GOOD speech by Brett Herron,
GOOD: Secretary-General & Member of Parliament
10 May 2022
Note: this is the speech that was delivered by GOOD Secretary-General and Member of Parliament, Brett Herron, during today’s Parliamentary Budget Vote on Small Business Development.
If the State is seriously looking to the small business sector to create nine million jobs and lead South Africa’s socio-economic recovery, it’s going to need to bring the banking sector to the party and jointly develop an enabling environment that acknowledges small businesses’ struggles in a struggling economy over the past decade-and-a-half.
The fact that just 27% of the R200 million COVID-19 loan guarantee scheme announced by President Ramaphosa in April 2020 has actually been approved, with another 13% somewhere in the pipeline, shouts at us to wake up and smell the coffee.
It reflects the very wide gulf that exists between the vision of small businesses leading South Africa’s socio-economic recovery and the precarious position many small businesses that haven’t been forced to their knees over the past two years actually find themselves in today.
According to the Banking Association of SA, the main reason that just 27% of the loan guarantee scheme had thus far been approved was due to many small businesses having already been in financial distress before the Covid disaster struck.
Many small businesses were not in good standing before the pandemic did not have a good record of paying their debts, and had unrealistic expectations of borrowing money they’d be unable to repay.
If just 27% of entities had their books in order and ducks in a row on entering Covid, it implies that nearly three-quarters of the sector was already in trouble at the time.
Even if the extra 13% of applications are eventually approved, it implies that 60% of small businesses entering Covid were un-fundable, according to the present financial sector rules.
The loan guarantee scheme announced by President Ramaphosa was a joint initiative of government, the banking sector, the Reserve Bank and the Treasury. Treasury would initially provide a R100 million guarantee with the option to increase it to R200 million if needed and provided the scheme was successful.
If we could only disburse R27 million of a potential R200 million loan guarantee – in two years, the teeth of the lockdown financial disaster – how do the State and financial sector propose to materially assist small businesses to grow nine million jobs. now?
And what happens to businesses still in distress and drowning in debt, including all those excluded from benefitting from the Covid loan scheme? Do we right them all off?
Should we be considering an amnesty of some kind, coupled with business development assistance, to enable them to keep operating? Should we be obliging established businesses to play a mentorship role in guiding new entrants to the market?
In an economy of such dramatic inequality as ours, without changing the rules, the real existential question remains: How do new businesses enter the game if they don’t have the resources to tap into loans? And, are the rules of the game too geared to further enrich those who already have resources, which implies that most South Africans are excluded?
Media enquiries:
Brett Herron, GOOD: Secretary-General & Member of Parliament
Cell: 0825183264
Email: bretth@forgood.org.za
Samkelo Mgobozi, GOOD: Media Manager
Cell: 0792315977 (WhatsApp)/0829684021 (calls)
Email: samm@forgood.org.za