Small businesses are often treated or viewed as a sideshow – or, worse, as a charity – in South Africa. A closer look at how things work exposes flaws in this viewpoint.
In reality, innovation and job creation are driven by SMEs. The government is now trying to push for the creation of 800,000 jobs per year between now and 2030 – 11 million in total – to stimulate and develop the economy. Awake to the impact of SMEs when they are given a chance and supply chain barriers are removed, the National Development Plan (NDP) envisages this sector as accounting for 90% of these new jobs.
It is time for a mindset shift in South Africa, especially in corporations that might be reluctant to procure goods and services from start-ups and other small entities.
Many large organisations procure from old peers without opening the door for small businesses unless we speak of nonstrategic services such as cleaning and catering. Amid pockets of excellence in the entrepreneurial world, not all SMEs are faultless. Some fail to collaborate, as consortia, even when critical mass means either landing or losing new contracts. Also, not all of them are professional.
This category can do with coaching. Excluding SMEs from supply chains due to misperceptions rather than skilling them or reducing entry barriers limits economic growth. How will SMEs be able to prove themselves and present track records unless given the chance to gain experience?
Blue chips like ArcelorMittal, Growthpoint Properties and Woolworths have been commended for building their own timbre by going the extra mile to shore up SMEs. Awake to the dearth of skills and resources in the nascent green economy, J.P. Morgan has stepped in to fund the Small Business Boost Programme at the Gordon Institute of Business Science (GIBS) Enterprise Development Academy.
This new project will offer extensive training, support and mentorship to two cohorts of 50 entrepreneurs. The list of companies that deserve praise for uplifting start-ups or procuring from small businesses is not short – but huge room for improvement remains.
Developed nations view the SME sector as a launch pad, which explains the healthy ties between corporations and small businesses, with governments playing supportive roles while universities churn out the relevant skills. A company like Microsoft comes to mind: it was built by students and grew because of the entrepreneurial and innovative minds behind it.
A huge 58% of gross value added in the 27 European Union countries came from SMEs in 2011. In OECD countries SMEs accounted for an estimated 99% of enterprises and two-thirds of employment in 2010.
These numbers highlight the fact that corporations don’t create jobs to the extent that might be believed. “Innovative SMEs fuel employment and economic growth,” added the OECD report. “Nearly all net job creation in the US between 1997 and 2005 came from firms less than five years’ old.”
Back home small businesses support the success of their larger peers. “The diversification of supply chains assists big businesses to have a wider choice of suppliers from SMMEs and promotes innovation within the value chain. The growth and sustainability of big business therefore depends on a strong small business sector, both as consumers and suppliers,” Small Business Development Minister Lindiwe Zulu once observed.
The benefits of cracking open supply chain management to include the SME sector are apparent. For South Africa to grow, research and development (R&D) should be made a top priority, because it catapults economies.
The South African government (which funds projects), academia and the private sector invest a smidgeon below 1% of its GDP on R&D, while the Netherlands – whose economy is much bigger than ours – spends twice as much in percentage terms. The average in OECD states is 2.5%.
If we are serious about being innovative and unlocking opportunities while also improving our competitiveness, we should bolster our R&D budget. We have just averted a credit downgrade – yet our economy, against the backdrop of runaway unemployment, has all the right ingredients for pronounced growth.
Coupled with that, new industries have to be nurtured to complement the entrenched ones such as mining and manufacturing. The question is: Where will the magic come from? To quote the NDP, the green economy is poised as one of the areas that will support growth.
Aggressive investment in transport will bring magic in three ways: it will create jobs, lower input costs and cut travel times – both social and economic benefits. The tourism and telecomms industries can grow further. The medical industry, with traditional herbs remaining untapped in commercial terms, also stands out for its potential to help stimulate the economy.
Captains of industry and lenders are well-placed to invest in R&D, to improve our competitiveness, and to help entrepreneurs chase these dreams. It is through a strong SME sector that South Africa can achieve some or all of the NDP imperatives and reach its true potential.
Empowering Township Entrepreneurs
Big drive to bring ideas to life in the townships this Global Entrepreneurship Week.
As part of Global Entrepreneurship Week, Experian teamed up with Rhiza Babuyile and Township Fleva – two organisations responsible for supporting township communities – to assist entrepreneurs in transforming their innovative ideas into thriving businesses.
