Business Competition and Regulation - New Growth Path Policy in South Africa - Case Study Example

Business competition and regulation Name: University: Course Title: Instructor: Date: Business competition and regulation Introduction A small business refers to a business unit which is owned privately and also operated in a private manner. These types of businesses are characterized by their relatively small number of employees as compared to larger businesses and companies. The definition of small businesses varies from one country to another. This is normally based on the number of employees that these businesses have with most of them ranging from less than fifteen to even less than five hundred in other countries. There are also other ways of defining businesses as small. These include parameters such as the annual turnover, the values attached to the assets that the businesses have and also their net profits. In today’s world, it is estimated that these small businesses contribute majorly in the creation of job opportunities for people in individual countries. This is the same case in South Africa, where these small business ventures contribute greatly to the gross domestic product of the country. Most people in that particular country are employed in this sector. This paper aims at exploring whether the new growth path and the industrial policy action together with the budget support the development of small business in South Africa. New Growth Path policy The new growth path policy is a policy that projects at the creation of jobs for the people of South Africa (OECD, 2011). The plan here was to empower the people of the country so as to encourage them to start up their own businesses and at the same instance get other people employed in these ventures (Lipczynski et al, 2009). This was to be done through the creation of jobs and entrepreneurial enabling environments in all the sectors of the economy. An example was creation of eighty thousand jobs in the manufacturing and others in the construction industry. The jobs were also to be created in the operations sectors of the economy. Others would also be created in infrastructure that was environmentally friendly in all parts of the country (Patel, 2011). The new growth path policy works in support of the development of small businesses in South Africa. To begin with, the president of the country made the placement of the creation of jobs and enabling environments for people to engage in small business ventures as a priority for the year 2011. This was to be accomplished through taking advantage of the impacts that the new growth path policy would have which would have led to the creation of job opportunities for the people of South Africa. Here, the government came up with several strategies that were aimed at promoting the development of small businesses in the micro economic policies that were formulated. This involved the development of the skills of the workforce of the country. This aimed at improving the skills of people so as to encourage and at the same instance enhance them to start up their own business ventures (Patel, 2011). The new growth path strategy also aims at improving the rates of innovations in the country. This works well with the development of entrepreneurial activities in the country. This ensures that more people are capable of using their innovations to earn an income, and this would on the other hand make them employed (Lipczynski et al, 2009). It also aims at reducing the costs that are associated with starting up of businesses. This involves the reduction of the interest rates on loans. Additionally, it aims at reducing the costs involved with conducting business such as in the required licences of operation so as to ensure that more people can easily do business (Hofmeyr, 2011). The policy also involves the promotion of enterprises which include these small businesses and cooperatives. This acted to the advantage of the small businesses as it plays an important role in the tackling of monopolies and fixation of prices with the aim of ensuring that even the small businesses thrive in the competitive markets. It also reduces the instances of abuses of markets that existed before. These abuses of markets were done by the powerful individuals and companies in the markets. This prevented and also made it difficult for the smaller businesses to enter the markets and operate peacefully. However, with the emergence of the new growth path policy, this is reduced and the markets are made more favourable to the smaller businesses to compete with the bigger and more developed ones (Stiglitz, 2012). These points highlighted above confirm that the new growth path policy promotes the development of small businesses in South Africa. In as much as it is quite difficult with the array of both interests and also perceptions to make people agree that either a policy is in bad taste or is good, this policy is in the best interest of the development of small businesses in South Africa. This policy also portrays the capability that it has in leading the general economy of the country towards the path of sustainability, equitability and also the enhancement of a very democratic development. Industrial Policy Action Plan Since the year 1994, South Africa implemented several industrial policies. It was until the year 2007 when the country came up with the National industrial policy and also an industrial policy action plan. The objective of the policy was the promotion of industries that are value added in eight sectors of the industrial economy. These sectors are the capital and transport as one sector, and components and goods associated with the automotive industry as another sector. The other sectors were fabrications; chemicals, plastics and also pharmaceuticals; forestry, which include fields such as pulp and furniture; business process outsourcing; tourism and finally clothing and textile. The policy states the specific mechanisms that are fundamental in the assistance of these sectors (Kirk, 2011). This policy also worked well to the full benefit of the small businesses in the country. The policy led to the introduction of learning and training facilities. The facilities were aimed at improving the skills of people in the different industries of the manufacturing industry. This improves their skills and makes them capable of using their acquired skills in coming up with their own business ventures. This is also advantageous to the already existing small businesses in that they could afford to send their members of staff to these training facilities to get trained at cheaper costs as compared to the existing private institutions (Kirk, 2011). This policy also restricts the importation of other products that are manufactured by the local factories in the country. With this, the small businesses that start up or are in business benefit from the fact that their