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Cape Town - In his State of the Nation Address President Jacob Zuma should keep in mind that youth unemployment can be addressed by the development of the small and medium enterprise (SME) sector.

This is what Chartered Institute for Business Accountants (CIBA) believes.

"By all accounts this will be the president’s toughest address to date," CIBA said on Tuesday.

“Key to our economic development and growth is the development of the SME sector in SA. In comparison to other developing nations SA has not done enough to unlock the potential of our SME sector," said CIBA president Prof. Dovhani Thakhathi.

"Red tape, limited access to infrastructure such as sanitation, electricity, and transport make it difficult of SMEs to flourish and create employment."

"Government is well aware that storm clouds are gathering and in response have identified the National Development Plan as a means to address youth unemployment and improved economic growth," said CIBA.

Unemployment, especially among the youth, remains stubbornly high; economic growth has been seriously affected by the recent strikes; the economic performance of SA's business sector has been lacklustre, further affecting the government’s ability to raise funding for infrastructure; and the country faces further credit downgrades.

On Monday, as part of Youth Day celebrations, Deputy President Cyril Ramaphosa said that youth unemployment is probably the single most critical challenge facing South Africa.

"More than a third of young South Africans in the labour force are unemployed. In every province, the unemployment rate among youth is more than double that of people over 35 years of age," said Ramaphosa.

In the last five years alone, R2.7bn has been set aside for youth entrepreneurship finance and support.

Many entrepreneurs are also subject to poor education and therefore are not always aware of the opportunities available to them” said Thakhathi.

Small Business Ministry

Thakhathi, therefore, welcomes the establishment of the Small Business Ministry by Zuma.

“The NDP put small businesses at the centre of our 2030 vision. Small businesses hold the key to create sustainable jobs and can place the economy on a trajectory of sustainable growth,” said Thakhathi.

Stiaan Klue, CEO of the SA Institute of Tax Professionals (Sait), agrees with Thakhathi.

“We need to go a step further. Government needs to reduce red tape in the processes required to create and run a small business," said Klue.

"We need a national accord. Government, educational institutions, large business and the banks need to join the struggle and close the fragmented gap in uplifting and facilitating sustainable small businesses.”

Klue believes the responsibility for the development of SMMEs cannot be pin-pointed at present and appears to currently lie somewhere between the Ministry of Finance and the Ministry of Trade and Industry.

"The concept of this important ministry was first mooted to the public at Sait’s annual budget breakfast in 2013 and it has the potential to fundamentally benefit the South African economy from the grass-roots level and upwards,” he said.

“What we need is a small business indaba that will develop a white paper. We need all stakeholders to sign a small business development accord.”

Thakhathi believes a small business indaba is needed to develop a white paper to make SA "the most small business-friendly country in the Southern hemisphere”.