The development and growth of SMEs is essential for the alleviation of the current unemployment crisis. This concept is accepted worldwide. However, knowing that something is the right thing to do and actually doing the right thing are two very different notions, especially in the corporate world.
Getting help from others
Although most companies are started with profit making in mind, it’s important to remember where one started and, once a success has been made of your enterprise, to assist those smaller businesses as much as possible. When Phase 2 Computers was started in 2001, my partners and I had no start-up capital and had to take a R150 000 loan on 14 days repayment terms just to purchase stock.
As a small business, Phase 2 was greatly assisted by the suppliers that it did business with; suppliers gave extended terms for payment, marketing assistance was received through the supply of signage, assistance was given with regards to Phase 2’s shop-fitting, while product training and back-up support was also received.
Finding a balance
Yet, despite the critical importance of small businesses, many companies remain ‘in it for themselves’ – whether it be suppliers not allowing small businesses terms for payment or clients not making payment for work delivered on, this is a mind-set which needs to change.
However, although there is a need for all able businesses to assist in small business development, a balance is absolutely critical. One needs to be aware of the fact that, in certain cases, giving too much leniency or assistance can put ones’ own business at risk. There needs to be a balance between giving back by helping small businesses in their growth and protecting your own business’ interests – operation at the middle of the spectrum and not at either extreme is essential.
Some businesses may in fact actually be negatively affecting the growth of small businesses – whether knowingly or without realising that they are doing so. In the IT industry, for example, Phase 2 has distributors that it purchases products from in order to resell to the end users in its target market. However, some time ago, these distributors sold directly to the target market, cutting Phase 2 out of the loop and therefore negatively affecting our business in a severe way.
Understanding the value of SMEs
When considering whether or not small business development is of value, perhaps it is worth pointing out the incredibly difficult economic environment all business owners face. Although Government is passionate about small business development, non-BEE Often, it is only really business itself that can help other SMEs in their growth.
The benefits of assisting small businesses are endless. Aside from the possible enterprise development points one can gain from such activity, being a part of assisting another person in making a success of their business, and in turn for them to be able to create employment opportunities is benefit enough.
In addition, through assisting small businesses, close relationships can be built based on mutual trust and respect, resulting in a more amicable working environment for all involved. It is also, in many cases, much easier to work with small businesses as this usually involves a more personal relationship with the business, where one is often dealing with the managing director or CEO of the company. There is also less corporate red-tape to navigate your way through.
So, focus on collaboration. There are many ways in which to empower small businesses. Perhaps the most obvious form of empowerment is in the financial realm. For example, when big corporate suppliers provide small companies with price assistance when these small companies purchase goods from them for re-sale, this allows the small companies to make a better profit margin on the resale of those goods. Although this doesn’t necessarily apply to a great extent in the IT industry, mentorship can also be an invaluable tool in small business empowerment.
As a grateful once-small-business, Phase 2 considers small business development a necessity and it has become part of its company ethos. We endeavour to assist small businesses through donations, such as supplying computer equipment to small start-up businesses free of charge and by offering add on services such as free delivery. We’re also happy to take on any and all clients without having a preferential customer policy in place.
Imagine if all businesses focused on assisting other small businesses. Together, we’d be able to create a better economy and achieve the reduction of unemployment.
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.
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.
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.
Other 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.
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”.
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.
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”.
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.
Make The Most Of SA’s Law And Initial Coin Offering
Cryptocurrencies offer significant investment opportunity, but remember that when something seems too good to be true, it probably is.
This article could comfortably take up a single blank page in this glossy magazine and still be accurate — South Africa (and many other countries with it) is rapidly adopting the blockchain and cryptocurrency revolution and it’s all happening in a relative legislative lacuna (my Latin professor would be so proud).
At the outset, however, this article relies on at least a working understanding of some of the underlying technology and concepts that make ICOs possible, and I won’t be trying to explain them in any great detail. Far smarter tech-journos have written some illuminating pieces on the topic and a Google search will quickly yield some very insightful guides.
