The Department of Economic, Small Business Development, Tourism and Environmental Affairs (DESTEA) has set aside over a quarter of a billion rands for economic and small business development over the coming year.
Presenting his maiden budget vote speech on Wednesday in the Provincial Legislature, DESTEA MEC Makalo Mohale said his department has set aside about R255 million for economic and small business development during the 2019/20 financial year, the highest allocation for its four main programmes which also include; administration, environmental affairs and tourism.
“The purpose of this programme is to manage and coordinate economic development activities and initiatives to grow the Frees State economy,” said Mohale.
The main emphasis behind this action plan is to ensure increased economic transformation and job creation in the province as unemployment continues to spiral.
“Unemployment has been declared a national crisis and this challenges all of us government, business, labour and civil society to work together to roll back the frontiers of poverty, hunger, inequality and unemployment,” he added.
According to Statistics South Africa, the province’s official rate of unemployment increased from 32.8 percent in the first quarter of 2018 to 34.9 percent in the first quarter this year.
Youth unemployment remains a stubborn challenge as the unemployment rate among those aged 18-34 years increased to 39.2 percent over the same period.
Mohale said government and related services sectors continue to employ the majority of the Free State population, accounting for 24.7 percent of provincial employment, year-on-year. Manufacturing, as one of the productive sectors recorded an increase of 19 000 jobs when comparing the first quarters of 2019 and 2018.
But ideally, job creation should be the responsibility of industry as government is only there to create an enabling environment for business.
Mohale’s total budget is about R631 million. He allocated about R159 million towards administration with about R207 million going to environmental affairs. Tourism got just over R10 million.
“The budget we are presenting today will be meaningless if in the next five years our programme of action would not have consolidated support for small businesses and cooperatives especially owned by women and young people inclusive of climate change resilient communities so that our commitment to grow and sustain township and rural economy, tourism, as well as preservation of our natural environment is realised,” he pointed out.
The MEC noted township and rural economies are now faced with a new challenge presented by commercial developments like big malls and spaza shops mostly owned by non-South Africans.
If left unchecked, this could strangle the township economy which is strongly supported households which buy their daily requirements from these local shops.
Mohale bemoaned the lack of entrepreneurial skills amongst those living in the townships saying it worsened the situation for the people, citing those willing to start something, often struggled to find suitable working space, appropriate working tools or equipment and finance.
“Very few, if any young people will afford the exorbitant rent at township malls. We are also aware that developers prefer more established multi nationals and give them long contracts blocking new entrants into the commercial space.
“To address this challenge of affordable and convenient working place, working together with partners like Small Enterprise Development Agency (SEDA), Municipalities, Motheo TVET and several banks, we are rolling out the Shared Economic Infrastructure Facilities programme as an attempt to address this problem. To date, Clarens, Brandfort, Mangaung and Ficksburg Shared Economic Infrastructure Facilities are at different stages of completion and operation,” explained Mohale.
When completed and fully operational, the five Shared Economic Infrastructure Facilities will accommodate no less than 111 enterprises and create an estimated 200 jobs.
Two pilot projects are expected to be rolled out this year in Botshabelo and Trompsburg.
The MEC said another initiative that the department will be implementing is to fully support our stokvels to help them leverage on their purchasing power in order to accelerate their participation into the mainstream economy as opposed to be inclined to be just bulk buying consumers.
This, according to him, will entail necessary support mechanisms such as acquisition of necessary licences to formalise t stokvels and to ensure that their investments are best utilised to truly liberate them economically.
Mohale also outlined other support programmes for the Small, Medium and Micro Enterprises (SMMEs) which he said were expected to present a major boost to the sector. These include: the Risk Sharing Incentive which is aimed at reducing the loan burden on SMMEs and reduce their risk profile, which often decrease the chances of loan approval.
Through this programme, DESTEA provides grant of between 10 percent to 40 percent for SMMEs with approved loans from funding institutions. To date, seven applications worth R3.95 million have been approved for funding by DESTEA through this programme. It has attracted R17.9 million worth of funding from Development Finance Institutions.
“This financial year, we will submit business proposals to different DFIs to leverage funding of up to R50 million for businesses in the Free State. We therefore call upon Free State enterprises to develop bankable business plans in order to benefit from this programme,” noted Mohale.
Other initiatives include the Tabalaza Pitching Programme which is tailored to promote entrepreneurship as a platform for SMMEs owned by young people to pitch and showcase products to potential supporters and investors. A total of 38 enterprises participated in this programme and 13 of the enterprises were awarded prizes ranging from R250 000 to R100 000 and 10 module business training.
SMME loan funding by the Free State Development Corporation last year provided financial support to 96 small businesses with total disbursement amounting to R16.2 million.
The loan funding helped create 214 job opportunities in the province and a further 198 jobs were created on other SMME support initiatives offered by the FDC.
Graduate Start-up Programme which targets unemployed graduates into harnessing those with an entrepreneurial nature to create businesses as opposed to applying for jobs is also being implemented.
The main objective of this programme is to encourage young graduates not to only look at employment as an only option to survive but rather to think of creating jobs for others and fight unemployment.
“With the skills and knowledge they have acquired in different institutions of higher learning, they should come up with economic solutions to the challenges our country is facing through entrepreneurship. The programme is for youth between the ages of 18 and 35. It will go out on a call for entry towards the end of July whereby 75 most promising ideas will be selected,” noted Mohale.