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.
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.
What Can Businesses Expect From The Future Of Work?
While the future of work will always be a constant process of innovation and change, here are a few things that business today can expect in the near future.
The phrase “future of work” is something professionals have been talking about since the birth of the traditional workplace in the late 19th century.
Once defined by cubicles that were arranged neatly side by side with meeting rooms and, of course, the head office with an amazing view of the skyline, today’s offices are strikingly different.
Over the last decade, there has been a surge in the development of open-plan offices, and more and more companies are moving their employees to co-working spaces and experimenting with remote work. For businesses that are still straddling the traditional office, but looking to embrace the future of work, it could be overwhelming at first. While the future of work will always be a constant process of innovation and change, here are a few things that business today can expect in the near future.
Expect flat hierarchies
In 2017, most companies have recognised that employees, especially younger ones are turned off by the conventional hierarchies that once dominated the world place.
Start-ups and small businesses often pride themselves on their “flat” workplace culture, which aims to give both leaders and employees the chance to give input on an equal level. In theory, these structures aim to make room for more innovation and also to help workers feel more appreciated in their roles.
Yet, it doesn’t come without its issues. There have been various studies showing that egalitarian workplace structures can be disorienting and can potentially result in higher turnover rates, as employees feel lost in their roles. Thus, it will take time for the workplace to strike a balance between structure and equality, but so far it seems we are well on our way.
The architecture of the office space is changing rapidly
Chances are you’ve heard of open-plan offices. With corporate giants like Facebook and Google companioning the flexible workspace, company around the world are breaking down literal walls to create airy and open offices that encourage collaboration.
Again, much like the flat workspace, open-plan offices need to be considerate of individual needs. While many workers appreciate the chance to work in a more informal setting, the open office has also faced criticism for introducing new distractions by not including enough private areas, which can lead to a downturn in productivity. As a result, more companies are turning to co-working spaces, which offer both workspace and community space.
Co-working spaces differ from open-offices in the way that they provide community management, structure, and flexibility, ensuring that workers have their needs met, whether that means a private office for the whole company or a hot desk for workers who just want to come in a couple of times during the week.
Remote work will be commonplace
Allowing employees to work remotely has proven to be successful. Companies have been introducing remote days over the last five years, and some even allow their staff to telecommute on a full-time basis. In the early days of the freelance ecosystem, remote work was considered to be unprofessional, but we have learned over the years the allowing employees to telecommute, even on a part-time basis can make them more productive and satisfied in their roles.
There’s no doubt that advancements in communication tools, such as Slack, have allowed workers more freedom, but there are also enormous benefits for businesses as well.
Companies can save on overhead costs by moving teams into a co-working space, or take out a flexible lease in combination with allowing workers to work outside of the office, even if it’s just a few days a week. By saving on rent and utilities, leaders can make room in their budget to invest in employees, by offering educational workspaces or purchasing new equipment.
Overall, these changes have a long way to go before they become permanent fixtures in the workplace. In fact, many businesses are now experimenting with various workplaces trends to find what works best for them and their employees.
Yet, even if you are not ready to grant your staff remote days or turn your office into a single shared space, it’s vital that your business is aware of these trends so you can keep up with the rapidly changing future workplace.
How Investors Can Take Advantage Of The Rand’s Currency Trading Rates
Negative sentiment is likely to be pervasive with the SA economy, and it will take more than a new figurehead in government to right the wrongs of a mismanaged economy.
The USD/ZAR currency pair is trading in the 13.65 range heading into mid-December 2017. Over the past year, the 52-week low was 12.3126, and the 52-week high was 14.5742. As one of the more volatile currencies in the trading spectrum, the ZAR is closely associated with the political shenanigans taking place in South Africa.
The year to date return for the currency pair is -0.50%, after having started 2017 at 13.7351. Much of the activity taking place with the ZAR is speculative. Futures contracts are largely responsible for the whipsaw movements in prices.
Wilkins Finance strategists stress the importance of credit ratings agencies on currencies:
‘Whenever credit ratings agencies such as Moody’s and Fitch downgrade their assessments of the South African economy, this has a negative impact on the ZAR. The impact is not always predictable however – towards the end of November 2017, the USD/ZAR had appreciated after the recent ratings downgrade of the economy.’
Moody’s Investors Service downgraded South Africa’s economy to a rating of Baa3. This is the lowest rating level for Moody’s. Further ratings will be announced in February next year. Fitch has already downgraded the foreign currency and local currency to BB +, but has offered a stable Outlook for the ZAR.
That S&P also downgraded the South African economy to sub-investment grade is an important decision, and one that will have negative ramifications for the South African bonds market. Now, the Barclays Global Bond Index will no longer feature South African bonds. That South Africa’s bond market will be excluded from the World Government Bond Index will also be a bugbear to any hopes of the ZAR appreciating.
Interest Rates in the South African Economy
The South African interest rate is highly attractive to foreign investors, given that the UK, US, Canada, Japan, and European bank rates are at historic lows. There is little to be gained by investing cash in fixed-interest-bearing securities in these economies. The current interest rate in South Africa is 6.75% (as at November 23, 2017). The interest rate has dropped to expand economic activity in the country.
