20 Insight – a specialist in B-BBEE advisory, supplier development, and SME financing.

The views expressed here are not necessarily those of Independent Media.