South Africa has experienced over 300 years of colonialism, and over
46 years of apartheid. During these years Small, Medium and Micro
Enterprise (SMME) promotion, particularly for the majority of the
population, was not encouraged. By contrast, blacks were meant to
provide labour to the white business establishments. Consequently,
the policy framework was geared towards the promotion of large
enterprises often leaving SMMEs at a disadvantage. Monetary, foreignexchange
and industrial strategies were formulated to support the
specialisation of large fi rms in capital-intensive production, feeding the
higher end of the market. Small-scale producers were left to produce
inferior goods, commonly catering to the lower end of the market
and using labour-intensive means of production. That is to say, the
past government adopted a discriminatory approach in the promotion
of SMMEs which was in line with its policy of discrimination.
Such discrimination sowed the seeds of the two disconnected and
parallel economies that exist in South Africa today — fi rst economy
and second economy which are discussed in the third section in this
chapter. Following political freedom in 1994, the important task of
transforming and deracialising the economy and opening up business
opportunities to previously excluded black South Africans was started
(Ndabeni 2005). That is, it was only after 1994 following South Africa’s
democratic dispensation that SMME promotion was encouraged, 204 \ LINDILE L. NDABENI
particularly through public policy initiatives. In particular, the government
acknowledges the potential impact of SMMEs on poverty reduction,
job creation and their general impact on the national economy.
Typically, small- and medium-sized enterprises are an important
component of the national economy. More specifi cally, this chapter
acknowledges the important role of SMMEs in the national systems
of innovation (NSI). Accordingly, the report emphasises the role of
organisations and institutions in the NSI. Politically, the government
highlights the role of SMMEs as an instrument for economic development
among the previously disadvantaged communities. Typically
the SMME sector has increasingly been targeted by the government
as a means of stimulating economic growth in general, as a vehicle
for wealth distribution and for attaining equitable growth, and as a
means to addressing rising unemployment. Therefore, the promotion
of the SMME sector is a key element in the government’s strategy
for job creation and poverty eradication (Biepke n.d.). However,
their development is hampered by a number of constraints including
fi nance, markets and managerial skills (Biepke n.d.; Ndabeni 2005).
Accordingly, the objectives of supporting SMMEs include creating
and enabling environment for SMMEs; facilitating greater equalisation
of income, wealth, and earning opportunities; supporting advancement
of women in business; creating long-term jobs; and preparing
the SMME sector to comply with challenges of an internationally
competitive economy (Republic of South Africa 2005). However,
there is still an uneven geographical distribution of service providers
as they tend to cluster in urban areas; that is, within the NSI of South
Africa, there are disparities in terms of a rural and urban divide. Provincial
disparities have also been observed as service providers tend
to be located in the prominent provinces of Gauteng, Western Cape
and Kwa-Zulu Natal.