IN APARTHEID SA the government did little to create an enabling environment for entrepreneurs. As a result, starting your own business seemed a less attractive option than joining a corporation.

While studies continue to show that the number of small businesses as a percentage of all businesses remains far lower in SA than in both the developed and the developing world, South Africans are now more attracted to the idea of starting their own businesses.

This shift may be attributed to a number of factors. The change began with the advent of the ANC government. It has placed increasing focus on the development and sustainability of small businesses. The drive began in 1995 with the White Paper for the Development and Promotion of Small Business in SA. It has increased in urgency and momentum over the past 10 years, the latest initiative driving it being the deputy president’s Asgisa programme. Part of its function is to place specific emphasis on growing small business by lightening regulatory burdens in conjunction with broad-based black economic empowerment (BEE) initiatives targeting small and medium businesses (SMEs).

Secondly, the global trend among women looking for increased flexibility in terms of work hours and workplace location, coupled with government's strong focus on gender empowerment and BEE, has led to an increase in the number of self-employed women.

Thirdly, with declining growth rates, high levels of unemployment and increasing incidences of downsizing and retrenchments between 1997 and 1999, running one’s own business now seems less risky, in some ways, than becoming a “victim” of retrenchment. .

Another possible reason for the increased appeal of self-employment has been the focus on affirmative action. With the promulgation of the Employment Equity Act in 1996, self-employment began to seem a more attractive option for many white males.

The more recent trend of supporting and promoting the development of black entrepreneurs through enterprise development on the broad-based BEE scorecard has also made starting a business more attractive for black entrepreneurs.

Of the reasons stated above for the increase in self-employment and owner-managed businesses, four are closely related to transformation and empowerment. Yet although BEE has clearly been one of the drivers of self-employment and the creation of small and microenterprises, it is essential that broad-based BEE now successfully transforms the self-employed and small business sector into one that creates jobs and profits.

One of the key ways to ensure that this is indeed the case is the effective implementation of incentives for procuring from small businesses.

The draft codes on procurement have specific set-asides for procurement from micro enterprises and qualifying small enterprises (QSEs), but these are problematic in the sense that large businesses are disinclined to award larger contracts to small businesses lest the contract catapults the small business’s turnover to such an extent that it is no longer a “qualifying small enterprise”. In such cases, the big company will effectively lose some preferential procurement points.

The trade and industry department’s period for commentary on phase two of BEE closed on March 31 and its BEE unit is engaged in working through public comments, which include concerns about the turnover thresholds for QSEs and the impact of the proposed preferential procurement set-asides.

The department's final document will need to find a balance between rewarding procurement from small and very small businesses, while making this viable and attractive for larger companies through increased scorecard points.

Another key way to ensure the growth of small business is by decreasing the cost of doing business. This includes both the cost of BEE compliance as well as the cost of verification.

Possible solutions to the former, which have been raised during the public commentary period, include allowing small and medium enterprises (SMEs) to outsource skills development, enterprise development and CSI contributions to third parties, which will implement training, enterprise development and CSI initiatives on their behalf. This will allow the enterprise to focus on its core business.

The department is looking into ways of reducing the cost of verification for SMEs. It is critical that an SME gets the financial benefits from having a BEE verification certificate, and that these benefits far outweigh the cost of verification. This can be ensured only if procuring from small businesses is heavily incentivised on the broad-based BEE scorecard, in conjunction with other SME growth initiatives.

Clow-Wilson is research and special projects manager at Empowerdex.