The South African Institute of Chartered Accountants’ (SAICA) annual SME Insight Survey, which is part of SAICA’s continued commitment to government’s National Development Plan (NDP) objective of using SME growth as a driver of employment, enables the institute to present evidence for dialogue with policymakers to suggest ways to facilitate such SME growth.
The 2015 survey attracted more than 1 300 responses from business owners. The increase in this figure, from 800 respondents in 2014, indicates that many SMEs are eager to engage government on policy decisions that will affect their chances of long-term sustainability and individual company growth – which, the research also indicates, is the only way to turn SMEs into mass job creators.
The 2016 survey is currently calling for SMEs to participate, and thereby to voice their wishes regarding the policy conditions that government could change. Changes to government policies over the past two years indicate that this type of pressure helps to give the minister more power to influence change. SMEs wishing to participate should find the survey here: 2016 SMME Insight Survey
Of the companies who participated in the last survey, those employing the highest staff complement are invariably those SMEs with the highest turnover. Clearly if these companies could increase turnover they would employ many more people.
What many SMEs are not eager to do, the research makes clear, is to grow their businesses by doing business with government, at national, provincial or municipal level. 73% of respondents do no business with any government agency whatsoever, and a further 15% rely on government contracts for less than 10% of their turnover.
Only 8% derive more than 25% of their turnover from government business.
This is even more anomalous when considered alongside the fact that 38% of the SMEs surveyed have BBBEE ratings of 4 or better (under the previous regulations), which qualify them to compete for government tenders at a time in which the state is spending enormous amounts on development, and is ostensibly building a procurement engine that favours transformed SMEs.
The 73% who do no government business at all were asked to rate their reasons for this, and the general consensus identified a number of key perceived barriers:
- That the tender process is too onerous, and is not transparent
- That government institutions are too slow to make decisions
- That government takes too long to pay invoices, especially to SMEs, which have the most sensitive cash-flow
- That they cannot meet BBBEE requirements, or that the BBBEE certification process is too onerous.
Changing perceptions: Government is listening
This is not the first time these issues have been raised, and it appears that government is responding proactively in a number of areas. In his 2015 Budget speech, former Minister of Finance Nhlanhla Nene announced his intention to create one portal for doing business with government; a central tender registry that will allow SMEs to register with all the requisite paperwork once, and henceforth apply for tenders without having to repeat the red tape each time.
This should make the process of applying for government contracts less daunting, while at the same time affording the transparency which will help to curb nepotism and/or corruption. It should also speed up the process of awarding tenders; hopefully, the establishment of this registry will encourage more SMEs to compete for government business.
It is understandable that late payment is a thorny issue for SMEs, most of which rate other SMEs, as a sector, most likely to settle invoices on time. With restricted capital and high overheads, many SMEs cannot survive, let alone prosper and grow, without reliable cash-flow.
Government’s undertaking to institute a KPI for all government financial officers to make payments within 30 days will be a strong incentive for SMEs to bid for more government business – as long as it is monitored and enforced effectively at all levels by the Treasury.
At the same time, as successful SME owners who do plenty of government work have pointed out, government’s financial officers are also bound by stringent regulations set in place to contain fraud, so by law they cannot make payments for which the paperwork is not in order.
SMEs need to ensure they understand whatever tax certificates, legal compliances or other information are required, and submit them in full along with their invoices, if they want to enable and receive prompt payment.
Government have also halved the tax rate on smaller SMEs, from 6% to 3%. This will make it easier for these businesses to compete with bigger operations for business in both the private and public sector, and with government being by far the country’s biggest spender on procurement, it should also encourage more SMEs to do business with government.
The turnover threshold regarding complex BBBEE compliance process has also been doubled, to R10 million. 75% of the SAICA SME Survey respondents have turnovers of less than R10 million per year, so under the new regulations they are automatically rated at least at BBBEE Level 4, which qualifies them to bid on government tenders. Far from being an onerous battle with red tape, the new BBBEE codes actually make it easier for many smaller SMEs to tender for government business.
An area that requires action
There is another concern raised by SMEs that suggest government could, through fairly minor tweaks in policy, make it easier for entrepreneurs to establish SMEs and grow them to the point where they become job creators. 49.9% of those surveyed cited government red tape as a disincentive to starting new companies – these include a wait of three weeks or more to process VAT registration, and similar hurdles involving company registration, tax clearance certificates and other required permits. Some have suggested that government might find the example of Rwanda a useful model in streamlining these processes.
