Entrepreneurship and small business development has been acknowledged worldwide as an engine of economic growth. Without small business development, the economy stagnates, employment declines and ultimately the general standard of living deteriorates.

A recent exercise undertaken by the Department suggests that, with the right kind of support from Government, the SMME sector could generate between 50 000 and 60 000 jobs a year in the Western Cape.

However, the historical legacy we inherited from Apartheid is daunting. A vast proportion of the population was either excluded from participating in the economy or actively discouraged from establishing its own businesses. Poverty also acts as an enormous barrier to establishing businesses.

The resource-poor seldom are able to offer financial institutions any meaningful collateral to obtain loans. The result is that the greater majority of our citizens face insurmountable obstacles when attempting to enter the formal economy. This is not only a tragedy for the poor and marginalized, but it is a barrier to the optimal functioning of the economy as a whole.

While Government initiatives to promote SMMEs have in the past have been well-meaning, the Department has concluded that two things need to happen: (1) that we need to make a quantum leap in the level of support we are giving to promoting SMMEs and that (2) we need to address the problems in a holistic and integrated manner.

In optimising SMMEs contribution to employment and economic development the following needs to be done:

• Raising the rate of formation of new SMMEs with growth potential, since these SMMEs will contribute to investment, employment and income generation;
• Encouraging and supporting new SMMEs arising from previously disadvantaged backgrounds, since these start-ups can contribute to a redistribution of economic ownership and income, as well as a more participatory economy;
• Increasing the rate of graduation of micro-enterprises into SMME categories, since only then will the legacy of apartheid be overcome; and
• Decreasing the undesirable mortality rate of SMMEs that could be viable undertakings.

To be real and to show that we are committed to build the Western Cape economy through small business development, the Department of Economic Development and Tourism has to be bold and daring about how it will achieve this.

Developing a culture of entrepreneurship and innovation is pivotal to the continuation of small business in South Africa. Because entrepreneurship was not fostered in Historically Disadvantaged Communities, it is important to take these concepts to schools, so that the children may be the custodians of entrepreneurial values in the future. Even more important, is the fostering of entrepreneurship among the unemployed.

In developing this entrepreneurial culture we have to ask ourselves, what are the challenges facing us in terms of entrepreneurial development?

The Global Entrepreneurship Monitor reports of 2001, 2002 and 2003, that compared SA to about 37 countries, claim the following:

• We rank 19th overall regarding entrepreneurial activity, i.e., 6 out of every 100 adults in SA are entrepreneurs (or 1 in every 15 adults). We fall below the average of the countries (e.g. India, Mexico, Brazil) that participated in the study;
• We have a reasonably high number of start-ups, but few reach a stage where they are able to pay salaries and wages for longer than 3 months. South African start-ups evidently have a low success rate;
• Men are twice more likely than women to be engaged in an entrepreneurial venture;
• 1 in 10 adults in a metropolitan area is engaged in an entrepreneurial venture, compared with 1 in 22 in small towns and only 1 in 56 in rural areas;
• 1 in 22 black adults is engaged in an entrepreneurial venture, compared with 1 in 12 coloured adults, an 1 in 10 Indian and white adults;
• Education is the key factor which influences whether or not an entrepreneur progresses beyond the start-up phase;

These claims mean that we are faced with the enormous task of addressing one of the key elements of small business - entrepreneurship.

Probably the greatest tool that the Department has is in facing these challenges its own financial budget. This budget, is however, very limited as the Provincial Government has other daunting challenges, such as building houses and shoring up our social infrastructure.

We have undoubtedly realised the potential of small businesses and entrepreneurs to grow the economy of any economy. However, we have also realised that it comes with key support and implementation challenges.

To tackle this particular challenge, the Department has identified five core areas, which each and every entrepreneur requires to be successful:

1. Entrepreneurs need to be able to access business support services close to where they are situated, therefore it is spatially located;
2. Entrepreneurs need to have a tight and reliable community of business-support service providers who can assist them;
3. Entrepreneurs need to be able to access work opportunities, be it through procurement opportunities or links with big business;
4. Entrepreneurs may require assistance to develop their assets and access resources; and
5. Entrepreneurs need to be skilled and human resource development has to be implemented. HRD will occur not only at school level but also amongst the unemployed.

It is believed that once these support mechanisms are in place, small businesses will thrive.

There are four main ideas, which will be put into place by the Department to address these issues raised. Over the last couple of months my predecessor and more recently, I, in my new capacity as Minister of Economic Development, have announced various initiatives to support and finance entrepreneurs.

These are the:

• The Enterprise Development Pipeline (an integrated support system)
• The RED Door
• Funding and finance (The deal with ABSA)
• Access to opportunities (Encouraging big business to procure from SMME's)

Despite these four areas of interventions we have also recognised that preferential procurement could go some way in providing a springboard for entrepreneurship to flourish.

To ensure the objectives of preferential procurement are achieved, two years ago we introduced effective systems to enable the recording, tracking and monitoring of goods and services procured. This system is constantly being monitored and reconfigured to ensure it works without glitches.

Our seriousness about this is demonstrated by a host of services we have introduced to ensure preferential procurement is for everybody. These services and interventions are:

Access to information, support and communications:

• All tender invitations to be advertised at least in the Government Tender Bulletin;
• All tenders should be published on the internet;
• Any potential supplier must be entitled to receive information regarding financial support, training, assistance with tendering, etc.

Uniformity and simplification;

• Documents must be rationalised and simplified as far as possible;
• Tender documents to include a description of all preferential procurement requirements, e.g., HDI requirements, basis for adjudication, etc.

Breakout procurement (unbundling):

• Obligating large contractors to engage small businesses in the performance of their contracts;
• Requiring joint venture formation between large and small businesses.

These measures are just some of the interventions we have made to ensure that all citizens of the Western Cape, black and white, benefit from preferential procurement. Over the coming months we will strengthen and broaden these initiatives.

Most importantly we are saying we need you as SMME and big business to partner on this road we have taken. At the end of the day we will all benefit.

Thank You.