Godongwana says SME growth key to boosting sluggish economy

Finance Minister Enoch Godongwana said supporting small and medium-sized enterprises (SMEs) by minimizing the factors limiting their growth is key to building a vibrant and resilient business sector as well as driving economic growth.

Godongwana was speaking at the release of the Southern Africa – Towards Inclusive Economic Development (SA-TIED) special report on Thursday, organized in partnership with Business Day Dialogues.

“SMEs are an essential part of this, because they generate jobs, adapt [with] more flexibility in the face of changes in the economic environment and redirect their funds to local communities,” the minister said.

Godongwana added that for SMEs to realize their potential and effectively play their role in stimulating economic activity, barriers to their growth must be reduced.

This ultimately reiterates his predecessor Tito Mboweni’s reform plan, Operation Vulindlela, which pledges to address key structural economic issues.

“There is this discussion now in Operation Vulindlela which is looking at reducing bureaucracy to ensure that small and medium enterprises, [have less] regulations on them and they can have space to grow,” Godongwana said.

Read: Godongwana pledges to reform and cut red tape to boost economy

Fostering a robust and resilient economy requires a recalibration of “policy measures that promote greater access to private sector finance, particularly for SMEs,” and increased support for research and development that will help improve productivity gains.

These are some of the recommendations of SA-TIED’s special report on the transformation of the country’s economy made with regard to the achievement of the Minister’s economic objectives.

Policy coordination

Despite his declarations, the minister recognizes that there is no miracle solution that can solve South Africa’s economic challenges overnight. He said several interventions must be coordinated to build a robust economy, adding that the country’s economic policies must work together to ensure success.

“It is clear that the historic low levels of growth in the national economy reflecting several structural challenges are insufficient to meet our development challenges.

“Macroeconomic policy alone cannot address these poor long-term growth trends. However, effective fiscal monetary policy plays a critical role in addressing high levels of income inequality.

In this light, the Minister of Finance added that South Africa’s economic policy cannot only focus on inward looking to facilitate growth, but must also aim to facilitate and agitate economic activity on the continent and with neighboring countries.

Foster regional growth

“The integration of markets in Africa is at the heart of economic development, not only in South Africa, but on the continent as a hole.

“Trade is at the heart of all our economic growth. South Africa has the potential to become an engine of inter-regional trade and industrial development by linking other Southern African countries to the value chain,” said Godongwana.

To facilitate this regional economic activity, one of the report’s recommendations is to reinvest in the operation of the country’s Special Economic Zones (SEZs).

“South Africa’s Eastern Cape SEZs are latent engines of growth and employment that can be best harnessed by improving infrastructure and the capabilities of local providers,” the report notes.

“Other Southern African SEZs require the addition of a strong business service offering, streamlined regulations and procedures, consistent incentive structures and organization around strategic anchor industries to revive the formation of agglomeration economies.”

World Bank support

To support these economic ambitions, the South African government has received financial support from the World Bank in the form of an 11.4 billion rand ($750 million) loan.

The World Bank last week approved the country’s loan request to help deal with the socio-economic impact of Covid-19, which has seen South Africa record more than three million infections so far. day.

Read: World Bank approves R11.4 billion loan to support South Africa’s Covid-19 recovery

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