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Empowering Growth

Industrialising the nation – is government doing enough?

Mannie Hirsch

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In September 2011 President Zuma raised his concern about the lack of black industrialists in South Africa and called for the economy to produce “authentic black entrepreneurs” who own factories. A few months later in his 2012 State of the Nation Address, President Zuma introduced government’s plans to make a massive investment in infrastructure. The aim, he said, is to “industrialise the country, generate skills and boost much needed job creation.” A few days later, during his budget speech, Finance Minister Pravin Gordhan announced that R845 billion is to be spent on energy infrastructure, transport, logistics, housing, telecommunications and water, budgeted for the next three years.

The role of B-BBEE

In December 2011 new procurement regulations as well as proposed amendments to the Broad-Based Black Economic Empowerment Act were introduced, in terms of which tenders can no longer be awarded to black intermediaries who then pass on the skilled work to non-compliant companies. Sub-contracting of worth more than 25% of the value of the project now must go to a contractor with an equal or greater B-BBEE status or to an exempt micro enterprise.

This is aimed at encouraging the development of capacity within black-owned companies. Local production is also given more support with the ‘China Clause’ which requires tenders to stipulate a minimum threshold of local production and local content and obliges contractors to honour these terms. Contractors may not change their minds and procure cheaper materials from China.

The B-BBEE amendments also propose a controversial requirement that states that, in order to score BEE points for Enterprise Development, companies will be expected to provide practical support to their beneficiaries, in addition to the funding support that was originally required.

But are any of these measures sufficient to boost the development of black-owned manufacturing companies?

Walking the talk

My colleague, Deon Oberholzer, CEO of Gestalt Fund Managers, believes that it’s all very well to introduce procurement regulations, but government itself must walk the talk. He cites the example of the Gautrain busses which were imported instead of being manufactured locally. South Africa’s manufacturing sector has suffered due to competition from other emerging markets. Manufacturing now only represents 15.6% of the South African GDP.

Some commentators believe that government is the guilty party – it has the greatest buying power in the country but is itself not sufficiently committed to local procurement. The concern is that government will repeat its old ways in its proposed infrastructure projects. “Will they still contract the bulk of the work to larger international companies that only employ temporary construction workers, or will they find a solution to bring the black medium-sized businesses into the projects on a sustainable basis?” asks Deon.

Some local authorities are being proactive in this regard. A notable example is the Rustenburg Local Municipality in the Northwest Province, which has embarked on a R3 billion investment in a rapid bus transport system to serve the entire Rustenburg region, including the surrounding rural settlements and the mining operations in the area.

The municipality has stipulated that 25% of the money paid to contractors has to be spent within the community. The result is that contractors are engaging with local suppliers, transferring skills and building capacity. The system will be run by specially trained professionals selected from within the community and support services (such as bus and infrastructure maintenance and manufacture of materials and uniforms) will be sourced locally, supported by procurement agreements with the local authorities.

But even with a nationwide drive to involve local suppliers and build local manufacturing capacity, we still have the challenges of our critical skills shortage, along with a serious lack of understanding in our emerging sectors of the complexities of entrepreneurship.

The reality of working in SA

In October 2011, Deon conducted a study of a group of Soweto-based entrepreneurs and found a number of constraints; a poor understanding of financial systems (such as the difference between income and cash flow), a misperception of how the tender system works compounded by a belief that all are entitled to a fair share of tenders, an inability to market their products, a limited grasp of paying suppliers, collecting payment, applying for funding or the purpose and content of the business plan, a poor understanding of or compliance with labour legislation, little ability to manage customer relationships, no functional understanding of health and safety requirements, and neither the tools nor the skills to develop strategies for growth or manage a bigger business. Overall, the test group perceived the role of government as a required enabler and yet an unwelcome restraint in terms of regulations and compliance.

According to Deon, other studies have also shown that emerging entrepreneurs are constrained by mindsets of entitlement, self pity, a focus on short-term gains and the inability to move from thinking like an employee to thinking like a business owner. He concludes that, given these challenges, the policy of giving blanket support to all SMEs is not the answer to fostering the rise of black-owned industrial companies. To meet this specific target, we need to identify high potential businesses early and give those selected businesses the right support.

If private businesses are indeed required to be hands-on in supporting black-owned enterprises in terms of the proposed amendments to BEE legislation, this could go a long way in identifying potential industrial stars. But then government has to come to the party as well by committing to procurement from new local suppliers and directing practical resources to specifically help establish such new manufacturing companies.