The annual event ‘Tshogo’, which took place in Tembisa yesterday (Thursday, 15 November), is the culmination of roadshows in Gauteng’s populated townships, such as Diepsloot and Orange Farm. These involved up-and-coming start-ups pitching their business ideas to a panel of experienced judges, including Simon Rudman, Social Innovation Lead at Experian SA.
Twenty winners received funding to the combined value of R280 000 to kickstart their business venture, while our others received marketing packages to equip them – and their ventures – further.
“Throughout the competition we were greatly inspired by each and every one of the entrants. There is definitely no scarcity of bright ideas,” says Rudman. “By keeping our entrepreneurs top of mind and providing continuing support, we can grow the township economy for the greater good of the country.”
Experian is pleased to support Rhiza Babuyile, by providing the JoZi Business Hub participants with career counselling as well as credit and financial education aimed at empowering and equipping entrepreneurs with the financial know-how to manage and grow their business and to make smart credit decisions.
“We believe data has the power to transform lives and societies for the better and our corporate social responsibility programmes pioneer how we use our business skills, products and services to promote financial education, financial inclusion and support small business entrepreneurs.
“These engagements also provide a great opportunity for us to include the entrepreneurs in our solution development process. Their feedback is invaluable in helping to shape products which will hopefully contribute to their success”, adds Rudman.
Global Entrepreneurship Week is a celebration of innovators and job creators who launch start-ups that bring ideas to live and drive economic growth. The JoZI Business Hub’s Tshogo roadshow could not be a better example of this in action.
Call For Applications: Young Entrepreneurs Global Exposure Trips
Closing Date: 30 November 2018
Investec CSI’s Young Entrepreneurs Programme provides South African entrepreneurs from various sectors with global exposure.
Every year Investec, in partnership with En-novate, sends a group of young entrepreneurs from various sectors to specifically selected countries in order to gain global exposure. Each itinerary provides them with opportunities to network and engage with venture capitalists, funders and captains of their specific industry. The aim is for them to gain learning and exposure to innovation, technology and process advancements. The programme also offers networking with subject and sector experts.
Applications for the Global Exposure trips are now open to ALL entrepreneurs – regardless of sector – who meet the criteria. Closing date is Friday 30 November 2018.
The programme itinerary and each trip is customised according to the profiles of the candidates, stage of business and specific sector.
By way of example, Investec recently sent 14 entrepreneurs from South Africa to Berlin to meet people doing Out of the Ordinary things in textiles: https://www.investec.com/en_za/focus/young-entrepreneurs/sa-entrepreneurs-return-inspired.html
Business Lessons From Women For Women: If You Have To Fail, Fail Forwards
Lessons from three young black South African women on how they have turned an idea into a profitable business.
Just 70 years ago, black women in SA were largely regarded as legal minors with no power to open bank accounts, lease property or conduct legal transactions without their husbands’ permission. Some remnants of this legacy remain, but, increasingly, traditional roles are being subverted and women are building businesses. However, women entrepreneurs still remain part of a small minority of thriving business success stories.
The Mastercard Index of Women Entrepreneurs found women in early-stage entrepreneurship decreased by 15.7% in 2018 and only 18.8% of all business owners in SA are women. Suffice to say there’s more to be done, and a lot of it starts with support. When Lebogang Ndlovu, owner of Amare Beauty Hub, announced her intention to start a small business shortly after matric, her parents weren’t happy. She forged ahead despite the lack of support and tenaciously founded three different ventures, which all, unfortunately, failed. She then decided to attend consumer financial training offered by Santam through Mzansi Financial Education. From this training, she learned to ‘fail forwards’ and started her current company – a highly successful Soweto-based spa. She credits the support and mentorship she received as imperative to this success.
That says Tersia Mdunge, Santam’s Corporate Social Investment Manager, is what Santam’s Consumer Financial Education (CFE) is all about, “To grow entrepreneurship, South Africa needs to provide enabling conditions, opportunity and support. As the cornerstone of our economy, it’s pivotal we do so. At Santam, our Consumer Financial Education and Mentorship programme helps young, black entrepreneurs from previously disadvantaged backgrounds to turn their ideas into tangible businesses. We’ve assisted 1 595 individuals so far, and we’re absolutely committed to continuing to do so.”
