5 Steps South Carolina Lawmakers Should Take to Invest in Small, Rural, and Local Businesses

It’s taken us a while to post our first blog here at ourvillage but we’re finally here!

And it’s so fitting because today is Ujamaa, the fourth day of Kwanzaa. Ujamaa is the principle of cooperative economics. It represents a commitment to the practice of shared work, wealth, and good in the world.

As we reflect on this principle, many policy makers and elected officials could learn valuable lessons by studying this principle. This principle is embodied by the words of Nobel Peace Prize winner, Wangari Matthai who said:

Rather than working collectively to expand opportunities for the people, elected leaders like South Carolina Governor Henry McMaster are actively taking steps that would retract opportunities, especially from Black, Hispanic, and women entrepreneurs.

If South Carolina really wants to grow its economy, then it should focus on supporting small, rural, and local businesses, especially those owned by “minorities” and women. The following blog shows why Governor McMaster’s recent Executive Order calling on state agencies to ignore contracting and procurement laws is shortsighted.² Here, we offer a roadmap the Governor and other SC officials can explore to strengthen and invest in small, rural, and local businesses, including those owned by women and entrepreneurs of color.

So how’d we get here?

On December 3, 2025, Governor Henry McMaster issued Executive Order 2025-40. The Executive Order:

1. Directs state government agencies to immediately stop the use of race-based quotas and set-asides in state contracting, procurement, and spending decisions,

2. Requires agencies to align future procurement and spending decisions with principles of “merit-based” criteria, and

3. Requires all agencies and instrumentalities to provide the Governor’s Office with information identifying any regulation, policy, or practice that requires or permits consideration of race in procurement or contracting by January 9, 2026.

In theory, McMaster’s Executive Order eliminates one of the few policy levers that actually could help promote growth, investment, and opportunity for minority and women entrepreneurs. In practice, however, the program has been plagued by a lack of oversight, enforcement, and accountability.

Whose Problem is it Anyway?

Despite the Governor’s claims, the real problem in South Carolina is not that agencies are over-using race-conscious tools. It’s that agencies are not following the law at all! According to the South Carolina Commission For Community Advancement And Engagement which was recently rebranded from its original name of the South Carolina Small and Minority Business Contracting and Certification Office (SBCC), more than half of all state agencies failed to submit either the legally required annual Minority Business Utilization Plan or the quarterly reports designed to track progress toward the state’s ten percent minority-business participation goal (see figure 1).³

Further, some of the state’s largest institutions—including major universities and statewide agencies—submitted no plan, no quarterly report, or neither.

Take the South Carolina Department of Corrections (DOC) for example. The DOC reported having a $5 million “controllable budget”. A controllable budget means the dollars available for procurement after subtracting legally mandated expenses such as insurance, benefits, and other statewide charges. In plain language, this means that in fiscal year 2024-2025, the DOC would have made $5 million available for procurement opportunities. At minimum, the agency should have developed a utilization plan showing how it would spend at least ten percent of those opportunities with minority contractors. It then should have provided quarterly reports detailing how it’s making (or not making) progress towards that goal.

Instead, the DOC failed to submit either the required annual utilization plan or any quarterly reports. This is just unacceptable.

Collectively, these five agencies alone controlled nearly $247 million in discretionary, “controllable” spending, South Carolina effectively left an estimated $24.7 million in potential MWBE contracting unrealized—all because agencies did not submit utilization plans or comply with basic reporting requirements. These are not hypothetical dollars. These are real contracting opportunities that could have strengthened minority- and women-owned firms, expanded local employment, and advanced the state’s stated economic inclusion goals.

Without these plans and reports, the state has no meaningful way to assess whether public contracting dollars are reaching the minority- and women-owned businesses the law is intended to support.

Can Governor McMaster Really Instruct Agencies to Not Follow the Law?

Not at all. Gov. McMaster knows that his Executive Order requiring state agencies not to follow the law is illegal. South Carolina’s laws are clear about who has the power to create, amend, or repeal contracting and procurement law. Spoiler alert: it’s not Governor McMaster.

Still, Executive Order 2025-40 steps well outside the Governor’s authority by attempting to suspend existing statutory requirements and by implying a judicial determination that only the courts can make. McMaster’s own Attorney General Alan Wilson has publicly stated that the State cannot eliminate race-conscious contracting provisions without either: 1) action by the General Assembly; or 2) a court ruling declaring such provisions unconstitutional. To date, none of those steps have happened.

So what’s really going on here?

McMaster’s order erases the legal framework that has governed contracting for more than three decades. Cases such as Croson, Adarand, and O’Donnell make clear that states can use race-conscious tools when they are built on evidence and narrowly tailored to remedy discrimination.⁴ Instead of engaging with that precedent, the Governor in some dystopian twist, is relying on the SFFA ruling against Harvard, a case about college admissions, not public contracting to support his claim that race conscious programs are not permissible.

Is there even a need for a Set Aside Program?

Local governing bodies have already begun the work of determining how to support businesses owned by Black South Carolinians and other entrepreneurs of color. Charleston County School District (CCSD) offers one of the clearest examples.⁵ In 2022, CCSD commissioned a comprehensive disparity study that documented statistically significant racial disparities across multiple industries in both the availability and utilization of minority- and women-owned firms. The study concluded that CCSD had a compelling governmental interest to take corrective action because its contracting patterns showed the “substantial and persistent underutilization” of these businesses.

The Disparity study revealed evidence of discrimination that is both statistically significant and persistent over time. It is in these exact circumstances by which the Supreme Court allows governments to adopt narrowly tailored remedies. Future disparity studies should be the foundation for any future set aside program the state should undertake.

