Is S.C. doing enough to grow, maintain small businesses?

Is S.C. doing enough to grow, maintain small businesses?

Statehouse Report
August 4, 2017

By Lindsay Street

Unemployment is down. Small business taxes and regulations are down. But there are 25 percent fewer small businesses today than prior to the Great Recession, according to small business advocates.

What’s killing small business in South Carolina? Lack of access to capital, they say. Now, they are eyeing the billions of dollars the state has spent on luring big business and say they want a piece of the pie.

“Regulations are not holding back small business. Taxes are not holding back small business in the state,” said Frank Knapp CEO of the S.C. Small Business Chamber of Commerce.  He points a finger to lack of capital resources as to why the state’s largest employment sector is drying up.

“It doesn’t mean we don’t do the incentives for big businesses, but we can carve off some of that money and do a good job of seeing small business grow.”

But the appetite for change from state leadership may be a missing component. After all, the state has experienced a boom in big business.

Going fishing

South Carolina has landed some big fish in the last six years. The state has pulled in 94,505 jobs and $24.2 billion in investment with new and expanding companies, and those companies are often lured with incentives.

Boeing and Volvo are just two of the juggernauts the S.C. Commerce team brought to the Lowcountry. In total, those companies will employ about 9,500 people. To bring those jobs here, Boeing received $1 billion and Volvo received $212 million in state and local incentives, according to data from watchdog website  Good Jobs First.

In contrast, Lowcountry Local First represents 12,000 mostly small business employees. Its companies have received little to no state or local money, according to its Executive Director Jamee Haley.

In all, Good Jobs First reports that South Carolina has spent $2.5 billion in incentives for corporations moving or expanding here.

Boeing, Continental Tire, Volvo, Vought Aircraft and BMW tip the scales for big economic development deals. Large companies like those receive local fee-in-lieu of tax agreements, workforce education deals and state incentive grants.

The 2017-2018 budget includes $40 million for a closing fund that can be offered to lure businesses through investing in property or infrastructure improvements. Other discretionary spending includes job development credits that offset moving costs to the state, and port volume increase credits.

Nevertheless, the state  invests in small business — just not to the extent of big companies seeking to bring thousands of jobs and millions in investment.

“S.C. Commerce assists small businesses in a number of ways including providing one-on-one support; business-to-business matchmaking; connecting to relevant resources and supplier development — with the latter being the most productive,” S.C. Commerce spokesman Adrienne Fairwell said in a statement to Statehouse Report.

“When companies relocate to SC or expand, our team is the service after the sale — helping identify crucial suppliers and vendors to support initial and ongoing supply chain needs.”

For some, that’s enough, especially when coupled with the state’s business-friendly atmosphere.

Appetite for change

S.C. Sen. Thomas Alexander, R-Oconee, owns a small business and is the chair of the Senate Labor, Commerce and Industry Committee. He said the state needs to continue doing what it’s doing to help small businesses: keep taxes low, cut regulations and keep investing state dollars into the federal Small Business Administration.

“We will continue to work with small business,” Alexander said. “We can make sure small business can compete in the marketplace.”

Economist Joey Von Nessen of the Darla Moore School of Business at the University of South Carolina said there was no cut-and-dry investment formula for expected returns when it comes to economic development. But, he said, landing those successful large businesses can be a positive boon to smaller businesses that crop up around them.

“When you’re looking at economic development, looking at small business and major companies are both important,” Von Nessen told Statehouse Report. “It all fits together.”

Alexander agreed.

“As you bring business in, you’re helping small business,” Alexander said. “There’s always appetite to help small business. I don’t think it’s an either-or proposition.”

Capital needed

In May, S.C. Commerce Secretary noted, “Small businesses make up more than 97 percent of all private employers in South Carolina.”

But Knapp said that while  recruiting big business and keeping regulations and taxes low has been helpful, access to capital is needed. That capital could come from S.C. Commerce. Lowcountry Local First’s  Haley agreed.

“It could do a multitude of things and probably cost a whole lot less,” she said of investing in small businesses.

Haley said change at S.C. Commerce is going to have to come from leadership, such as the governor’s office. So far, however, Gov. Henry McMaster appears to be following his predecessor’s lead in recruiting tastes, she said.

“We need to put different people in office,” Haley said. “If we keep electing the same people, we’re going to keep having the same un-innovative ideas coming forth.”

Knapp said he recently talked with McMaster about focusing on growing small businesses in the state.

McMaster’s office did not respond to a request to comment on whether the governor would begin trying to steer  some of the state’s investment money to mom-and-pops.  Alexander said that beyond looking at removing more regulations on businesses, there isn’t much more on the legislative horizon in terms of changes for small businesses.

Haley conceded that it was “much harder” to support small businesses than it is focusing on a few large industry giants.

“It’s a complete change in the Department of Commerce and how they look at economic development because they only know one model,” Haley said, calling the model “go out and chase the elephant.”

“It is much harder to support grassroots organizations across the state that are working in the communities … but it’s a lot less expensive.”