Empowering growth

Land ownership is a critical factor in empowering a new black industrial sector. Government land should be allocated for the development of industrial clusters, with ownership rights built into the deal. Once ownership of the land and its infrastructure is in the hands of the people who are working on it and there is a stable market for their products, along with knowledge transfer coming from established businesses, then much else can fall into place, such as; leveraging of funds, accountability for success and retaining the flow of money within that community.

The R845 billion infrastructure building programme has the potential to create a platform for sustained industrial development and transformation. But government will need to be vigilant about the structure of its tenders and will have to do as much to empower its suppliers as it is asking of the business sector.

Mannie Hirsch has consulted internationally on the development of emerging entrepreneurs. He founded The Gestalt Group in order to pave the way for emerging entrepreneurs to enter the mainstream of the South African economy. For more information, contact Mannie at mannie@gestaltconsult.com, on 011 781 7841 or visit www.gestaltconsult.com.

Business Landscape

How Stock Taking Can Grow Your Business

With the end of 2018 approaching, it can be the ideal time to take figurative stock of the five success elements of your business.

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MUCH like doing the dishes at home, stock taking in business is one of those chores we need to get done, whether we like it or not. All businesses – no matter how small or big – also need to take stock of their growth on a regular basis.

With the end of 2018 approaching, it can be the ideal time to take figurative stock of the five success elements of your business, by asking the following pertinent questions:

  1. People: do you need to invest in new people or new skills development?
  2. Purpose: has the focus of the business changed?
  3. Processes: do the activities people undertake still match the purpose of the business?
  4. Physical Resources: have you got everything you need to achieve your business’ purpose?
  5. Market: are you still serving the needs of your customers and clients?

If, in the end-of-year-madness, you only have time to take stock of one of the five success elements of your business, then focus on the last element – your Market. Listen to your market: Who they are, what they want, what they purchase, when and why they purchase, and what services they require. Don’t ever assume their wants and needs, but rather stay in touch with your market and regularly take stock of their changing needs and interests.

Related: Stop Surviving And Start Thriving In Business

And remember… you do not operate in a vacuum

Do not only take stock of your own business, but also take figurative stock of the businesses you compete with for market share. Have they changed their approach, pricing structure, service offering and what is the perception on their offering?

Do not turn a blind eye to what your competition is doing, instead learn from them by researching their suppliers, customers and value offering. Importantly, you should not copy your competitors; rather focus on your unique offering and how you can grow your market share and become even better at what you do.

Apart from your competitors, internal and external factors also impact your business. Regularly take stock of how your macro-environment can impact your business. These elements include policies, compliance matters, the economic climate, new trends and technological advancements as well as environmental impacts. Anticipate these changes and trends expected to hit in 2019, so that you can remain ahead of the curve – for optimal business growth.

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Business Landscape

A Look At Youth Mentorship During Global Entrepreneurship Week (GEW)

Entrepreneur: A person who sets up a business or businesses, taking on financial risks in the hope of profit.

Kristly McCarthy

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Global Entrepreneurship Week kicks off from 12 November – 16 November. Around the world, entrepreneurs are carving out their paths and are taking matters into their own hands.

Back home, Futureproof wants to instil a culture of curiosity, tenacity and risk taking in every South Africa – young or old, intrapreneur or entrepreneur.

In fact, we go as far as to teach young children from the age of 8-years-old about the art of entrepreneurship as part of our countrywide school program. Most recently, the company has seen success in the Orange Farm area and is teaching 110 Grade 3’s to master the art of entrepreneurship.

To celebrate this week, the team at Futureproof interviewed several well-known entrepreneurs and asked them the big question: ‘What do you wish someone had told you before you became an entrepreneur?’ Here’s what they had to say:

Clive Murray, the founder and CEO of World Water Exchange: “Making money is easier than keeping it. Don’t change the rules you make for yourself when times get tough.”

Marc Ashton, former MD of Moneyweb and CEO of Dynamic Body Technology:

  1. Don’t start a business…
  2. If you are feeling foolish and still wan to then do it with partners.
  3. If you are doing it with partners then lay out the terms of divorce upfront.

CEO and Co-Founder, Lisa Illingworth says that Futureproof has made it their life’s mission to aid children with the real-life, hands-on skills that they need to succeed as entrepreneurs.

“Text books just don’t teach the things that entrepreneurs really need to know. So much growth and economic activity can be realised out of entrepreneurial ventures, but we are all too scared to take the leap… why? Because we don’t feel supported and we would probably prefer to stay in our comfort zones”.

