Community-based small, medium and micro enterprises (SMMEs) are currently barred from effective participation in the Just Energy Transition (JET) by existing legislation and policy not allowing their innovative ideas to come through.

This was said at the 2024 Annual TIPS Forum with the theme Small Business, Inclusive Growth and Industrial Policy in South Africa.

Elize Hattingh and Michael Hector said in a report that many SMMEs, often found within small communities, were innovators who had developed unique solutions to address climate change issues in their areas.

“However, the nature of their work usually conflicts with what is outlined in policy. Many policies and by-laws are frequently seen as outdated or out of touch with the evolving business environment and technological advancements. Therefore, procurement strategies and policies must adapt to the changing landscapes in sectors such as energy, water, and waste, especially with the emergence of technologies like waste-to-energy and digital platforms,” they said in their report.

Zoning laws or building codes might prohibit the installation of specific renewable energy systems or require costly permits and that enterprises owned by marginalised citizens, such as people with disabilities, lack the resources or expertise to navigate these procedures effectively, making it challenging to access procurement opportunities.

The report noted that despite the introduction of the extended producer responsibility (EPR) and the revision of the National Waste Management Strategy, a mismatch between policy intentions and implementation continued to persist.

For many SMMEs, there were significant issues surrounding licensing, particularly for newcomers and start-ups in the waste sector. It was also noted that engaging with local authorities presented numerous challenges due to the bureaucratic red tape involved in applying for licences, procurement and adhering to local by-laws.

This was especially problematic for green entrepreneurs who provide essential services to communities but face barriers beyond their control, highlighting the need to reduce governmental red tape.

Despite legal protections against discrimination, persons with disabilities (PWD)-owned enterprises might still encounter bias and prejudice from procurement officials or other stakeholders in the renewable energy sector.

This bias could manifest in various forms, such as stereotypes about the capabilities of PWD-owned businesses or unconscious bias in procurement decision-making processes.

“A similar issue is evident in the water sector, where regulatory obstacles and administrative burdens hinder SMMEs from securing financing. Complex licensing procedures, ambiguous land tenure issues, and excessive bureaucratic red tape can discourage investors and lenders from offering financial support, especially to businesses in underserved or marginalised areas,” they said.

Absa’s chief operating officer for Corporate Funds Management, Dumisani Mkhonza, said innovative funding solutions for SMMEs that had been identified included lending-based grants, advance payments and affordable soft loans from corporates such as public sector entities and financial institutions.

He said these soft loans were interest free or at low interest rates to maintain purchasing power of the available capital and were at extended repayment period.

This had the potential of improving the working capital and overall cash flow position of SMMEs.

He said to address poor credit records of entrepreneurs, a negative credit record should be imposed when successive efforts to ensure compliance with credit terms were willingly disregarded.

“A negative credit record should not automatically prevent an SME from obtaining credit, but there must be an assessment of whether there was willingness but no ability to pay as opposed to ability to pay but no willingness. The SME management’s true intention, integrity and character must be tested,“ Mkhonza said.

Acting director-general of the Department of Trade, Industry and Competition, Malebo Mabitje-Thompson, said policy planning was particularly important as the Government of National Unity (GNU) was prioritising all inclusive industrial policy that would especially ensure the participation of rural and peri-urban small businesses.

She said the recently signed procurement policy was among the guidelines for the new government in basing its decisions on articulate research using the state as a base for procurement and creation of demand.

“We should look at what products locally are a priority, what we know small businesses are good at and what interventions needed to be in place to materialise the opportunities for our SMMEs,” she said.

BUSINESS REPORT