3 small business policies in south africa india and brazil pg20 - tips
3 small business policies in south africa india and brazil pg20 - tips
3 small business policies in south africa india and brazil pg20 - tips
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How South Africa can boost support to <strong>small</strong> <strong>bus<strong>in</strong>ess</strong>es: Lessons from Brazil <strong>and</strong> IndiaThe Government of India has a number of support schemes for <strong>small</strong> <strong>bus<strong>in</strong>ess</strong>es, <strong>in</strong>clud<strong>in</strong>g schemesaimed at <strong>in</strong>creas<strong>in</strong>g the competitiveness of <strong>small</strong> firms, mak<strong>in</strong>g it easier to access f<strong>in</strong>ance, export <strong>and</strong>help<strong>in</strong>g firms to acquire new technology. However <strong>bus<strong>in</strong>ess</strong> owners <strong>and</strong> <strong>small</strong> <strong>bus<strong>in</strong>ess</strong> associations offera mixed account of how the Indian government has fared when it comes to support<strong>in</strong>g <strong>small</strong> <strong>bus<strong>in</strong>ess</strong>es.Of note is the fact that the awareness of government schemes is very low. A study by consultancyMilagrow Bus<strong>in</strong>ess & Knowledge Solutions shows that only between 20% to 30% of micro, medium <strong>and</strong><strong>small</strong> enterprises are aware of various government <strong>in</strong>itiatives. This is somewhat similar to the situation <strong>in</strong>South Africa (see above section).Milagrow’s Rajeev Karwal believes part of the problem is that the MSME m<strong>in</strong>istry plays only a m<strong>in</strong>or role<strong>in</strong> the Indian central government <strong>and</strong> is often subjugated by the various <strong>in</strong>dustries m<strong>in</strong>istries <strong>in</strong> centralgovernment. Most of these m<strong>in</strong>istries are dom<strong>in</strong>ated by big <strong>bus<strong>in</strong>ess</strong>es. The MSME m<strong>in</strong>istry, he says, is“lack<strong>in</strong>g <strong>in</strong> teeth” 37 . Anil Bhardwaj, secretary general of the Federation of Indian Micro <strong>and</strong> Small &Medium Enterprises (Fisme) echoes this view. Bhardwaj commented that the largest drivers for thegrowth of <strong>small</strong> <strong>bus<strong>in</strong>ess</strong>es have been the changes to the economic framework <strong>in</strong> the 1990s <strong>and</strong> thecountry’s young sizable population, not the government’s support schemes for <strong>small</strong> enterprises. 38MARKET ACCESSThe 2006 MSME Development Act <strong>in</strong>troduced a new def<strong>in</strong>ition for <strong>small</strong> <strong>bus<strong>in</strong>ess</strong>es (MSMEs) which thegovernment applies to determ<strong>in</strong>e which enterprises can benefit from its support schemes, but critically, italso <strong>in</strong>troduced a system by which <strong>small</strong> <strong>bus<strong>in</strong>ess</strong>es wait<strong>in</strong>g on payments from corporates or publicsectororganisations can approach facilitation councils to settle outst<strong>and</strong><strong>in</strong>g debts. However, accord<strong>in</strong>g tosome, the act has made little if no difference to <strong>small</strong> enterprises <strong>in</strong> India; <strong>and</strong> <strong>in</strong> the words of thegeneral secretary of Fisme Anil Bhardwaj, it is “basically a promotional act” which “doesn’t have anyteeth”. 39Added to this, not all the facilitation councils have been set up so far. Only 13 of the country’s 35 states<strong>and</strong> territories had set up one as of March 2010. However, the uptake of cases to the councils is affectedby <strong>bus<strong>in</strong>ess</strong> owners stay<strong>in</strong>g away from the councils, fear<strong>in</strong>g that though they may be able to recover theiroutst<strong>and</strong><strong>in</strong>g money by tak<strong>in</strong>g an entity to a council, that entity will simply never want to do work withthem ever aga<strong>in</strong>. This problem also applies to payment delays: a tra<strong>in</strong>ed eng<strong>in</strong>eer, Ch<strong>and</strong>er Goel, whoowns Goel Eng<strong>in</strong>eers, said public sector companies <strong>and</strong> large companies took a m<strong>in</strong>imum of three monthsto pay him. He has already stopped supply<strong>in</strong>g one public-sector company because they were tak<strong>in</strong>g toolong <strong>in</strong> pay<strong>in</strong>g him. He said that whereas under the MSME Act one can compla<strong>in</strong> when payments are notmade with<strong>in</strong> 60 days, this was not “a practical solution”. “When you make a compla<strong>in</strong>t, next time you arenot go<strong>in</strong>g to get the <strong>bus<strong>in</strong>ess</strong>,” he said. 40BUSINESS SUPPORTThe National Small Industries Corporation (NSIC) which has been tasked by government to support <strong>small</strong><strong>bus<strong>in</strong>ess</strong>es was also criticised, <strong>in</strong>clud<strong>in</strong>g most notably by a lead<strong>in</strong>g <strong>small</strong>-<strong>bus<strong>in</strong>ess</strong> f<strong>in</strong>ancier runn<strong>in</strong>g agovernment-backed fund <strong>and</strong> by Milagrow’s Karwal. Karwal po<strong>in</strong>ts out that the NSIC has made next to noimpact <strong>in</strong> support<strong>in</strong>g <strong>small</strong> <strong>bus<strong>in</strong>ess</strong>es, other than <strong>in</strong> its warehous<strong>in</strong>g of raw materials programme (SeeChapter 4 on schemes).Dr HP Kumar, the NSIC’s chairman <strong>and</strong> manag<strong>in</strong>g director, however disagrees. He says the corporationhas made an impact <strong>and</strong> has been “highly successful” <strong>in</strong> assist<strong>in</strong>g <strong>small</strong> enterprises. He po<strong>in</strong>ts out thatthe amount of total manufactur<strong>in</strong>g sector output contributed by MSMEs <strong>and</strong> the fact that these entities37 Interview with Rajeev Karwal , New Delhi, March 2010.38 Interview with Anil Bhardwaj, New Delhi, March 2010.39 Interview with Anil Bhardwaj, New Delhi, March 2010.40 Interview with Ch<strong>and</strong>er Goel of Goel Eng<strong>in</strong>eer<strong>in</strong>g, New Delhi, March 2010.Page: 23 of 111