Why are SMEs in the manufacturing sector important to the South African economy?
Although manufacturing operations rely on a core of highly skilled people to develop products for the market, they usually employ significant numbers of people, with basic skills, on the factory floor and production lines. It is at this level that small manufacturing companies make a major contribution to the economy – they contribute to job creation in a country where unemployment is a major challenge. What is most exciting about manufacturing is that it creates jobs in the very area where we need them most – low to semi-skilled positions.
If manufacturing activity at all levels is not encouraged, the possibility of creating employment will not be realised.
What are some of the major barriers for manufacturing companies operating in South Africa and looking to conduct business beyond our borders?
Many are struggling at the moment. Some of the difficulties are related to currency fluctuations and the value of the rand against other major currencies. The low value of the rand against the dollar does lend some competitive advantage, relative to other economies but definitely not to Asia.
On the other hand, we need to do more with regards to marketing and sales into the continent. We are simply not taking advantage of the natural markets for our products available on the continent. We also need to educate the rest of Africa about the depth of our manufacturing expertise in South Africa. We need to emphasise our broad range of product offerings.
How is this lack of marketing impacting on perceptions about South African products?
There is generally little understanding in the rest of Africa about our country’s manufacturing capabilities. In dealings with major companies and governments, people are unaware of what our manufacturing concerns can produce.
This is especially the case in the defence sector where people are surprised at the range of high quality products we offer. But, I also think that we are not spending enough time getting to know the continent and its needs. We do not send our best and brightest into the rest of Africa.
Are smaller manufacturing companies aware of the support they can get from government to assist with growing their businesses?
There are many small businesses who do not know where, or how, to find government support. The ‘Think Big’ TV series, however, showed that where entrepreneurs have taken the time to find out what is available, they benefit greatly from initiatives from sources like the Department of Trade and Industry.
How can contact between small business and government funders be improved?
Processes can be made easier. The compilation of material required for submission to the department can be daunting. The level of detail required is obviously in place to reduce risk, but I believe that reducing the volume of material required should not necessarily result in a sharp increase in government’s risk exposure.
It appears to outsiders that small manufacturing companies are battling for their place in today’s markets. This can be attributed to the cost of materials and high levels of international competition – especially from Asia. What is your view?
There is no way of avoiding the fact that Asia is a cheaper manufacturing destination than South Africa, and that their cheaper products compete for local market share. I don’t believe that this competitive advantage will last forever – particularly in Africa.
This is mainly because many people buy goods on the basis of the cheaper prices of Asian products, rather than focusing on quality. What we could be doing better is engaging with Africa and telling potential customers exactly what they will get when they buy from a South African company.
We should focus more on supporting the industrialisation and skills development processes in the countries we trade with. Win-win relationships can only develop when we leave real capacity in the countries we partner with.
For example, if you’re in Zambia and a South African-manufactured product breaks, support is close by. If you are buying from India or China, the picture is totally different. However, the real objective is to develop the capacity in-country to undertake basic maintenance with a view to support the move further up the value chain.
We need to be clever about what we can bring to the table in our neighbourhood and market these advantages. It is our neighbourhood after all.
While the ‘Think Big’ series has concluded on TV screens, episodes can still be viewed online by visiting www.standardbank.co.za/thinkbig. For an array of additional tips and tools on how to start, manage or grow a business, visit bizconnect.standardbank.co.za.
Related: Manufacturing in South Africa
5 Thoughts To Give You The Courage To Make Change
The only constant is change. If you can’t learn to embrace it, you’ll be left behind.
In my experience, change is harder for those who perceive themselves to be succeeding than those who perceive themselves to be failing. Failure produces an irresistible motivation to reflect and to seek changes that will eliminate the pain you are feeling. It is those who perceive themselves to be successful who are most likely to stick to the status quo in a sea of change.
Change always happens: Contexts change, markets change, competitors change and so on. So, reinforcing a strategy and recipe for success seems the logical thing to do, right? If it ain’t broke, don’t fix it, goes the mantra. Why on earth would you mess with a winning formula?
The problem is that these winds of change are numerous and subtle, moving slowly and in different directions, making them invisible to the ‘successful’ eye. Business books are filled with case studies like Kodak who, despite acknowledging the threat of digital, were so entrenched in their current thinking that they sailed their ship right off the end of their flat earth.
