SMD

Annual Report 2023/2024

% To create 9 million of South Africa’s 11 million needed jobs by 2030 through the SMME sector, and so contribute to reducing the unemployment rate to 6%. % To reduce the cost of regulatory compliance and promote ease of doing business for SMMEs and ensure policy coherence through partnerships among for SMMEs and ensure policy coherence through partnerships among key societal players, business and government. However, it is recognised that in South Africa, the majority of SMMEs and Co-operatives are concentrated at the lower end of the enterprise development spectrum and face additional challenges, including: % Lack of access to finance and poor profitability, which account for the main reasons for business discontinuance. % Inadequate collateral on the part of the entrepreneur, a lack of credit history, the inability to produce an acceptable business plan according to financial institutions, poor market research and the absence of a viable business idea. % Lack of access to vibrant markets, which become one of the fundamental requirements to accessing funding and mentorship at early stages. Notably, small businesses located in rural areas are at a disadvantage compared to their urban counterparts. % Restrictive labour laws, which are identified as a significant regulatory obstacle to entrepreneurship and low skills business growth, particularly when it comes to hiring and firing staff. % Inadequate access to ICT and communication infrastructure, utilities and transport, land or space at affordable prices, which is instrumental to supporting new businesses. % Inadequate support for building Research and Development (R&D) capacity among SMMEs, which could help in transforming ideas into sustainable businesses. % Lower levels of entrepreneurship and low skills level in enterprise, financial and business management by SMMEs and Co-operatives. While addressing these challenges might seem a daunting task, the Department has already made significant strides in ensuring that SMMEs and Co-operatives are accorded their rightful space and voice within the South African economy.

During the current administration, the Department was assigned a responsibility to ensure that at least 50% of funding instruments of national and provincial Development Finance Institutions (DFIs) are dedicated to SMMEs and Co operatives through establishment of the SMMEs and Co operatives Funding Policy. During the year under review, the DSBD in line with its mandate has embarked on the process of finalising the first South African SMMEs and Co-operatives Funding Policy to create an enabling environment to support formation, expansion and maintenance of existing small businesses. The SMMEs and Co-operatives Funding Policy is aimed at: % Deepening access to finance. % Increasing the number of small enterprises that are established. % Reducing the level of concentration or monopolies in certain sectors of the economy, transforming the ownership patterns of the economy. % Addressing the financial literacy challenges amongst small businesses and Co- operatives in both formal and informal sectors by promoting financial education. % Focusing on unserved and underserved areas such as townships and rural areas. % Advocating for a reduced red-tape environment for small enterprises. As part of the SMMEs and Co-operatives Funding Policy development process, an implementation plan was generated to guide its operationalisation by outlining practical steps on how to implement the Policy, identifying the role players to be involved in various initiatives, managing the anticipated risks and mitigating factors, and communicating the intended outcomes of the Policy. The implementation of the SMMEs and Co-operatives Funding Policy is expected to eliminate issues related to lack of coordination on SMMEs and Co-operatives funding support programmes, double dipping and ecosystem fragmentation. The period under review has been challenging for the Department at an operational level. On 31 August 2023, the Government introduced Cost Containment Measures to assist national departments, public entities and provinces to close fiscal gap. This was due to deteriorating revenue collection and funding conditions since the tabling of the 2023 Budget. The tax revenue under collection has worsened, already

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Department of Small Business Development • PERFORMANCE INFORMATION • Part B