Lack of support for small business, the big contradiction

Government has confirmed its support for SMMEs, stating its awareness that these small and medium enterprises are the answer to economic growth and job creation in South Africa and that banks and funding agencies are to assist SMMEs where possible. Where then is this support for SMMEs and how does one access it?


Vaalnest Boutique Hotel, the Gauteng winner of the 2010/2011 Entrepreneur of the Year Award (ETEYA), is an 85% black owned and managed company and the owners have invested more than R8 million into the business. Yet when applying for funding little or no response is received yet being the Gauteng ETEYA winner. 


In 2010 the hotel was given the opportunity to expand its capacity with an order that arose as the result of the World Cup. The development is zoned as Guest House Special and Other in the Midvaal Municipality. It is stated in the title deed that 50% of the land may be built up. With the extensions to the hotel, only 38% of the land would be utilised; being well within the 50% limit.


The correct avenues of approval were followed and confirmation of approval was received yet when manager of Vaalnest, Keith Attwell, arrived at Midvaal Municipality to collect the approved plans he was advised that it has actually not been approved as the project is too large. Vaalnest sought relief from the head of department at the town planning offices, the Mayor of Midvaal and, finally, the Premier. Vaalnest was eventually contacted by the MEC of the housing office who stated that the matter is being dealt with. A year and a half later the first meeting was held with the Midvaal Municipality and a representative from Gauteng Tourism, Sedibeng district. The outcome of the meeting was that the Municipality would assist Vaalnest with an application for re-zoning to hotel status.


Vaalnest now needed funding in order to finance the development of the hotel as the window for funding from sales had lapsed. Being directed to GEDA by the head of department in the MECs office, an application for funding was made. A prompt response was received, an assessment was executed of the property and the site plans and a report was given confirming that the account had been handed over to the GEP. After six weeks it was established that GEP does not recognise GEDA’s assessments and a new application had to be made. After the application had been completed again, Vaalnest was advised that the GEP was taking a break from funding due to new management.  Once notification was received that GEP was again supplying funding, but no response has been received to date. The frustrated management of Vaalnest has experienced similar grievances with the job fund.


There is great disappointment in the manner in which Government has handled the various requests by Vaalnest management. Should this funding have been received, 128 permanent jobs would have been created with a further 60 temporary jobs arising and ten new businesses would have been developed in the Mamello township.


As a result in the delay in the above, Vaalnest came under financial pressure and this led to Vaalnest being put into liquidation. Without notice boards were put up on the 2nd of October 2012, confirming that it would go on sale by auction on the 9th of October 2012. Despite urgent communication and requests for help sent to Sedibeng Tourism, CEO of SA Tourism, CEO of Gauteng Tourism, the MEC and HOD of Economic Development, the CEO of GEP, Chief Director Sector Transformation of the Department of Tourism and the Minister of Tourism, no response has been received. The owners of Vaalnest will have to bid on the hotel along with other buyers and invest even more money to keep their business.


Until Government takes its municipalities and Government agencies in hand, turning them around to become more competent, with faster turnaround times and more reliable systems, SMMEs will continue to fail at the current rate of 96% and South Africa’s economic and employment crises will continue on.

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