The 2014/15 Global Competitiveness Report by the World Economic Forum (WEF) ranked Rwanda 6th out of 144 countries in terms of ‘burden of government regulation’. The country has achieved this status by attending to areas like the ease of starting a business, obtaining construction permits, registering a property, paying taxes, trading across borders and enforcing payments. It takes six-and-a-half days to register a company in Rwanda, and a day to register for VAT; South African start-up businesses can expect a wait of 46 days and 21 days, respectively, to obtain these essential clearances.
It is hoped that the concerns expressed by SME owners in the research will be considered by government policymakers in their on-going efforts to support and encourage SME growth, and that the information will be valuable in shaping future policy. SAICA has launched the 2016 version of the annual SME Insight Survey as its contribution to the health of the SME sector and thereby to job creation. As Terence Nombembe, CEO of SAICA, said when releasing the 2015 Insight Survey’s findings, “By collecting these insights and investigating the findings, our aim is to influence policymakers in creating a more enabling SME environment – and to demonstrate the ways in which SAICA’s Small and Medium Practices (SMPs) can better assist their SME clients.”
It’s Never Too Late To Start A Business
Entrepreneurship at any age is key to minimising unemployment in SA.
Whilst the country continues to battle a high unemployment rate – which increased to 27,5 percent, according to the Quarterly Labour Force Survey for the Third Quarter of 2018 – the narrative of entrepreneurship as a viable career choice should be widely promoted and encouraged across all generations.
However, according to Anton Roelofse, regional general manager at Business Partners Limited (BUSINESS/PARTERS), the recently released 2018 Real State of Entrepreneurship Survey, compiled by Seed Academy and Old Mutual, revealed that 80 percent of entrepreneurs in South Africa are under the age of 45, with the majority of entrepreneurs reported to be between the ages of 25 and 34.
“In light of the high prevalence of unemployment, there is no reason that entrepreneurship should be reserved for the younger generation. Considering that only 20 percent of entrepreneurs are over 45, it is now more important than ever for older aspiring entrepreneurs to realise that the country needs them and it is never too late to start a business,” he says.
Delving into the reasons for this low rate of entrepreneurship among older generations in South Africa, Roelofse refers to the 2016-2017 Senior Entrepreneurship Report. “According to the report, older individuals have the lowest confidence in their ability to start and run their own businesses, and many believe that entrepreneurship is a young person’s occupation because the majority of entrepreneurs are young.”
In contrast to these beliefs, Roelofse says that it has actually been shown that older entrepreneurs are more adept at building resilient businesses, which is especially crucial during times of slow economic growth.
“If more older entrepreneurs follow their entrepreneurial dreams, not only will more jobs be created, but the idea of entrepreneurship will become more socially accepted for all ages and hopefully have a ripple effect.”
As such, it is vital for older aspiring entrepreneurs to realise that they are more equipped than they think to start and run a business, says Roelofse, who lists three pointers to boost older aspiring entrepreneurs’ confidence:
- Work experience: Starting a business at a later age means that the entrepreneur will have a lot more work experience. This will be extremely beneficial as it will contribute to the entrepreneur’s leadership skills, business management and acumen, problem solving skills, and industry experience, should the entrepreneur decide to open a business in the same industry.
- Personal networks: It is often said that it’s not what you know, but who you know, and as one grows in age, so do their personal and professional networks. Older entrepreneurs will therefore be more likely to know other established professionals who they can turn to for advice, collaboration, and offer their services to.
- An established passion: Older entrepreneurs tend to be less restless in their pursuits, as they have had more time to figure out what they are most passionate about, which can often be a driving force to start a business as well as motivate their success in the future.
These are just a few of the reasons supporting the notion that more older aspiring entrepreneurs should start their own businesses and contribute to increasing employment opportunities in the country, says Roelofse. “Age should be seen as an added strength, not a hindrance, when it comes to entrepreneurship. And aspiring entrepreneurs, regardless of their age, should be encouraged and supported to contribute economically,” he concludes.
Johnson & Johnson Launches Africa Innovation Challenge 2.0
Calling on African Entrepreneurs to Submit Ideas in Six Categories: Mental Health, Consumer Packaging, Botanical Solutions, Health Worker Support, Digital Health Tools and Essential Surgery.
