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Business Landscape

President Ramaphosa’s Support Of Entrepreneurs And SMEs In SONA Had Us Cheering

President Ramaphosa reminded us that while change can produce uncertainty, it also presents great opportunities for “renewal and revitalisation, and for progress”.

Mari Schourie




Like so many South Africans, instead of going out to play, I stayed home on Friday night to watch our new president deliver his maiden State of the Nation Address. And like so many of my fellow citizens, I felt revitalised by President Cyril Ramaphosa’s commitment to setting our beloved country on a path of growth and optimism for the future.

More, though, I was thrilled that President Ramaphosa recognised how vitally important it is for everyone – business and government and citizens – to support entrepreneurs and small businesses. It is something that as a company, we’ve made a core part of our business. Being in the co-working and serviced office industry, we work with entrepreneurs and small businesses every day. They are the backbone of our business.

Related: How South African Small Business Owners Can Overcome Economic Uncertainty

As such, we’ve developed in-house programmes to support them. When we can utilise their services ourselves, we do. A member of the co-working space, who has a catering company, runs our coffee shop in headoffice. We run workshops and knowledge hubs to encourage ongoing skills development and the joy of learning. We’ve even put some of our entrepreneurs at the centre of our marketing campaigns; we live and breathe the business lives of our entrepreneur members. And we learn from them too.

Economic growth sustained by small business

So when President Ramaphosa said that ultimately, “the growth of our economy will be sustained by small businesses, as is the case in many countries”, I couldn’t help cheering. Recognising entrepreneurs and small businesses sometimes means changing our thinking, looking a little bit further than our immediate surroundings.

In his speech, President Ramaphosa said government would honour its undertaking to set aside at least 30 percent of public procurement to SMMEs, co-operatives and township and rural enterprises and would continue to invest in small business incubation. “We encourage business to do the same,” he said.

And we would encourage the public to think about it too. Instead of employing the services of a major corporate or chain, is there a small business nearby that does the same work? Do you have local suppliers in your area that you could use? Is there an innovative service in your area started by an entrepreneur you could support? Do you think about where you buy your products and services, or you on autopilot? When you discover a fantastic small business, do you tell your friends? Do you post on Facebook or Twitter or Instagram and take note of it?

As Ramaphosa says, “It is our shared responsibility to grow this vital sector of the economy. We will work with our social partners to build a small business support ecosystem that assists, nourishes and promotes entrepreneurs”.

Related: Small Business Savvy: Why You Need Negotiation Skills

Centre of the economic agenda

Yes! We are trying to do the same thing in our own way. For example, we recently opened a co-working/serviced office development in downtown Johannesburg’s central business district. While co-working is becoming a more established trend in workspaces, what makes the Village Road The Workspace different is that this time we are collaborating with MiWay business insurance to launch an entrepreneurial hub and business development programme within the space.

The thinking is that we should become a mecca for start-ups, entrepreneurs and small business owners. This partnership will bring a number of benefits to members, including monthly knowledge hubs hosted by professional speakers as well as industry related workshops where guest speakers will impart business know-how to members.

We also believe that by supporting and funding an entrepreneur competition, which will run over the next nine months, we will give voice to our belief in entrepreneurship and its ability to create jobs. We will be able to showcase innovative businesses, with four employees or less. And the prize will give the winning business a major headstart by funding office space, office requirements, and insurance requirements etc for a year. Imagine not having to pay those things every month. Freeing up that money to put back into a business.

President Ramaphosa has promised young South Africans will be the “centre of the economic agenda”. At the centre of the national agenda is job creation, especially for young people. He praised the CEO’s Initiative of launching a R1.5 billion small business fund, remarking that it was an “outstanding” example of the role the private sector can play. Government will do its bit by reducing the regulatory barriers for small business and finalising a small business and innovation fund for start-ups.

This is fantastic news. President Ramaphosa reminded us that while change can produce uncertainty, it also presents great opportunities for  “renewal and revitalisation, and for progress”.

We are behind him every step of the way. And will continue to do our bit. So if you know of an innovative entrepreneur business out there, with four people or less, encourage them to take a step closer to their dreams.

Mari Schourie is CEO of The Workspace, part of the InteSpace group of companies, provider of flexible space solutions including XtraSpace Self Storage, SpaceBox, Ecobox, ACT Logistics, Big Box and Multibox in Mauritius.


Business Landscape

How Economic Crime Is Impacting Business In South Africa

77% of SA organisations have experienced economic crime and CEO’s and boards are increasingly being held accountable for economic crime.






South African organisations continue to report the highest instances of economic crime in the world with economic crime reaching its highest level over the past decade, according to PwC’s biennial Global Economic Crime Survey.

South African organisations that have experienced economic crime is now at a staggering 77%, followed in second place by Kenya (75%), and thirdly France (71%). With half of the top ten countries who reported economic crime coming from Africa, the situation at home is more than dire.

The Global Economic Crime and Fraud Survey examines over 7200 respondents from 123 countries, of which 282 were from South Africa.

