Government budgets must empower small businesses

Cape Town – President Jacob Zuma says government budgets must be used to achieve the objective of economic transformation, which ultimately seeks to benefit the majority of South Africans.

Delivering the State of the Nation Address (SONA) to a Joint Sitting of Parliament on Thursday night, President Zuma said the State spends R500 billion a year buying goods and services. Added to this, government also has a R900 billion infrastructure budget.

He said interventions to accelerate economic transformation in the year ahead will include using legislation, regulations, licensing, budget and procurement as well as Broad-based Black Economic Empowerment Charters to influence the behaviour of the private sector and drive transformation.

“As a start, the new regulations that make it compulsory for big contractors to subcontract 30% of business to black-owned enterprises have been finalised and were gazetted on the 20th of January,” he said.

President Zuma said through these regulations and programmes, government will be able to use the State buying power to empower small enterprises, rural and township enterprises, designated groups and to promote local industrial development.

“Two key challenges we face is the high levels of concentration in the economy as well as collusion and cartels, which squeeze out small players and hamper the entry of young entrepreneurs and black industrialists.

“The competition authorities have done excellent work to uncover the cartels and punish them for breaking the law,” he said.

Last year, the President signed into law a provision to criminalise cartels and collusion. The law came into effect on 1 May. The provision carries jail sentences of up to 10 years.

“We are now stepping up our actions to deal with the other challenges, namely economic concentration, where a small grouping controls most of a market. 

“During this year, the Department of Economic Development will bring legislation to Cabinet that will seek to amend the Competition Act. It will, among others, address the need to have a more inclusive economy and to de-concentrate the high levels of ownership and control we see in many sectors. We will then table the legislation for consideration by Parliament.

“We reiterate that radical economic transformation should mean moving beyond share ownership schemes only,” he said.

The President said government would like to see black people involved directly in business, owning factories.

He said in this regard, the development of the Black Industrialists Programme is thus critical.

“The programme has from inception supported more than 22 entrepreneurs. In this way, we seek to open up the economy to new players, give black South Africans opportunities in the economy and indeed help to make the economy more dynamic, competitive and inclusive.

“This is our vision of radical economic transformation.”

Getting the ownership balance right

He said government will use all levers of the State to implement radical economic transformation.

“The skewed nature of ownership and leadership patterns needs to be corrected. There can be no sustainability in any economy if the majority is excluded in this manner. In my discussions with the business community, they accepted these transformation imperatives.

“Today, we are starting a new chapter of radical socio-economic transformation. We are saying that we should move beyond words to practical programmes.

“The State will play a role in the economy to drive that transformation. In this regard, government will utilise to the maximum the strategic levers that are available to the State,” he said.

Majority of black South Africans excluded from economic participation

According to the National Empowerment Fund (NEF), only 10% of the top 100 companies on the Johannesburg Stock Exchange are owned by black South Africans through the black empowerment codes.

President Zuma said in terms of the 2015/16 information submitted to the Employment Equity Commission, the representation of whites at top management level amounted to 72%, while African representation was at 10%.

The representation of Coloureds stood at 4.5% and Indians 8.7%.

The report further provides that white South Africans, in particular males, are afforded higher levels of recruitment, promotion and training opportunities, compared to the designated groups, the President said. – SAnews.gov.za