Johnson & Johnson today launched the Champions of Science Africa Innovation Challenge 2.0, the second continent-wide competition calling on African innovators to submit ideas for innovative technologies, products and solutions that have the potential to create positive impact for African communities. The challenge focuses on identifying scalable and sustainable solutions to six major health and environmental problems for Africa’s population.
“The growing number of innovation hubs throughout Africa is sparking a new generation of entrepreneurs who are innovating and finding new solutions for issues facing their communities,” said Josh Ghaim, Ph.D., Chief Technology Officer, Johnson & Johnson Consumer Inc. and member of the Johnson & Johnson Research & Development Management Committee, who is launching the challenge today at the Africa Women Innovation & Entrepreneurship Forum in Cape Town.
“Our goal with the second Africa Innovation Challenge is to expand our support for the region’s entrepreneurs by pushing the boundaries of creative solutions to meet several areas of urgent need. With six new solution categories, Africa Innovation Challenge 2.0 represents an extraordinary opportunity for the region’s growing community of innovators to showcase new ideas with the potential for broad societal impact,” added Ghaim.
“At Johnson & Johnson, we believe a great idea can come from anyone, anywhere, and we work with entrepreneurs around the world to relentlessly pursue innovations that advance and enhance the health of everyone, everywhere,” said Seema Kumar, Vice President, Innovation, Global Public Health and Science Policy Communication, Johnson & Johnson and member of the Johnson & Johnson Research & Development Management Committee, who is simultaneously launching the challenge today at the Women Leaders in Global Health Conference in London.
“This is an exciting time to be part of Africa’s rapidly advancing innovation ecosystem, which recognizes that people and patients across the continent are waiting for urgent solutions. The Africa Innovation Challenge provides an important platform to support emerging entrepreneurs and help accelerate the development of unique, sustainable health care and environmental solutions.”
The Africa Innovation Challenge 2.0 is designed to address the critical unmet needs of the continent and local communities in Africa while providing support to Africa-based entrepreneurs in creating innovative health care products and services. Among the selection criteria, entries must demonstrate the potential for scale from proof of concept stage to long-term sustainability. Challenge participants with the best solutions will receive up to US$50,000 in funding and mentorship from the global network of scientists, engineers and business managers within the Johnson & Johnson Family of Companies to bring new solutions forward.
“We are thrilled to be collaborating once again on the Africa Innovation Challenge,” said Thierry Zomahoun, President and CEO of the African Institute for Mathematical Sciences (AIMS) and Founder and Chairman of the Next Einstein Forum (NEF). “Earlier this year, at our biennial Next Einstein Forum event, we had the pleasure of hearing from the first challenge winners. The incredible success of their businesses provides wonderful examples of leadership and entrepreneurialism and is a testament to the amazing young talent across Africa. We look forward to the winners of Africa Innovation Challenge 2.0.”
“The Johnson & Johnson Family of Companies comprises of one of the world’s largest health care companies and is drawing on over 85 years of engagement in Africa in over 25 countries, and we are proud to support Africa’s rapidly advancing innovation ecosystem,” said Alma Scott, Vice President, Operations and Partnerships, Global Public Health, Johnson & Johnson.
“We’ve learned over time that solving last-mile challenges through local empowerment offers the greatest potential impact in the fight against public health challenges, and that it can also help fuel the local economy and catalyse infrastructure investments.”
Solution Categories for the Africa Innovation Challenge 2.0
The challenge’s six new solution categories aim to address significant threats to Africa’s health care systems and environment:
- Botanical Solutions: Sixty to eighty percent of households in Africa still rely on traditional medicine to care for themselves and loved ones. We are seeking naturally-derived, plant-based solutions that tap into traditional knowledge and deliver consumer health and wellness benefits through topical application.
- Packaging Innovations: Managing packaging waste from the increasing consumption in Africa is a challenge for many communities. We are seeking sustainable innovations for packaging of single-dose units and other affordable product sizes that will reduce or eliminate waste, while protecting the product.
- Mental Health: Caring for someone with mental illness, especially the youth, can be very challenging for rural communities. As a result, 75-85% of persons living with mental illness in Africa may not have access to mental health care. We are seeking innovations that create awareness for mental illness as a public health problem and offer solutions for patients, caregivers, and their communities to address these issues.