Related: The Mentorship Challenge – Behind Every Great Leader Is A Great Mentor

In fact, while entrepreneurship could literally catapult our country, an article in the Daily Maverick in 2017 described entrepreneurship in South Africa as ‘Sitting backwards on a donkey riding further away’.

Issues that entrepreneurs will come to face, even in their younger years is that of funding issues, lack of mentorship and opportunities, low skill levels, compliance and of course, poor standards of education and lack of access to education.

The current structure of the education system was initially designed in an entirely different age to achieve economic outcomes that are no longer viable due, in large, to the rapid innovation and adoption of technology.

“Gearing the country up for the forth industrial revolution is proving to be a challenge in both the public and private sectors. Are we really ready and how we use this particular week of the year to relook the problems and derive opportunities from them?” says Lisa.

Lisa provides context on the issues that entrepreneurs face. “Imagine this: you have a brilliant idea but no investment. You have no clue where to begin but you take it to the banks and a few potential investors. Without a solid plan and ‘street smarts’, the deals fall through, or you jump through hoops, give away more than half of your company and land up working tirelessly with no returns. This a reality for many who really don’t know how to launch an idea, understand its feasibility and raising the capital they need through mechanisms that won’t cannabalise the business at a later point.”

Lisa says that the country remains hopeful for President Ramaphosa to implement his vision for entrepreneurship as stated in the SONA 2018. “The President stated that ‘establishment through the CEOs Initiative of a small business fund – which currently stands at R1.5-billion – is an outstanding example of the role that the private sector can play. Government is finalising a small business and innovation fund targeted at start-ups’,” she continues.

“We need to change how and what schools are teaching for this to be realised on a large scale and providing the foundations so that these kinds of funding initiatives will have the best possible chance of growth and success”.

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Business Landscape

Make Your Travel Even More Rewarding

From engineers to businessmen, hairdressers, creatives and stay-at-home-partners, the British Airways Executive Club benefits all who join.

British Airways

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The British Airways Executive Club is uncomplicated, free to join on ba.com and from the moment you join, you will benefit from exclusive privileges and rewards, such as upgrades, hotel stays and car rentals with British Airways and oneworld® airline partners.

Besides collecting Avios, which can be redeemed on flights, you will also collect Tier Points every time you travel, allowing you to progress through the different Tier levels within the Club, which are Blue, Bronze, Silver and Gold.

Your Tier status will open up a world of opportunities and added benefits, such as fast track check-in, free seat selection and saving your meal preference selection as part of your Executive Club profile for future flights.

When travelling within southern Africa or internationally on British Airways, Executive Club members from Silver Tier status and up will experience a valuable and enjoyable ‘moment in time’ between checking in and boarding with lounge access into all British Airways eligible lounges. Some of these features include on-site spas, wine tasting from a monthly selection of the finest South African and international wines, a Living Library, private meeting spaces and business facilities to mention but a few.

The more Tier points you earn the sooner you will reach your next Tier status in the Club, which will result in additional benefits, such as bonus Avios, priority check-in, extra luggage allowance, access to over 170 lounges worldwide and enhanced opportunities to afford the luxury of travelling in the British Airways Club (Business Class) cabin.

Related: How I Run An International Business From A Remote Beach Town In The Eastern Cape

british-airways-foodWhen travelling in Club, priority boarding is on offer giving passengers a minute or two to reflect as they settle into the comfort of the business class seats, meaning significantly more space, which can be utilised to work on your next business pitch, read a book on your digital device or stretch out and relax before touching down.

Be welcomed with pre-drinks and a hot towel as you get seated and wait for the rest of boarding to complete as the flight embarks to your chosen destination. On-board hospitality will include a variety of delicious meals, which gets your day off to the best start or ends your trip on a tasteful note. Being an Executive Club Member, your meal preferences can be stored and offered where possible.

As part of the Executive Club you will collect Avios every time you fly and you can even top up your Avios with ease and make use of a collective balance by pooling Avios together within a household account, to reach your dream destination sooner. By calculating earnable Avios and Tier points with the simple calculator available on ba.com, an estimation can be done before booking your next flight.

Take advantage of the opportunity to redeem exclusive awards with Avios by booking reward flights, upgrade flights or spoil friends and family by gifting your Avios.

Appreciate travel more than ever before with The British Airways Executive Club. It’s designed to recognise and reward all passengers, ensuring every journey is exceptional and enjoyable.

Fly with British Airways on its extensive route network within southern Africa and beyond which includes Johannesburg, Cape Town, Durban, Port Elizabeth, Livingstone, Harare, Victoria Falls, Windhoek, Mauritius and London.

For more information and to become an Executive Club Member visit ba.com

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