Government, central bank key to SMME growth

BETTER co-ordination is needed between the government and the Reserve Bank to create an environment that encourages the growth of sustainable small, medium and micro enterprises (SMMEs).

This is the view of Nicholas Biekpe, the president of the AfricaGrowth Institute, who added: ‘By that I mean the central bank and the government should co-ordinate their policies in such a way that each knows what the other has in mind.’Biekpe, who is the visiting professor of development finance and econometrics at UCT’s Graduate School of Business, was speaking this week in South Africa after the release of survey findings that showed confidence levels in the SMME sector had increased in line with the economic growth data released by Statistics SA recently.’This is excellent news for the sector, but it will help a great deal if the central bank could cut interest rates by 50 basis points during the next monetary policy committee meeting, to help reduce the debt burden of SMMEs.’According to the study, based on the responses of 1 700 randomly surveyed small businesses, the upswing in the third quarter continued from the second quarter after it had fallen to a two-year low between December last year and March this year.This quarter confidence levels in all the three main sub-sectors of SMMEs – the trade, industrial and services sectors – had increased.The overall business confidence index averaging all the three indices increased 8,06 per cent to 52,84 points from 48,90 points previously.However, Biekpe warned that despite the rise in sentiment, most businesses surveyed had raised key issues affecting them negatively, including late payments by the government, high taxes, inadequate access to credit, staff costs and insufficient demand for goods and services.Thami Mazwai, the head of the Centre for Small Business Development at the University of Johannesburg, agreed that a 30-day payment period and an interest rate cut were essential to promote small enterprises.Mazwai said: ‘Our economy needs a booster and the interest rate cut will do, and if the government could adhere to its commitment of paying within 30 days.’However, Mazwai said he did not think SMMEs were out of the woods yet as spending during the festive season was unlikely to be great.’SMMEs normally ride on the growth of big business. If this sector does not do well, neither will small businesses.’ – Business Report