Although Africa has the highest growth rate of female-run businesses globally, according to the World Bank, South Africa lags behind countries like Ghana.
Here, three women entrepreneurs from Johannesburg share their entrepreneurial journeys and the difference mentorship made:
1. Lebogang Ndlovu, owner: Amare Beauty Hub
Although young, Ndlovu knew she wanted to be an entrepreneur after matric. It was tough convincing her parents to get on-board. “I come from a typical black family background where the norm is to be employed and not create employment.”
After getting her parents on-side, she used the allowance they provided to start a home executive concierge service. That, unfortunately, failed, and she tried two other ventures, which also didn’t last. It was then that she decided to attend Santam’s training. She did thorough research before jumping into yet another business. She realised that, “It does not matter how many times you fail, learn from your mistakes and move along.”
Ndlovu finally found her passion in beauty. She currently runs Amare Beauty Hub in Soweto; a fully-fledged beauty and health spa that focuses on “beauty on a budget”. With her business partner, she’s already considering expanding the business into micro-franchises to empower other women who are interesting in the beauty industry.
2. Nthabeleng Nhlapho, owner: Afro Kids Salon
Before 2016, running her own business was just a dream for Nhlapho, even though she always knew that she was an entrepreneur at heart, because of her family background.
“Getting into business has always been an idea I have toyed with, and after many years of procrastination, I finally decided to take that leap of faith. My dad’s side of the family is quite entrepreneurial as a number of my brothers have started and are sustaining their own businesses. So, in a sense, I think I was born to be an entrepreneur.”
After doing research, Nhlapho saw a gap in the market for an ethnic hair salon for kids. Having a daughter with ethnic hair herself, Nhlapho says, “It became apparent that many mothers like me are uncomfortable with having to take their young daughters to adult hair salons where the environment is not conducive for little budding minds, and stylists do not have the patience with children.”
Nhlapho’s Afro Kids salon is based in Sandton. She opened her door in September 2016 soon after she attended Santam’s training sessions. She gives credit to the mentorship she received and to support from friends and family for her success.
3. Phumzile Nala, owner: Pumzi’s Pretty Petals
Phumzile Nala’s grandmother inspired her love for flowers. “My grandmother loved flowers and used to do flower arrangements at friends’ and family events, which is where I was introduced to flower arrangements.”
Nala attended the Santam CFE workshops in Vilakazi Street in April this year. Her mentor, Martine Solomon, says, “Phumzile started the training with the hope that she would go into public speaking and training and development, however, that changed when she realised her passion for flowers. Phumzile was very helpful during her time in the programme, assisted with the roll-out of the CFE programme as well as CFE training and development.”
Now, Nala is a proud owner of a beautiful flower shop in Roodepoort called Pumzi’s Pretty Petals. In just six months, the business is showing steady growth. Nala’s other mentor, businessman Donnie Koetzee, played an instrumental role in this growth, helping Nala buy stock and get through start-up hurdles. Nala says, “At the beginning, I went through a lot of teething problems and had to take credit in order to keep the shop open.”
Even though Nala cannot compete with big retailers in terms of pricing, she gives her clients a far more personalised and meaningful experience. “We take time to teach our clients about our different offerings, and that is something they will not find in bigger stores.”
Nala found her unique value proposition, which is something that all entrepreneurs need to identify in order to compete. She also gives credit to social media as she makes use of it to advertise her flowers. Her dream is to open four stores in the four major cities of South Africa.
This programme is a direct response from the Department of Treasury for financial services companies like Santam to educate their clients and prospective clients on financial knowledge.
“We went above and beyond what is required of us and turned this into a successful initiative that empowers many to fulfil their dreams. Our programme has been dedicated to empowering our people to becoming financial savvy consumers and entrepreneurs. We have also made it our mandate to focus on risk management and understanding business insurance. Many small businesses do not consider the risks that come with running a business and how they would bounce back if they would be faced by a law-suite for instance;” concluded Mdunge.
For those who would like attend Santam’s Consumer Financial Education, please look out for an invitation on Santam’s website, the requirements are that as a consumer you need earn less than R250 000 and as a business owner, your business need to have a threshold less than R10 million.
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