IT-Online | April 22, 2025
News about President Cyril Ramaphosa wrote that signing the legislation to the National Small Enterprise amendment bill is widely welcome. Viresh Harduth, Vice-President: Small scale at Sage Africa & Middle East.
This development promises to streamline access to financial and non-financial aid for small and medium-sized enterprises (SMBs) and to provide better protection from unfair commercial practices.
The newly signed law aims to reduce SMB deficits and bureaucratic agenda and level out large organizations and arenas, including large corporations and public sector entities. This is at a critical time, and business confidence will be boosted by a break from load control and expected interest rate reductions.
The legislation is poised to promote a more inclusive economy and create more opportunities for SMMEs and cooperatives, which should increase job creation and economic diversity.
Despite contributing 40% to South Africa's GDP and providing 87% of employment opportunities, SMB has historically been underestimated by government policy decisions. It is encouraging to bring a new focus on supporting and growth in this sector through interventions such as new behaviour.
Provides important support to SMB
By providing a more collaborative and predictable business environment, ACT aims to drive innovation and growth within the SMB sector. This could lead to increased competitiveness, job creation and overall economic development. However, the speed and quality of implementation of the provisions of the law determine how effective it is to achieve its goals.
One important element of this legislation is the merger of Cooperative Banking Development Agency (CBDA), Small Enterprise Development Agency (SEDA), and Small Enterprise Finance Agency (SEFA) to establish small businesses.
Development Financial Institution (SEDFA).
This integration provides SMB with a single entry point for seeking funding and other assistance. This move is particularly important given that 42% of SMBs cite financial pressure and cash flow issues as critical challenges, according to SAGE's recent SBBO report.
Combining these institutions is a complex task that can take months or years and is essential to ensure that the services provided by existing institutions are not disrupted during the transition.
Furthermore, the report states that 51% of SMBs have shown rising operating costs worldwide, highlighting the importance of reducing deficits and improving access to affordable funding. In South Africa, where economic disparities are becoming more prominent, SEDFA's ability to provide streamlined support is essential to help SMBs overcome these barriers and thrive.
Dealing with unfair practices
SMB is likely to help establish a law-based ombudsman for small and medium-sized businesses, as it aims to ensure fair treatment by large businesses and government agencies. The Ombuds address common challenges such as delayed payments and unfair terms of contract. This indicates that small businesses often lack the resources to contest in court. By providing dedicated channels for conflict resolution, the ombuds help level the playing field.
The law also empowers small and medium-sized business ministers to declare certain practices unfair, but careful implementation is essential to protect SMBs without thwarting sound market competition.
Bridging digital disparities
Digital conversion is no longer an option in SMB. Globally, 70% of SMBs are hoping to grow revenues, while 67% plan to expand their workforce over the next six months. This is driven primarily by investments in digital tools and AI. If South African SMBs follow this trajectory, they need both the resources and skills to embrace digitalization.
As SMBS is increasingly adopting digital tools to drive efficiency and growth, it also needs to address the skills gaps that prevent many companies from fully utilizing technology. While 85% of SMBs view technology as the center of achieving business goals worldwide, South Africa is lagging behind, with only 78% of local SMBs recognizing digital technology as important.
This digital lag is exacerbated by a lack of skilled talent. Globally, 33% of SMBs are looking to strengthen training opportunities to address digital skills shortages. SMBs in South Africa will benefit greatly from targeted skills development programs and help them maximize their digital transformation potential. By investing in training initiatives, governments can ensure that SMBs are equipped to compete in an increasingly digital economy.
Leveling the stadium
It is also essential that the government accelerate structural reforms in Operation Vulindlela in lockstep along with the implementation of the law to completely lock the possibilities of the SMB sector. As important as new behaviours, challenges such as logistics bottlenecks and slower local government performance continue to constrain SMB growth.
South Africa's SMBs have shown incredible resilience, with 78% expressing confidence in their future success despite the challenges they face. However, this optimism must coincide with concrete support to ensure sustainability.
Creating a more effective environment for SMBs in South Africa will help ensure its sustainability, which can contribute significantly to the country's economic growth. By addressing financial constraints, filling the digital skills gaps, and ensuring fair treatment through the Ombud Services, the new law could change the SMB landscape of South Africa.
The National Small Business Amendment Bill represents a major step forward in empowering SMBs in South Africa. Effective implementation can address many of the challenges facing this critical sector. By fostering a more inclusive and supportive business environment, the law will help you maximize the potential of SMBs and drive economic growth, job creation and innovation across the country.
“Disclaimer – the views and opinions expressed in this article are the views of the author and are not necessarily those of the Bee Room.”