The rise of economic crime

Trevor White PwC Partner, Forensic Services and South Africa Survey Leader, says: “ Economic crime continues to disrupt business, with this year’s results showing a steep incline in reported instances of economic crime. At 77% South Africa’s rate of reported economic crime remains significantly higher than the global average rate of 49%. However, this year saw an unprecedented growth in the global trend, with a 36% period-on-period increase since 2016.”

Related: PwC Focus On Sugar Tax

Economic crime in South Africa is now at the highest level over the past decade. It is also alarming to note that 6% of executives in South Africa (Africa 5% and Global 7%) simply did not know whether their respective organisations were being affected by economic crime or not.

While the overall rate of economic crime reported was indeed the highest for South Africa, the period-on-period rate of increase for South Africa and Africa as a whole was below that of our American, Asian and European counterparts.

Global indicators of a rise in economic crime

From a regional perspective, the biggest increase in experiences of economic crime occurred in Latin America, where there was a 25% increase since 2016 to 53% in respondents who indicated they had experienced economic crime. The US was a close second with a 17% increase over 2016 to 54% of respondents, while Asia Pacific and Eastern Europe experienced increases of 16% and 14%, respectively.

Asset misappropriation continues to remain the most prevalent form of economic crime reported by 45% of respondents globally and 49% of South African respondents. While the instances of reported cybercrime showed a small decrease in the South African context (29% in 2018 versus 32% in 2016), it retained its second place in the global rankings (31%) albeit at a lower rate of occurrence than 2016.

One of the new categories of economic crimes was that of “fraud committed by the consumer”.

It is the second most reported crime in South Africa at 42% and takes third place globally at 29%. This was followed closely by procurement fraud (39% in South Africa versus 22% globally). This indicates that the entire supply chain in SouthAfrica is fraught with criminality.

Related: PwC: Pria Chetty

When combined with the high instances of bribery and corruption reported (affecting more than a third of organisations at 34%), the resultant erosion in value from the country’s gross domestic product (GDP) is startling. Accounting fraud, which is usually perpetrated by senior management and results in the largest losses, increased from 20% to 22%.

Accountability of the board

Accountability for fraud and economic crime has moved into the executive suite, with the C-Suite increasingly taking responsibility, and the fall, when economic crime and fraud occur.”

The survey shows that almost every serious incident of fraud has been brought to the attention of senior management (95%).

85% of South African respondents indicated their organization had a formal business ethics and compliance programme in place.

In addition, 20% of local respondents indicated that the CEO (who is part of the first line of defence) has primary responsibility for the organisation’s ethics and compliance programmes, and is therefore more instrumental to the detection of fraud and the response to it.

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Business Landscape

PwC Focus On Sugar Tax

The proposed sugar levy is unlikely to make sizeable dent in fiscal deficit, but the Sugar Beverage Industry is offering a helping hand to reduce obesity.






In 2016, the National Treasury announced a Sugar Beverage Levy (SBL) on sugar-sweetened beverages (SSBs) scheduled to take effect April 2018. The aim of the levy was to prevent and control obesity in South Africa, but key industry players also viewed it as a potentially significant new source of revenue that could help plug the growing fiscal deficit.

The fiscal deficit has been widening as National Treasury faces slow economic growth and a shrinking tax base. Initially estimated at 3.1% of GDP, fiscal deficit projections increased to 4.3% of GDP in October last year.[i]

However, official data suggests the deficit already reached R195 billion in the first 8 months of the 2018/19 fiscal year, so it could amount to approximately R250 billion, thereby exceeding Finance Minister Gigaba’s October projections by 25%.

The levy has undergone various changes since it was first announced.

When the levy takes effect in April this year, it will amount to 2.1 cents per gram of sugar per 100ml, above 4 grams per 100ml.

This is down from an initial 2.29 cents per gram of sugar with no exempted amount.[ii]

Related: Silver Linings For Smaller Businesses In Budget 2018

Our estimations suggest the tax burden is approximately 10% given current levels of sugar content, down from approximately 20% previously. In addition, industry has recently reacted to the news of the SBL, reducing the sugar content of popular beverages by including non-nutritive sweeteners.

In addition to efforts to reformulate, the industry introduced smaller bottle sizes to curb excessive sugar consumption and limit the excise tax burden.

SBL excise revenue estimations

We estimated that in a scenario in which the beverages industry makes no change to the sugar content of SSBs, the levy would result in an estimated R1.5 billion loss in sales revenue and a R 1.4 billion excise revenue gain for government.

However, a reformulation by industry would result in a lower loss in sales revenues of only R1.07bn and lower than expected excise revenue gain for government of R990mn.

Given the estimated fiscal budget deficit of up to R250bn, additional revenues of between R990mn and R1.4bn are unlikely to make a significant dent in plugging the deficit and could support the assertion that the levy will focus on curbing sugar consumption rather than providing significant additional revenue inflows.

In our quantitative analysis of the proposed tax on SSBs, we use the PwC Economic Impact Assessment Model to derive the potential impacts, based on a 10% sales reduction calculation due to potential excise driven price changes.

