( 3 minutes read)
· South African President Cyril Ramaphosa has been announcing bailout plans regularly to support over 700 000 firms and
more than three million employees through this difficult period
· The question now asked is: why SMMEs (small, medium micro enterprises) are preferred. As compared to large enterprises, they create more jobs, without any government participation
South African President Cyril Ramaphosa has been announcing bailout plans regularly to support over 700 000 firms and more than three million employees through this difficult period. The other interesting statistics is that the doles so far given works out to a tidy sum per a head, going by the estimates of Statistics South Africa, which has put the country’s population in the mid-2019 population at 58.78 million.
The question now asked is: why SMMEs (small, medium micro enterprises) are preferred. As compared to large enterprises, they create more jobs, without any government participation. It may be noted that most of the large enterprises in South Africa are government–owned and when they are not generating resources to fend for them, the government chips in through the budgetary support. Also, the decision making in smaller organizations is faster and swifter.
There is a strong public opinion that is developing in South Africa for larger role for the private sector. For that, they need capable professionals, not bureaucrats, for beefing up the capacity of the government to help in directing the bulk of its rescue package resources towards the most productive economic activities. That will help the government in reducing the insurance payouts under UIF, promote trading and cut social grants.
The South African government is tapping resources to meet the burgeoning expenses. Despite the huge demand on it necessitated by the Covid-19, the government is diverting only R130 billion of the R500 billion from the annual budget. The rest is coming from the World Bank, International Monetary Fund, BRICS New Development Bank and the African Development Bank. There is a rationale behind committing mostly grants to welfare works. It would be costly for the country to borrow money from the junk status. Ramaphosa knows it more than anyone else.
