Views

SMEs are vital routes to cut back unemployment

By Gwen Mahlangu-Nkabinde

 29 April 2010, Business Report - As the world economy continues on a somewhat slow recovery path, South Africa should not waste the economic rebound opportunity by not recharting strategies and approaches that ensure labour-intensive economic opportunities are created.

In as much as our economy has lost jobs during the recession and the momentum of job creation picks up, small and medium enterprises (SMEs) remain among the important anchors to rely on in our efforts to grow the economy on a labour-intensive path. This is because their capital and operating structures are less complex compared with large capital-intensive businesses and therefore less complex strategies and approaches are needed to create labour-intensive economic opportunities.

Furthermore, research reveals that SMEs employ 52 percent of the South African workforce, contributing 43 percent to gross domestic product.

Among other things, the creation of labour-intensive economic opportunities is the government's focal point in order to absorb the many job seekers, both skilled and unskilled, who have been unemployed for years and yet witnessed the country's past successes on economic growth.

It is therefore important to stimulate business cultures and employment creation capacities that are linked to our economy's inherent or structured nature. At the same time the country's competitiveness must be grown to keep up with that of the world economy.

The skills gap is a major challenge in our economy. It could retard faster and better economic development in the medium to long term if the skills creation pace does not move faster to be at par with large capital intensive and specialised services businesses' pace of creating skills-intensive job opportunities.

These businesses are not to blame in this respect. It ought to be seen as an inevitable reality emanating from the country's innovation improvements and technology changes that result in skills-intensive job opportunities being created.

Even though our economy battles with the skills gap, it remains vital to strike a short- and long-term balance in resolving this challenge.

Job creation should still occur at a reasonable pace in order to absorb the many job seekers.

Job creation in the short term should therefore be based on the structured nature of our labour pool that is underpinned with strategies that boost on-the-job training. This means that unskilled and relatively educated job seekers are afforded employment opportunities that are less skills-intensive, but in the mid to long run avails opportunities to build skills that equip them for skills-intensive jobs.

SMEs tend to create labour-intensive economic opportunities that are less skills-intensive and possess a springboard to transform less skilled workers into skilled workers as the businesses grow. It therefore presents a great opportunity to the Economic Development Department, all government departments and the private sector to ensure that many SMEs are promoted and complement the vision of a labour-intensive economic growth path.

The SME platform also avails one of the best opportunities for new entrant entrepreneurs to learn and grow business wisdom that is essential to run larger businesses.

Successful SMEs with adequate expansion capacity should be encouraged to transform into larger businesses and in turn create more job opportunities.

Besides the economy challenging the skills of work seekers, entrepreneurial skills are also challenged.

Among others, a solution is perhaps to entice many experienced workers who have attained entrepreneurial skills through their job responsibilities, to start small and medium businesses that are labour-intensive driven.

The government will then support them to be successful entrepreneurs and avoid their entrepreneurial skills being eroded through business failures. One of the critical aspects that necessitate the success of SMEs is the availability of appropriate competitive markets to sell their products. A competitive supply chain is also paramount in order for SMEs to produce and sell competitively priced quality products.

In this regard, the government will always strive to ensure that certain markets are competitively protected so that new entrant SMEs can grow appropriate business stamina to be competitive players in the economy.

Furthermore, necessary support to grow SMEs by the state's development funding institutions will be expanded based on the needs or challenges that exist.

SMEs are important players that are going to contribute to the success of the economy attaining the intended outcomes of a labour intensive growth path in future.

On the labour side, employment seekers are to be more patriotic. This means being prepared to take on the created job opportunities, work hard and grow their skills, being inspired by the vision of a developmental state.

On the government front, the correct implementation of economic policies and dedicated commitment that ensure SMEs thrive is vital in order for SMEs to smoothly propel the creation of many labour-intensive economic opportunities.

In turn, this will significantly help to cut back on unemployment, therefore reducing poverty and inequality.

Gwen Mahlangu-Nkabinde is the Deputy Minister of Economic Development.

Source: Business Report. View original here.