products manage to get local markets. The policy also led to the reduction of the taxes and duties that are charged on goods that are imported which are fundamental for the processing of other goods. This makes it simpler for small businesses to also afford to purchase newer machinery and also technologies that were once only afforded by the bigger companies and businesses. Therefore, this means that not only do the big businesses benefit, but also the smaller ones. This closes the gaps, especially the gaps in terms of technology, which were being faced by the actors in the industries (Rugraff & Hansen, 2011). It has also led to the reduction of the costs that are related with the production of the goods and services that were initially high. The high costs were not working well for the small businesses as most of them could not afford them (Lipczynski et al, 2009). These costs are in terms of the key inputs, especially water, electricity and wages. The policy ensured that the costs of both electricity and water were lowered so as to attract more of investments. It has been to the benefit of small businesses in that they can manage to engage in business that required these inputs because the costs which were associated with them lowered (Rugraff & Hansen, 2011) The policy also came up with the restructuring of the ways in which the government made its procurements. Initially, the government made procurements on an ad hoc means. This meant that the government procured what it wanted when the need arose. This resulted to the import of these commodities. With the new policy, the government introduced a system where it planned for its procurements. This meant that all the actors in the areas that the government wanted to procure would be informed in advance about the intended procurement. As a result, it meant that the local businesses in the country could supply to the government. Therefore, even the small businesses that operate in the country could benefit since the procurement processes were made public and open. These public and open procurements encouraged a healthy competition among the business owners. Hence, even the smallest business unit could have the capability of supplying to the government (southafrica.info, 2012). Budget The South African budget has been promoting the interests of the small businesses in the country (Gerber, 2007). In the budget of the year 2012, the minister of finance was elaborate on the importance of innovations and entrepreneurship on the growth of the country’s economy. In the previous budgets, for instance the budget for the year 2010, the minister allocated much funds in support of small businesses. There were also funds allocated as incentives for people to start up small businesses and other funds for the development of agriculture and associated investments in the rural areas (Southafrica.info, 2012). The minister was also elaborate on the need to offer finances for the support of these innovative ways of doing business. This is due to the fact that it was realised that these entrepreneurships are the same small businesses that are encapsulated in the policies that the country has in terms of development. They also feature in the goals that were to be achieved with the new growth path policy. In this respect, the minister of finance went ahead to give reliefs in terms of taxes for the small and micro enterprises (Gordon, 2012). The budget also went ahead to reduce the amount of both payments and returns that small businesses were required to make in a year. On this note, they were reduced to only two from the initial eighteen. This shows the dedication that the budget of the country has in terms of promotion of the development of the small businesses in the country. Debt financing was also going to be reduced in accordance to the budget. This meant that even the people that are involved in small businesses could manage to get financing from financial lending institutions such as banks and other lending institutions at lower rates. This would make it possible for the small businesses to be able to start up. For the ones in operation, the funds would help them to grow (Gordon, 2012). On the contrary, the budget went ahead to increase the costs of energy sources such as the electricity levy and also the fuel levy. This denotes that for most of the small businesses that rely on electricity and petrol or diesel as a source of energy would have to spend more. The expenditure would be in terms of the increase in expenditure on consumption of energy. This would impact negatively on the small businesses since it would lead to reduced revenues, which may hinder or reduce their rates of growth (Gordon, 2012). Conclusion Like other countries in the world, South Africa had also come up with many policies in the previous years that were either successful or failed to fully achieve their goals. The policies that preceded the new growth path policy for example were not marked with much success. Though some people argue that the new growth policy was a carbon copy of other past strategies, there are factors that make them different. The policies that countries come up with are aimed at fighting problems at hand or problems that are perceived to be faced in the future. It is not new for such policies to be supported by some people while others may be against them. However, most of the strategies get implemented despite the arguments that might be existent. References Gerber, K. (2007). Economic Environment. Cape Town: Pearson Education Publishers. Gordhan, P. (2012). 2012 Budget Speech. Retrieved on 11th April, 2012 from http://www.banking.org.za/getdoc/getdoc.aspx?docid=1178 Hofmeyr, J. (2011). Transformation Audit 2011. From Inequality to Inclusive Growth. Cape Town: Institute for Justice and Reconcilliation. Kirk, R. (2011). National Trade Estimate Report on Foreign Trade Barriers. Darby: Diane Publishing Company. Lipczynski, J et al. (2009). Industrial Organization: Competition, Strategy and Policy. Upper Saddle River: Prentice Hall Publishing. OECD. (2011). OECD Territorial Reviews: The Gauteng City-region, South Africa 2011. Paris: OECD Publishing. Patel, E. (2011). How the New Growth Path Will be Funded. Retrieved on 11th April, 2012 from http://www.amandlapublishers.co.za/images/stories/newgrowthpathdownloads/how_ipap. pdf Rugraff, E & Hansen, M. W. (2011). Multinational Corporations and Local Firms in Emerging Economies. Amsterdam: Amsterdam University Press. SouthAfrica.info. (2012). New Industrial Policy Plan Unveiled. Retrieved on 11th April, 2012 from http://www.southafrica.info/business/economy/policies/industry-180210.htm Stiglitz, J. E. (2012). South Africa’s New Growth Path – Globalisation on a Sound Footing. Retrieved on 11th April, 2012 from http://www.amandlapublishers.co.za/new- growth-path/779-south-africas-new-growth-path--globalisation-on-a-sound-footing-- by-joseph-e-stiglitz Read More