The National Small Enterprise Amendment Act: Key Provisions and Considerations

The signing of the National Small Enterprise Amendment Bill into law by President Cyril Ramaphosa in July 2024, thus becoming The National Small Enterprise Amendment Act, has been widely welcomed. This landmark legislation aims to streamline access to financial and non-financial assistance for small and medium businesses (SMBs), as well as offer smaller businesses better protection from unfair commercial practices.

The Act aims to reduce red tape and bureaucratic challenges for SMBs to level the playing field with larger organisations, including big businesses and public sector entities. This comes at a crucial time, with a break from load-shedding and expected interest rate cuts boosting business confidence.

SMBs have historically been underrepresented in government policymaking, despite contributing 40% to South Africa’s GDP and providing 87% of employment opportunities.

Its encouraging to see a renewed focus on supporting and growing this sector through interventions such as the new Act, however the speed and quality of the implementation of its provisions will determine how effective it is in meeting its objectives.

Small Enterprise Development Finance Agency (SEDFA) to Combine Siloed Agencies

One of the key components of the Act is the merger of the Cooperative Banks Development Agency (CBDA), the Small Enterprise Development Agency (SEDA), and the Small Enterprise Finance Agency (SEFA) to create the Small Enterprise Development Finance Agency (SEDFA).

This consolidation will provide SMBs with a single point of entry to seek financing and other assistance. Such a move is particularly important given that 42% of SMBs cite financial pressures and cash flow issues as significant challenges, according to Sage’s recent SBBO report.

Combining these agencies will be a complex task that could take months or even years, and is essential to ensure that the services the existing agencies provide are not disrupted during the transition.

Small Business Ombudsman to Address Unfair Practices

SMBs are likely to support the establishment of a Small Business Ombudsman under the Act, as it aims to ensure fair treatment by larger businesses and government entities. The Ombud would address common challenges such as late payments and unfair contract terms—issues that smaller businesses often lack the resources to contest in court. By providing a dedicated channel for dispute resolution, the Ombud could help level the playing field.

The Act also empowers the Small Business Minister to declare certain practices as unfair, but careful implementation will be essential to protect SMBs without stifling healthy market competition.

Addressing The Digital Divide

As SMBs increasingly adopt digital tools to drive efficiency and growth, the Act must also address the skills gaps that prevent many businesses from fully leveraging technology. While 85% of SMBs globally view technology as central to achieving their business goals, South Africa lags behind, with only 78% of local SMBs recognising digital technology as important.

This digital lag is compounded by a lack of skilled talent. Globally, 33% of SMBs call for enhanced training opportunities to address digital skills shortages. South African SMBs would benefit greatly from targeted skills development programmes to help them unlock the full potential of digital transformation. By investing in training initiatives, the government can ensure that SMBs are equipped to compete in an increasingly digital economy.

Levelling the Playing Field

It is also essential for the Government to accelerate the structural reforms of Operation Vulindlela in lockstep with the implementation of the Act to unlock the full potential of the SMB sector. As important as the new Act is, challenges such as logistics bottlenecks and poor local government performance continue to constrain the growth of SMBs.

South African SMBs have shown remarkable resilience, with 78% expressing confidence in their future success despite the challenges they face. However, this optimism must be matched with tangible support to ensure their sustainability.

The National Small Enterprise Amendment Act represents a major step forward in empowering South African SMBs. With effective implementation, it could address many of the challenges facing this vital sector, and help unlock the full potential of SMBs, driving economic growth, job creation, and innovation across the country.