Here are five thoughts to provoke you and guide you in finding the courage to change.
1. This too will pass
Live by the law of impermanence that says that nothing remains permanent; neither failure nor success. This should create a level of healthy paranoia in successful entrepreneurs that drives them to anticipate what will change and when it will change, and to constantly live in a start-up mindset. Being aware, self-reflective and conscious of your bias is the best remedy for the allure of a permanent reality mindset.
2. Use what you have
One of the most common reasons that we do not want to change is having to admit that the resources we have so painstakingly and expensively built and maintained are not as useful anymore. The now popular and commonly-used terms of ‘radical’ and ‘disruptive’ conjure up scenarios of throwing away everything we have.
In most instances where change is required, the most successful way to change is to use the resources currently available in your business in a reconfigured manner. My rule of thumb is that any new strategic direction should incorporate no more than 20% of new resources, know-how or processes. This approach might not be radical or disruptive, but it ensures that there is a higher appetite for change in the organisation and a higher probability of it succeeding.
3. Focus on the positive energy change creates
Change is terrifying for many, but it creates a positive energy in a business. We often spend too much time trying to pacify employees who are fearful of change. In my opinion, you should rather be weeding these people out of your business as it grows.
They slow down progress and redirect valuable time and energy from focusing on the future and building towards that. It is important to focus your energy on the positive energy that is being released when change happens, such as excitement, new possibilities, and new growth opportunities for people and the business.
4. Plan your change, but also expect the unplanned
Effective change is ideally planned. Thought-through, documented and communicated phases are always better than a chaotic laissez-faire approach. But as Mike Tyson once said,
“Everybody has a plan until they get punched in the face.”
Life happens, the unexpected is ever-present in our lives, and we need to plan for this. Allowing a 10% to 20% tolerance for the unknown is a wise thing to do to ensure your expectations are catered for. Accepting the potential of random change in your planning will make it easier to accept and manage.
5. Expect Magic
After the dust has settled following a recent change or upheaval, and nerves and emotions have normalised, there will inevitably be an unforeseen positive outcome from the change. When you expect to find this outcome and appreciate the chemistry of time, resources and random events that created it, you will see change as the unavoidable path to these magical events.
It makes going through the change so much more tolerable when you know that when this phase of change is completed, there will be an outcome that will make it worthwhile. This expectation has never failed to deliver for me.
Entrepreneurs do not have the luxury of remaining still and constant, even for a short while. Mighty corporates are also susceptible to the devastation of the law of impermanence. But, there is a different lens on this that I prefer; every day and every moment brings the gift of change to us which is always a door to a better, more fulfilled future.
5 Steps To Cutting The Fraud Of A Cash-Driven Society In Africa
African consumers still prefer cash transactions – here’s how to stop this from impacting on your business bottom line.
There is an issue when it comes to transactions in Africa. That issue is cash. There are plenty of reports that point to the percentage of people who remain unbanked on the continent – it’s high. There are also reports that talk about how those who are banked use their accounts as little more than cash repositories – money in on payday, money out on payday. Why?
The African consumer doesn’t trust the system. They also face significant difficulties in rural areas that have limited card-based services and access to cashless transactions. And bank charges are hefty, eating into their pockets.
Pay attention: Cash is king
Your consumer isn’t banking savvy. They have a bank account because their employer wants to pay via EFT or because a sales rep got them enrolled, but didn’t explain exactly how the banking system could work to their benefit. They don’t trust banks, they don’t like the transaction fees and cash remains the currency of choice. In this world, cash is king. For the entrepreneur this cash-based society has both challenges and opportunities.
The challenge: Cash is easy to lose
If the majority of your business transactions are carried out with cash, you run a big risk. Cash is easy to steal as transactions are rarely audited and accounted for. Unethical employees can put half in their pocket and half on the books, directly impacting on your income. Paper money is hard to audit and track, it is expensive to bank, and often undeclared.
The challenges lie in the land where you are the entrepreneur receiving the cash, but the opportunities lie in helping other people to manage their cash.