In essence, however, an ICO involves the creation of a unit of value, called a ‘coin’ which, at a basic level functions like most cryptocurrencies (cf Bitcoin). Purchasers of the coin buy the coin at a predetermined listing price, upon consideration of a ‘whitepaper’, published by the coin offeror, which eerily resembles a prospectus for the purchase of shares in a listed company.
Importantly, however, the purchase of shares (usually) doesn’t entitle the coin holder to exercise any rights in relation to the operation of the business — this is a key differentiating factor from shares.
From a commercial perspective, the coin holder anticipates that the value of the coin purchased will increase over time as demand surges on the back of a (hopefully) successful business concept. This sounds very much like the promised land for start-ups starved of genuine venture capital in South Africa. More particularly, the 150+ businesses that have raised more than $2,5 billion would argue that it’s a highly effective way of raising capital from an investor group that invests based on very limited knowledge and (potentially) recourse to the issuer.
In fact the South African Reserve Bank (SARB) has stated categorically that, because it does not guarantee the trade or issuance of cryptocurrencies, it offers no recourse or protection to consumers.
So where does this leave you, average Joe Seffrican?
Certain key pieces of legislation ought to be examined and applied to your precise scenario — both for would-be issuers and consumers of ICOs and other cryptocurrencies:
- The Banks Act will have some bearing where offerors of cryptocurrency coins fall within the definition of deposit-taking institutions and are thus required to adhere to the requirements of the Banks Act and potentially fall within the purview of the SARB.
- Collective Investment Schemes Act (CISCA) regulates businesses that seek to ‘collect’ or pool funds and investments and is regulated — and very strictly at that — by the Financial Services Board.
- The Financial Intelligence Centre Act, more commonly known as FICA, may have significant scope over certain transactions taking place utilising cryptocurrencies, especially mindful of the by-design anonymity of blockchain technology.
- Exchange Control Regulations have strict penalties for transactions that violate the permitted capital outflows of capital from the Republic. Given that the blockchain is designed to facilitate these very outflows, in many instances, this will be an area of concern for businesses and investors alike.
- Twin Peaks Financial Sector Regulation Bill, once promulgated would regulate all financial service businesses that provide the financial service and financial intermediary services. This opens a veritable quagmire of potential legislative and regulatory impact on the ICO sector.
- Here’s the big one — if it walks, talks and smells like equity, then the Companies Act and our courts in enforcing the Companies Act, are going to treat it like equity, meaning that some coins, which often carry rights and duties similar to conventional equity, may fall within the ambit of the highly regulated arena of public offerings of security. This is particularly the case in the light of our legal system’s view of the ‘substance over form’ doctrine.
- There may well be interplay between the Companies Act and the Consumer Protection legislation, which may be triggered in transactions that have no underlying value, operate in a manner consistent with a Ponzi scheme or are not adequately insured against data losses etc.
While it pains me to be the one pointing these risks out, when all and sundry seem to be turning pittances into fortunes, your grandma would be quick to point out that if it sounds too good to be true, it probably is.
At the end of the day, there are profound opportunities for both investors and businesses to be had, but you would be well counselled to carefully consider the full legislative and regulatory consequences of any purchase of offer of any ICO coin. This is unfortunately a classic case of the innovators innovating while the legislators scramble to play catch up in a world that is changing faster than their arcane promulgations can seek to regulate it.
- Growing A Successful Trappers Franchise Into A R300 Million Business
- New Fund For Small Businesses To Be Developed
- How To Think Like A Billionaire
- Relax Spas Founder Noli Mini Shares Her Insights On Building A Business Of Value
- What It Will Really Take For South Africa’s Businesses To Scale And Create Jobs
- Silver Linings For Smaller Businesses In Budget 2018
- Leadership: What Is Your Why? (Read Purpose)
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