- Health Worker Support: African frontline health workers experience high rates of stress and burnout due to the heavy burden of disease and marked health system challenges. We are seeking innovations that support the wellbeing and resilience of nurses, midwives and community health workers at the heart of delivering care.
- Digital Health Tools: The African continent has the world’s poorest health outcomes, with HIV, TB, Mental Health, Maternal Health and Ebola having especially large impact particularly on women. We are seeking digital tools (including apps and other mobile/web/data enabled tech) for these important health care areas that can inform, educate, communicate and connect people to treatment, support and care through their reach and information and improve health outcomes especially for women.
- Essential Surgical Care: A significant portion of the burden of disease in Africa can be treated with surgery. However, many health facilities in certain areas do not have the capacity to deliver even basic surgical services. We are seeking innovations that promote access to timely, safe, and skilled surgical care.
Challenge submissions may originate from anywhere in Africa, and from one or more individuals, teams or companies; subject to certain eligibility requirements set out in the terms and conditions for the challenge. The submitted health care solutions will be evaluated based on their ability to meet the following criteria:
- Idea submission addresses at least one of the six challenge categories
- Idea submission is innovative and creative
- Idea submission is scalable
- Idea submission outlines how the award would help the applicant(s) reach a critical milestone within the timeframe of a single year and provides a full commercialisation plan.
To apply to the Challenge and review the applicable terms and conditions, please visit the Africa Innovation Challenge website. The deadline to submit applications is January 16, 2019. Neither Johnson & Johnson nor any of its companies is granted any rights to applicant ideas as a result of their participation in the Challenge. Applicants and winners remain free to continue the further development of their ideas on their own. Award recipients will be announced in Spring 2019.
For more information on the Africa Innovation Challenge and the stories of innovation from past winners, please visit www.jnjinnovation.com/africachallenge/.
5 Reasons Why Co-working Spaces Are So Great For Entrepreneurs
If you need an office or command centre, but don’t have the money or time to spend on all of the administrative duties that come with running an office, these are the benefits co-working offers.
Co-working spaces are designed to be dynamic by offering functionality and flexibility and are particularly well suited for companies and entrepreneurs who want to grow their businesses.
Linda Trim, Director at FutureSpace, a co-working joint venture between Investec Property and workplace specialists Giant Leap with two offices in Sandton Central, said: “As your business grows, a co-working office can become a viable option to scale up your team. It gives you the benefits of a fully fledged office at a much more affordable price than a traditional space – typically 25 to 30% cheaper.”
If you need an office or command centre, but don’t have the money or time to spend on all of the administrative duties that come with running an office, these are the benefits co-working offers:
1. Low start-up cost
Co-working spaces offer entrepreneurs and start ups a chance to work in a fully equipped office without worrying about the costs of setting up an actual office.
“By getting a shared space, you can operate your business without needing to compute and allocate funds for building rent, insurance, office equipment and various other expenses that come with starting a business,” Trim noted.
Even if you can afford it financially, the time spent on sourcing equipment and furniture and talking to contractors is a precious resource that should go to building your business.
It is extremely easy to scale up a shared office space as your team grows. Said Trim;”You can tailor your space to suit a one-person business, a team of two, a company of five – or even fifty. And add more space as you go. It’s very cost effective and better than trying to constantly guess what future headcount will be.”
3. Central locations
Good co-working spaces should be right in the thick of business nodes so it’s easy and convenient for your clients to find you. “Renting your own private office may force you to sacrifice location quality for a more affordable monthly. By moving your business into a co-working space, you get an address in the heart of a business district, along with access to transportation, cafés, gym and shopping.”
FutureSpace’s co-working offices are at 96 Rivonia Road and 61 Katherine Street in Sandton Central, Johannesburg and within walking distance to the Gautrain and Sandton City. More FutureSpace offices will open in business nodes across South Africa from next year.
4. Networking opportunities
Renting space in a shared office means surrounding yourself with goal oriented and high-achieving entrepreneurs and business people. This means every day is an opportunity to network with small business owners, great thinkers, consultants and other entrepreneurs.
“Being part of a co-working community means you are surrounded by potential partners, clients, and mentors – giving you the ability to easily outsource to talent when you need help with projects,” Trim added.
5. Promotes work-life balance
‘All work no play’ is a phenomenon you’ll never experience when in a shared office.
“Co-working spaces promote work-life balance by providing social events, coffee bars and gyms to de-stress and recharge during a day of work,” Trim concluded.
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