The Minister of Economic Development, Ebrahim Patel, is shown around the 22 on Sloane campus in Johannesburg by the co-chairperson of Global Entrepreneurship Network, Kizito Okechukwu. I SuppliedJOHANNESBURG – After the recent spate of attacks on foreign and locally-owned shops in South Africa, policymakers are now trying to regulate industries in which foreign businesses can or cannot operate.
Word on the street is that the Department of Small Business Development will be drafting new laws to restrict foreign-owned businesses from operating in certain sectors and locations, which in their view will help protect local ones.
For most governments, enacting new legislation and regulations is always a knee-jerk reaction whenever and wherever there is a problem.
It also vividly reminds me of a school case study we did about Nigeria’s “Ghana Must Go” campaign.
Due to the high influx of foreigners and the perception that Ghanaians were stealing opportunities, the Nigerian government in 1983 literally chased out roughly 2million undocumented migrants, mostly Ghanaians.
There is now a famous bag in Nigeria labelled “Ghana Must Go” and unbelievably, till today my guess is that it still sells more than Gucci and Louis Vuitton combined.
I will not delve too much into the implications which Africa’s most infamous bag had for the oil-rich powerhouse 36 years ago, however, it does paint an ugly historical picture.
Yet during that period, there were many jobs that Nigerians were not eager or willing to do, which prompted recruiters to employ foreigners, especially Ghanaians.
I will always be the first to defend any African, even to the extent that although the Nigerian government expelled those Ghanaians, its people are not intrinsically xenophobic.
The same goes for South Africans.
Having travelled to more than 30 African nations and made many friends and acquaintances, I believe no African is xenophobic.
I think the major challenges include severe inequality, poverty, poor leadership and selfish governance, as well as incorrectly tuned mind-sets.
The UN reports that 10 of the world’s most unequal nations are in sub-Saharan Africa.
The World Bank lists South Africa as the most unequal country in the world, mostly attributed to the various injustices of the apartheid era.
Although much has been achieved over the past 25 years, South Africa has failed to break the divide and ensure a justifiable equal nation – and inequality breeds poverty.
Many African leaders fail dismally in developing their nations and their people, specifically their youth, forcing them to seek shelter and opportunity elsewhere.
Think of the many Africans trying to cross the Libyan border to Europe. Many die at sea, many resort to crime just to survive and fend for their family, while others become victims to slavery, human trafficking and other heinous crimes.
I read recently that the Rwandan government agreed to accept 30000 refugees from the Libyan border, a 1000 of which arrived as early as last week.
South Africa has also been home to many refugees which also adds pressure to the social services budget.
With all due respect to the former Zimbabwean president Robert Mugabe, for his achievements, sacrifices and liberating his country, Professor Jonathan Jansen recently tweeted: “An African leader dies in a Singapore hospital. Tells you everything you need to know.”
On the flip-side, and having chatted to a few Zimbabweans, they attribute their strong education to him and how he infused so many young people with the right mind-sets to succeed.
Someone once said to me that he believes Zimbabweans run parts of the South African and British economy. Whether fact or not, this just shows the skill set and hard work ethic of Zimbabweans.
Sadly Mugabe’s presidency will be judged by the devastating economic mayhem he caused during the latter years of his governance, seeing doctors having to work as waiters, accountants working as nannies, engineers working as porters and so on.
As South Africa grapples with inequality, regulating the small business industry – especially in the informal sectors where foreigners can trade – will significantly decrease, if not cripple, township economies.
So let’s think for a moment.
Why do policymakers think that foreigners are taking away the township market from locals? Are locals not the ones most likely to receive government grants/support to start a business? Are they not the owners of the property in the townships?
Are they not the ones that have enough buying power to source locally? Are foreigners not paying rentals for the space? Are they not employing mostly local? The answer is a simple, “yes”.
The focus for government should be on how can locals be supported to outsmart the foreign shops – or even just be competitive enough to play in the same space? How can we encourage them to embrace technology to get the edge on their foreign competitors?
The challenge I see is lack of access. Due to their informality and lack of credit records, lots of small township local businesses fail to access capital from banks and development finance institutions. Some also lack the skills to scale, while some lack the commitment and drive.
This invisible economy is fuelled by cash and is worth over R350billion, yet one that government benefits little from. The percentage of money held outside the banking system should be a concern for policymakers and they should work to incorporate these informal businesses into the formal system. Instead of banning foreign traders, perhaps the government should consider taxing them, but not local traders.
Government should also look at ways to incentivise local traders and create meaningful partnerships with companies such as Massmart, Makro and Tiger Brands to create favourable pricing mechanisms for these micro-retail chains.
A few local township business owners told me that they enjoy working with the Somalians because they have taught them many skills, such as pricing strategy and bulk buying – even teaming up with them to buy goods in bulk to sell at cheaper rates.
In my view, over-regulating or displacing the informal business sector could leave the door wide open for the big guns such as Shoprite, Pick * Pay and Spar to march through with micro or express shops.
This would inadvertently shut down both the local and foreign small business owners.
Government should rather encourage more collaboration between local-owned shops and foreign ones, provide better access to capital for locals, provide skills training, look for innovative ways to get locals to be competitive such as tax exemption, favourable pricing with manufacturers, and lastly, also consider exchange programmes for some local businesses to visit other African countries and learn from their neighbours’ informal market environments.
A former South African MTN executive that was in Dubai recently to host a telecoms conference said one of the lessons learnt is that it’s economically healthy to encourage immigrants because they add value where locals cannot or will not do the jobs.
South Africa should aim to attract more foreign skills and entrepreneurs, as the majority of countries have started to invite and incentivise foreign start-ups to bring their innovative ideas into their nations and set up for business.
To summarise, I think the discussions on regulations should focus on how do we make it easier for locals to thrive; how do we use innovative methods to get locals to outsmart their foreign counterparts; how do we ensure that foreign traders employ more locals; how do we exempt locals from red tape and taxes and how do we get locals and foreigners to collaborate for their better economic good?
Research proves that micro businesses, entrepreneurs and even start-ups, whether local or foreign, are responsible for the most net new job creation and any attempt to stifle or shut them down will have an adverse effect on any economy.
Let us rather fill the hole in our economic discussions and give hope to the entrepreneurship ecosystem.
Kizito Okechukwu is the co-chairperson of the Global Entrepreneurship Network Africa; 22 on Sloane is Africa’s largest start-up campus.
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