by Thuso Khumalo
JOHANNESBURG, Sept. 18 (Xinhua) -- South Africa needs to follow China's strategy for small business development to stimulate economic growth that will deal with the persistent challenges of poverty, unemployment and inequality, a research expert said on Tuesday.
Septi Bukula, a research specialist from Osiba Research specializing in small business development, told Xinhua that China's economic growth is deep rooted in the country's success in developing small businesses.
"China has prioritized the development of small businesses and as a result a large quantity of its exports comes from small businesses," he said.
"South Africa needs to develop the capacity of small businesses to be able to export more," Bukula said.
The expert stressed the high input cost in South Africa is a big stumbling block to many small businesses, saying "China has put in place measures that ensure low input cost for small businesses and this has given them competitive advantage in terms of both exports and domestic sales."
"Our input cost tends to be so high. Industries that produce those inputs are dominated by large firms which are monopolistic in behavior and we need to address that," Bukula said.
The expert added South Africa needs to remove barriers on imports. "The country needs to follow China's example in removing structural impediments in order to stimulate high levels of small business activity," he said.
"For example, if you are a small business who wants to produce clothing and has to import textiles, the import tariffs are so high that it becomes difficult for small businesses to source raw materials," Bukula said.
He said China has embarked on aggressive export-led growth and that has helped the country to register high levels of economic growth.
"China is well-known to be a low cost economy and it has had a major competitive advantage in terms of the costs of production. This has made its products competitive overseas, which in turn has boosted export volumes," he said.
Bukula urged South Africa to use its strategic position in the global economy to stimulate exports from small businesses.
The researcher lauded China for a rapid growth of its middle class and said this has increased domestic consumption and fuelled demand for raw materials.
He said China's population size and growing middle class has created a vast market that cannot be ignored by any serious business person.
"South Africa has to work hard to grow its middle class because with the growth in the middle class there is growth in the consumption and that stimulates the economy," Bukula said.
Bukula also recommended small business development should be coordinated and led from a single office at government level.
He urged the government to treat the development, expansion and promotion of small businesses as one of the country's key elements in driving economic growth.
Bukula called on South Africa to draw up a national strategic plan with clear guidelines on how the country plans to stimulate the growth of small business enterprises.