The folly of creating businesses whilst tolerating a criminal-friendly environment

Johannes Wessels
@johannesEOSA1

The South African enterprise world remains in critical condition despite numerous initiatives to cultivate entrepreneurship and new businesses since the real causes undermining its well-being are not addressed.  One of the fundamental causes for a struggling enterprise world is the fact that SA is more criminal-friendly than enterprise friendly.

Mooi River LEGO

We’ve seen that:

Comfortable in this paradigm, Government embarked on an interventionist road to transform the economy in accordance with its perceived reality. It launched a range of black enterprise incubation programs with massive grants, prescriptive procurement strategies, BEE, industry charters, interference with IP and a commitment to even expropriate without compensation.

Continue reading “The folly of creating businesses whilst tolerating a criminal-friendly environment”

Are our enterprise policies shaped by obsessions? Paradigm paralysis (2)

Ramaphosa’s Manifesto – “A New Deal” – envisages the “massifying” of black enterprises to promote growth and job creation. It is shaped – like the National Development Plan – by the paradigm of SMEs as prime agents for growth and jobs. As the belief in the curative effects of bloodletting – it was the general consensus – acted as a barrier that prevented the consideration of alternative treatments, the belief in SMEs obscures evidence that net job creation is largely independent of firm size.

Convictions, one must remember, do not necessarily yield to evidence.

Masaai Mara crossing

For the creation of several hundred thousand successful businesses (or would “massifying” – Ramaphosa’s term – imply businesses by the million?) there needs to be at least a similar number of entrepreneurs with effective business skills and plans for these businesses to have a chance of survival.

But for a business to succeed one needs other ingredients than mere entrepreneurial aptitude and astute management: it requires support from customers and clients. Successful “massifying” of new businesses would therefore depend on a prior (or at least simultaneous) mushrooming of the spending power of existing consumers and/or the “massifying” of consumers.

On that, the New Deal is silent… Could a 2016 warning about economic transformation hold the explanation?

Continue reading “Are our enterprise policies shaped by obsessions? Paradigm paralysis (2)”

SA’s fight against unemployment: The importance of pet food, popcorn & detergents in the quest for growth

Johannes Wessels
@johannesEOSA1

On a sunny autumn morning in Bloemfontein I visited a business hand-picked by Government as a National Gazelle: one of the firms Government believes has the potential for massive growth and substantial job creation to attack the three-headed dragon of inequality, unemployment and poverty.

Popcorn & Flat Bread

The National Gazelles Programme is financed (well, by tax-payers) through SEDA (Small Enterprise Development Agency) and the Department for Small Business Development (DSBD). In the first phase 40 firms were identified in “10 priority industry sectors aligned with the National Development Plan and SEDA’s SME strategy”. The recruitment of the next batch is underway. (In enterprise literature, a Gazelle is defined as a company that grows by at least 20% per annum for 4 successive years)

Having covered  the decline in the number of formal businesses and how company losses now exceed taxable company income , as well as Government’s failure to create a business-friendly environment , the focus is now on the positive steps Government has taken to promote private enterprise.

Continue reading “SA’s fight against unemployment: The importance of pet food, popcorn & detergents in the quest for growth”

Ready to choose a San hunter rather than a Sherpa guide for mountaineering? Dlamini-Zuma on Radical Economic Transformation

When Nkosazana Dlamini-Zuma announced her Manifesto for Change, she reminded me somewhat of the stern Mother Abbess singing “Climb every Mountain” for Maria (Julie Andrews) in The Sound of Music.

Definitely not her voice, but her words… Dlamini-Zuma summoned support for Radical Economic Transformation (RET): “We must know which hills to tackle next. …(t)hese are the mountain of economic transformation, the highland of land redistribution and the summit that must see us educating and skilling our people. If not, the negatives will swallow the gains we have made.

Mother Abbess

Marvellous libretto…

Continue reading “Ready to choose a San hunter rather than a Sherpa guide for mountaineering? Dlamini-Zuma on Radical Economic Transformation”

A Cyril Swallow does not make a Summer of Growth: How business friendly is Ramaphosa’s New Deal?

We need to massify the creation, funding and development of black-owned small businesses, township businesses and co-operatives.” Cyril Ramaphosa’s New Deal for South Africa (14 Nov 2017).

This quote from Ramaphosa’s 10 point plan manifesto to get the economy growing forms part of the action steps under Point 5: “we must accelerate the transfer of ownership and control of the economy to black South Africans.

At first take the creation of an immense number of enterprises sounds like a pro-business approach. But is this objective realistic? Will it render the desired outcome? Even more basic: is it sound economics?

The New Deal is silent on how this enterprise factory that will mass-produce black-owned businesses would work. Whilst the manifesto was announced in the context of the ANC leadership contest, the “we” that Ramaphosa refers to is clearly Government and its administrative institutions. Continue reading “A Cyril Swallow does not make a Summer of Growth: How business friendly is Ramaphosa’s New Deal?”