President Cyril Ramaphosa announced the Economic Reconstruction and Recovery Plan in Parliament yesterday.
While the plan offers little new information to save our economy from complete destruction,
there is nothing new for entrepreneurs and small businesses to take heart from.
South Africa and its economy, like the rest of the world, face unprecedented times as a result of Covid-19.
This situation is not a normal economic downturn, and we cannot address an abnormal economic cycle with a normal response. This plan offers only the normal response that we’ve seen before.
The small business (SMME) sector has been the hardest hit during the COVID-19 pandemic and many businesses had to close their doors. Others managed to survive by rethinking their business models and embracing digital transformation.
The fact is that entrepreneurs and small businesses will not benefit from this plan. They make up a huge part of the economy and need specific, tailored reforms if there is any hope of survival.
In times like these, entrepreneurs are the most important drivers of change. Small and medium enterprises and entrepreneurial ventures can play a pivotal role in the economic turnaround we so desperately need.
Government cannot fix the economy but they can create a deregulated environment for businesses to prosper unhindered.
This requires improved ease of doing business, deregulation, fewer compliance hurdles and a significant cut in red tape.
South Africa is 84th out of 190 economies on the World Bank’s influential Ease of Doing Business report (2019).
When things change as fast and fundamentally as they do in the modern business world, entrepreneurs are often left playing catch-up, tied down by red tape and an inflexible regulatory environment.
In the drive to promote digital transformation in an era of lockdown and remote working, our regulatory environment must keep up.
Too much regulation and red tape will cause businesses to stagnate, taking economic growth and job creation with it. We are in desperate need of a model suited to quick innovation.
The government owes it to the business sector to deregulate and ensure that the ecosystem for business and entrepreneurs improves.
If such an environment is created, we need entrepreneurs and business owners to do what they do best – which is building and growing businesses.
Furthermore, we need a tax regime that is favourable for foreign investors. We are competing against much larger developing countries with much more potential for growth. We need to become more competitive and outpace other players for investment.
As the world returns to normal, investors are looking for solid opportunities to bring economic growth. Entrepreneurs stand at the ready to make these opportunities work. It is the government’s responsibility to deregulate so that we can transform South Africa into a business-friendly country.
Overregulation flies in the face of government’s plan to turn the economy around. Investors will look at the over-regulated environment and decide to invest elsewhere.
I urge the government to provide private investors and venture capitalists as well as small businesses and start-ups with tax incentives so businesses have easier access to funding.
This is the only way to transform the economy.
Right now, most important thing we need to do is to stimulate the economy as much as we can.
After all, innovation and business growth come from entrepreneurs. If they cannot operate more freely, who will think of innovative ideas and make it happen?
Ramaphosa has an incredibly long to-do list. But if we are serious about saving our economy and turning the situation around post-Covid-19, we have to focus on ease of doing business.
South Africa has the potential to be a high-growth developing country.
All businesses, including small and medium enterprises (SMEs), are at the centre of rebuilding the South African economy. Businesses are the only force that can create real and sustainable jobs.
If government listens to investor, entrepreneur and business owners’ concerns, we can attract large-scale investment and move closer to economic prosperity, which in turn will address other societal ills, such as the slow rate of transformation, unemployment and high crime levels.
If we support local business and entrepreneurs, economic growth is not an insurmountable task.
* Ferreira is the co-founder and CEO of Osidon.