Overall, South Africa’s inflation rate for the year is expected to remain at 5.3% dropping to 5.2% in 2018 and rising to 5.5% by 2019. Global investors remain concerned about the risk/reward environment in South Africa. The country has experienced significant capital outflows in recent years, driven in large part by uncertainty regarding future prospects. The USD/ZAR was trading at 14.60 in late November, and current ZAR strength is being attributed to USD weakness.
Factors on Both Sides of the Atlantic
One of the major economic events affecting exchange rates will be the reconciliation of the House and Senate bills on US tax legislation. Any major overhaul of the US tax code will invariably result in a dramatically boosted USD, and a weakened ZAR. For traders, it appears to be short-term call options on the local currency and long-term call options on the USD.
It is evident that currency traders are hedging against the ZAR over the long-term. The fundamentals of the economy are structurally unstable. The power grid infrastructure, water supply problems, and political instability at the highest echelons are but a few of the many problems plaguing South African growth prospects.
However, the ZAR will draw strength from the election of a credible leader, and this will be particularly noteworthy with Cyril Ramaphosa’s appointment. Overall, negative sentiment is likely to be pervasive with the SA economy, and it will take more than a new figurehead in government to right the wrongs of a mismanaged economy.
For many people, the holiday season represents a time of change.
For many people, the holiday season represents a time of change. Some folks have made the decision throughout the year to start a new business in 2018, and the festive season’s message is one of hope for a bright new entrepreneurial future. Unfortunately, for most, this dream can become a nightmare without considerable amounts of planning on part of the entrepreneur and start-up founder.
So, without sounding too depressing, Christmas and New Year’s should be a time for stringent planning rather than celebration for the season and the year ahead. Call me Ebenezer Scrooge, but hitting the laptop and doing research is the best thing an entrepreneur can do while family and friends are unwrapping gifts or holiday-making.
As a business owner who has used the month of January as a starting block for my foray into a new industry, I can say that one of the problems I encountered was not accurately defining my customer personas, both in real-time and online. It got me thinking; if I can make the mistake when it comes to accurately segmenting customers in real-time, how many people make the mistake of inaccurately creating customer personas for their online brands?
It’s All About the Customer
Creating a customer persona is easy. Most business founders have an idea of who their customer is before marketing their product. And once you know who the customer is, its just as easy to find out their likes and dislikes, as well as their habits.
The best way to create customer personas is to base your personas on research and data. Many established businesses find this a simple task, as they have a wealth of clients from which to draw this data. Unfortunately, this is not the case for business founders, so they must carefully test the waters using surveys, third-party research, and an ear-to-the-ground within the industry.
Once a business understands its various buyer personas, it’s time to start considering the typical online buyer persona…
Just because you can accurately determine your optimal customer due to your created customer personas, you may have to create alternative personas for online consumers. This is because a slightly different person will be looking for your product online.
As an example, Bob owns a pool business, building as well as maintaining pools for residential clients across Johannesburg. Bob’s nominal customer persona is that of Adam, the 40-something business owner who owns a home in a middle-class neighbourhood. Adam is likely to come across Bob’s out-of-home marketing material, or comes to Bob for business through referrals. However, Adam differs from Lerato. Lerato is a different age, race and gender. Even more importantly, Lerato looks for products and services exclusively online. To appeal to Lerato over Adam, Bob’s customer persona must be changed for the online customer, and the online customer must be exposed to tailored content to be appealed to.
Lerato also lives in a middle-class neighbourhood, but Lerato has young children, while Adam’s children have now moved out of home. This means that Bob can take advantage of Lerato’s need for pool safety nets and a custom-built pool fences, and Bob will make sure that Lerato is exposed to content about these services while making her online journey.
When creating online material, ensure that it is developed to take advantage of the online customer. One mistake that business owners make is that, in their attempts to be recognised as industry leaders, they try very hard to use industry specific language. They make attempts toward showing their prowess in the trade and showcase their own certification and business journey.
The online customer persona representing the business’s primary online buyer does not care about the business’s goals and objectives, and they have no clue as to what is being said when the website uses online lingo. They want content created for them; they want to know why they need the product or service, they want to know that they are using the best business for the job, and they want social proof regarding the service offered.
Make sure that you do proper content mapping research, and identify the online journey taken by the consumer through online channels before they make a purchasing decision.
Take this a step further and make sure that you define several online customer personas. Determine the value of each persona and structure content and the consumer journey for the most profitable of the personas. Additionally, determine the lifecycle of the journey, how much attention a segment of online content generates, and capitalise accordingly. For example, if most of the purchasing decision is made on the product or service landing page, make sure that the landing page is optimised as often as possible to increase your business’s revenue.
Hit January 2018 running, and make sure you understand your online client before receiving your first online lead. And if you make a few mistakes initially, don’t worry. 2017 was – and 2018 will be – known for being the year of big data, where business owners make operations and marketing decisions based on the behaviour of customers online. Always analyse the data available to your business when made available, and make changes accordingly. The best of luck for the year ahead!
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