Although excise revenues are expected to increase, other tax revenue streams are likely to experience a decline. Not considering excise impacts, the prospective tax revenue loss stemming from reduced sales revenues and showing in lower VAT, corporate income tax (CIT) and personal income tax (PIT) could range between R363 million and R518 million in the reformulation and non-reformulation scenarios, respectively.

Related: 4 Budget Speech 2018 Outcomes To Know For Your Business

Therefore, the net impact on estimated tax revenue combining the implications for excise tax, VAT, CIT and PIT revenue would only range between R631 million and R856 million, subject to which scenario is implemented.

It is unclear whether the SBL levy will assist in reducing consumers’ sugar consumption. However, industry facilitates lower sugar consumption by reducing bottle sizes and through reformulation.

Smaller sizes nudge consumers to lower sugar consumption

In addition to reformulating popular SSBs, the beverages industry has altered the size of the 500ml buddy bottle to 440ml, potentially nudging consumers to reducing their sugar consumption.

The move to the 440ml bottle represents a 12%[iii] reduction in size and means that sugar content fell from 53 grams in the 500ml bottle to 46.6 grams in the 440ml bottle.

The implementation of the new levy could still result in an approximately 61 cent increase in the price of the 440ml bottle.

It remains to be seen how South Africans will react to the current and impending price change of SSBs and if the SBL can indeed assist in reducing obesity. It is clear that monitoring and evaluation are key tools to help government and industry understand the effectiveness of this initiative to prevent and control obesity in South Africa.

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Business Landscape

What It Will Really Take For South Africa’s Businesses To Scale And Create Jobs

It is the “low-hanging fruit” of scaling up South Africa’s established SME businesses that we believe is at the core of how we can grow this economy further.

Graham Mitchell




Much has been said about the potential of SMEs to drive job creation and economic growth for South Africa. Our unemployment rate is at 26.7% – an astonishing figure that speaks volumes about the dire need for job creation. On the back of this, we are seeing increasing amounts of money being channeled into incubators and the funding of startup companies.

Although important, the starting of new businesses, unless they are completely innovative, well-timed and highly scalable, will not provide us with much-needed quick wins on our path to job creation and economic growth. It is the “low-hanging fruit” of scaling up South Africa’s established SME businesses that we believe is at the core of how we can grow this economy further.

The state of established businesses in South Africa

Established businesses that already employ 10-20 people have a working product, willing buyers and a proven business model and with some modifications, increased guidance and adequate management, they have the potential to increase their number of employees significantly as they scale up. However, a 2016/2017 report by the Global Entrepreneurship Monitor (GEM) in partnership with the University of Cape Town found that the rate of established businesses in South Africa has declined by an incredible 26% since 2015.

Related: How South Africa’s Small Businesses Plan To Invest Their Money In 2018

In fact, South Africa had one of the lowest established business rates of all the economies that participated in the GEM 2016 study (ranked 61st out of 65 economies). This, the report says, “paints a bleak picture of the SMME sector’s potential to contribute meaningfully to job creation, economic growth and more equal income distribution.” While we should not neglect the starting of new businesses, scaling up established businesses will provide young people with much needed experience to ensure that when they eventually start their own businesses, they may have greater chances of success.

How to increase the proportion of established businesses that scale up    

Have a clear vision for your business

When we as business coaches work with established businesses that are scaling up, we make sure to start with the founder as their attitudes and desires determine how far the business will go. Scaling up an established business begins with a clear vision. Often, we find that the businesses owners don’t have a clear vision of where they want to take their business, and without a vision, it’s very difficult to scale.

Determine why your business exists

Linked to a clear vision, business owners need to have a strong purpose that answers the question of why they want to scale. Some business owners often see their business as a vehicle that provides them with an income, rather than the business serving a bigger purpose to impact an industry or the broader society. As a result, they often stop short of developing the full potential of their businesses.

Be willing to learn and seek help where needed

Business owners also need to have a willingness to learn. Being entrepreneurs, they often have a definitive view of the world and how it should work, which drives them to create something that they believe needs to exist (a new business venture). A risk to these strongly held views and high levels of confidence is that entrepreneurs potentially won’t open themselves up to new ideas, or to being challenged that some of their beliefs and views may, in fact, be holding their businesses back.

Business owners need to realise that they may not have all the skills to scale their business. I’ve found that entrepreneurs tend to be strong in customer service, innovation and sales, and are often weaker in people management and attention to detail – skills that become a lot more critical at the point of scaling the business.

Related: Levergy Founders Tell You How To Scale Quickly – And Intelligently

business-day-tv-sme-summitOther areas of importance in scaling up

There are other critical areas that businesses need to address in scaling up but dealing with the founder is most critical. Strategy is one, cash flow is another, as is the question of hiring/finding and developing key talent. I will be unpacking these and more at the upcoming Business Day TV SME Summit on 8 March; and with increasing efforts by government to address the unemployment crises through platforms like the Jobs Summit announced in the State of the Nation Address, we hope that more conversations are had around harnessing the job creation power of established businesses that manage to scale up quickly and sustainably.

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