The Data shows a Need for Focused Investment

Existing racial inequities in business outcomes persist across the Charleston region and across the state.⁶ Here’s what we know.

White residents are nearly seven times more likely than Black residents to own a firm that employs multiple people. Employer firms are essential to sustaining economic growth. These firms hire workers, generate revenue, secure contracts, and circulate wealth back into local communities. A 7-to-1 ownership gap means Black entrepreneurs are dramatically underrepresented in the part of the economy that produces stable jobs and long-term wealth.

White-owned employer firms earn more than three times the revenue of Black-owned employer firms. In the Charleston region, white-owned employer businesses generate an average of $2.42 million in annual receipts, compared to just $702,392 for Black-owned employer firms. When Black-owned firms generate only a fraction of the revenue of white-owned firms, it limits their ability to grow, hire, or compete for larger public and private contracts. These disparities compound over time, widening racial wealth gaps across the region.

Firms owned by people of color generate less than half the revenue of white-owned firms, even when combining Black, Latino, Asian, and Native business owners. In Charleston, many firms owned by people of color are clustered in care industries, education and social services, personal services, and small retail—industries where annual revenues tend to fall well below $1 million for the average employer firm. By contrast, white-owned firms are disproportionately represented in higher-revenue sectors such as manufacturing, wholesale trade, and construction, where average employer-firm receipts often exceed $2–$3 million.

Because firms of color are concentrated in sectors that structurally produce lower revenue, they enter the market with fewer opportunities to scale, hire, or compete for large contracts. Industry segregation limits growth potential before a business even opens its doors.

Sector segregation drives inequity: white-owned firms dominate the highest-revenue industries, while firms owned by people of color are concentrated in lower-revenue sectors. White-owned firms are disproportionately represented in the region’s highest-revenue industries. These are industries such as manufacturing, wholesale trade, and construction. Firms of color, by contrast, are overrepresented in lower-revenue sectors like care industries, education and social services, personal services, and small retail—industries with far more limited revenue ceilings as noted above. If firms of color are locked out of the sectors that produce the highest earnings, no amount of “race-neutral” policy can correct this gap.

Women, especially Black and Hispanic women, face steep barriers to generating revenue, even when compared to men of the same racial group. In the Charleston region, male-owned employer firms earn nearly twice the revenue of women-owned employer firms. Even within the same racial group, women-owned firms generate significantly less: for example, Black women–owned employer firms earn less than half the average receipts of Black men–owned employer firms.

These inequities weaken Charleston’s overall business competitiveness and reinforce long-standing patterns of racial and gender inequity across the state.

5 Steps SC Lawmakers Should Take to Invest in Small, Rural, and Local Businesses

Set aside programs, although limited, remain some of the primary mechanisms that help minority- and women-owned firms compete for and win government contracts. If lawmakers want these mechanisms to work as intended, they must strengthen them, not repeal them.⁷ Are these tools perfect? By no means. However, South Carolina legislators can use them as a foundation from which to build a competitive yet equitable system where each business owner is supported and can thrive.

Here are five ways SC lawmakers can strengthen contracting and procurement law instead of repealing existing law.

1. Empower local jurisdictions to conduct comprehensive disparity studies before making any changes to existing law. South Carolina cannot meaningfully revise its contracting and procurement law without first understanding whether disparities exist and at what scale. A modern disparity study would document availability and utilization gaps, identify whether discrimination is occurring, and determine which race-conscious or race-neutral tools are legally justified in accordance with Croson. Acting without this evidence undermines policy effectiveness and actually exposes the state to real legal risk.

   
   

2. Establish a true statewide baseline of demographic data and agency spending while the study is underway. South Carolina cannot strengthen its procurement system without reliable data. Because the state does not consistently track who receives contracts, who participates as subcontractors, or how much is spent with minority- and women-owned firms, lawmakers lack a clear picture of current performance. Requiring agencies to collect demographic information from vendors, standardize reporting systems, and publish annual spending dashboards would help to establish the basic transparency needed for accountability and provide the data foundation for a modern disparity study. The District of Columbia is a good model for this. They revised their law to require frequent tracking monitoring and reporting of spend with MWBEs.

   
   

3. Provide real oversight of state procurement and small-business functions. The legislature should establish clear oversight authority to review procurement practices, monitor compliance, and publish annual reports. Agencies must be trained and required to accurately track spending, subcontracting patterns, and demographic characteristics of vendors to assess the state’s use of eligible small, minority-owned, and women-owned firms. Meaningful oversight turns plans into measurable outcomes.

   
   

4. Expand targeted business development support for minority and women entrepreneurs. Many South Carolina firms—especially small, rural, minority-owned, and women-owned —lack access to the capital, social networks, and technical assistance needed to compete for public contracts. Lawmakers can address these gaps by funding procurement-readiness programs, vendor workshops, bonding and insurance assistance, and navigation help for state contracting portals. Focused support for entrepreneurs in high-growth sectors, paired with mentorship programs connecting small firms to larger primes, will strengthen the state’s supplier base.

   
   

5. Prioritize and build out a statewide small and local business program. A dedicated small- and local-business program would provide a unified framework across agencies, establish clear goals, and support firms that form the backbone of local economies. Such a program should promote local business participation, expand contracting opportunities for emerging firms, and create pathways for small contractors to grow into prime vendors. Prioritizing small and local businesses strengthens economic resilience, keeps wealth in communities, and ensures public spending reflects state and regional economic development goals.

When the District of Columbia’s Minority Contracting Act was struck down by the courts in the early 90s, the District pivoted to a small and local certified business program. In 2024, the District reported spending $1.2 billion with small and locally certified firms. South Carolina can experience similar success if it decides to intentionally invest in its business owners. What will 2026 bring?

To be continued.