The solution: find ways of tracking cash
The business has to be smart. Allow cash transactions to remain a part of the process, but use services that facilitate some of the collections and ease those headaches. Companies often use cash management companies, but their price tag makes handling of cash even more expensive. Fraud is rife in the cash market. There are many ways to skin a cat, but handling cash in without technology to track it can be dangerous. Any mismatch of manual records and payments needs to be carefully analysed to pick up any discrepancies.
An alternative is to employ a service provider who can manage the cash transactions for you, but this will also be a cost to the business, Retail stores can collect on your behalf, but they want you to pay a service fee. Understandable costs, but ultimately each one impacts on the bottom line.
The technology opportunity
One opportunity which has already started to edge into the mainstream is the use of eWallets and digital cryptocurrencies. Cash carrying individuals can swap these out for virtual monies that they can use to manage their payments. M-PESA in Kenya is a superb example, even if it never really got a foothold in South Africa. For the entrepreneur that wants to engage with the cash empowered customer, these solutions could potentially help overcome the hurdles of trust and cost and ensure security on both sides of the fence.
The final countdown
What it boils down to is this – cash exists and cash-based transactions and attitudes are unlikely to change overnight so the entrepreneur needs to invest in solutions and systems that manage and audit transactions carefully. Ensure there are various control measures that can pick up anomalies, give people the opportunity to unpack these anomalies and then identify any issues.
Ultimately, if your business is to successfully avoid the multiple opportunities for fraud in the cash transaction society, then you have to invest in tools that will ensure your cash is properly managed and that you’ve chosen a well-known service provider to do so. Otherwise you’re just swapping cash fraud for technical fraud…
Are You Forgetting To Think About Your Business Strategy?
If you want to make money, save money and improve your efficiencies in 2018, you need to keep reviewing your strategy.
It’s hard to keep upwith the pace of change. Economic uncertainty, disruptive technologies, fast-changing consumer needs and complex digital marketing means entrepreneurs have to move fast just to stand still. While managing constant change this is easy, but dangerous to forget about strategy. A couple of pertinent questions: What are your business and marketing strategies? Who owns them? How many people in your organisation understand them? When last did you review them to see if they are appropriate now, and likely to be appropriate in the next year or two?
Every organisation, from tiny businesses, clubs, NGOs and start-ups to much larger companies would benefit by taking time out to review key strategy issues. I suggest you examine whether your target markets are the right ones, and are still buying enough to meet your sales targets. You should ask if your sales channels, pricing policies, promotional messages and the media used are right for the times.
- Do you really know what your target market needs and how those needs are changing?
- Are your products and services providing solutions to those changing needs?
- Does everyone in your organisation know what differentiates you from your competitors?
- Do you have the right people?
- Is your financial strategy still sound?
- What about purchasing or manufacturing — is it still as cost-effective as it could be?
- What are your competitors doing now?
- What are they likely to be doing in future?
Get out of your comfort zone
These are tough questions, but if you ignore them, your organisation may drift along in its comfort zone in the hope that everything will work out. A company that continues to try to sell familiar products to anyone who will buy, and does not know what its competitors are doing is taking very high risks in a changing environment.
The risk increases if your prices reflect your efficiency or otherwise at product procurement rather than the value they deliver to customers. Risk rises to danger levels if few people actually know and understand the strategy, because they will usually keep their heads down and do the same old things.
Start the journey
Strategy development is like a journey. You know the starting point, you decide on your destination (your goals) and then you map out how to get there, which is your strategy. You have to consider the time it will take, the resources you will need, especially money and skills, and how you will know you are still on track (your milestones). Start at the beginning; ‘we know where we are’.
Do not assume everyone has the same idea of where you are, especially your management team; you may be surprised at the distance between perceptions of where you are now. Then set the goals and recognise that the future may not be what you envisage. You will have to be flexible to cater for change in a different economy.
Using questions like those in this article, map out the strategy of how to get there. An outside facilitator is a good idea for a strategy session but if you choose to run it yourself be careful that your management team does not only tell you what you want to hear.
What great strategies are made of
Keys to good strategy in these turbulent times are to really understand your target market needs and provide solutions at a price that the customer regards as fair value. Two other ideals are to provide the products or services in a manner convenient to the customer rather than to you, and to inform the customer of the advantages of your solution in a manner and in media that the customer trusts. You may recognise the venerable 4Ps of marketing in a new guise; outwardly focused, concentrating on the customer.
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