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.”
Uber-like Insurance Platform Is Revolutionising The World Of Insurance Claims
the 4-Sure platform, which was launched two short years ago by actuary Shalen Moodley and a collective of seasoned tech gurus, is to provide value-added services that benefit the financial services industry. All partners had substantial success across Africa introducing loan origination platforms for leading banks before deciding to tackle the problems existing in the insurance claims fulfilment process.
A multi-sided, digitally-driven business platform that has been wholly-developed and launched in South Africa is ‘uberising’ the local short-term insurance industry by transforming the traditional claim fulfilment landscape.
Developed locally by Insuretech sensation 4-Sure and headed up by actuary-turned-entrepreneur Shalen Moodley, the 4-Sure platform seamlessly connects the claims ecosystem consisting of the customer, broker, insurer, service providers and suppliers and manages all complex interactions and sequencing required to deliver superb customer experience, optimal claim cost and fast turnaround times.
“The new system, which eliminates virtually all the manual processes and “waste work” involved in dealing with a claim, also provides enhanced opportunities for small businesses to compete for insurance claim work traditionally only available to a select few. Simultaneously, it reduces the fraud risks associated with the manual allocation of claims, and reduces costs across the board”, says Moodley.
“There are several weaknesses inherent in the appointment of the traditional insurance panels, “says Moodley. Relationships between the insurer’s agent and supplier base can result in some contractors being favoured above others. The payment of “incentives” by service providers as a reward for getting work can also skew the allocation process and drive massive cost inflations. Furthermore, costs can vary for similar jobs and the use of assessors for approval of routine jobs results in time delays and increased administration costs.”
“Most seriously for most insurers, is that contact with the customer is lost during the claim fulfilment process – they are disintermediated. Often, the result is dissatisfaction on the part of the customer, disrupted processes, unnecessary delays and often the possibility of an unhappy customer withdrawing their insurance and other investments with the associated brands of the insurer.
After extensive discussions with the industry regarding problems faced with settling claims, 4-Sure concluded that reformation of the system should be based on shorter, effective communication structures, the ‘democratisation’ of the panel system and the strategic use of technology to improve customer delivery and satisfaction levels.
The answer was the building of an entire ecosystem based on the use of sophisticated regressive algorithms that made the ‘Circle of Service’ between insurer and claimant transparent and frictionless. Creating an extensive database, making software available to service providers and connecting suppliers of raw materials as well as early payment mechanisms completed the service circle. As well as speeding up claim response times, the process was also efficient and fundamentally more effective.
Taking inspiration from the concept launched by the Uber transport system, the insurance platform includes a vastly increased list of qualified and rated service providers. As in the ride-sharing service, becoming listed requires that several stringent criteria are met by service providers. When a claim is registered – including the time when the customer requires assistance – it drops into the platform. Appropriate service providers listed can then respond and confirm their availability. They are then required to be on site at the time stipulated by the customer, undertake the work and then complete a Mobile App-driven reporting process for the insurer’s records (including before and after photographs, assessments and costings).
To participate in the platform a service provider must have a smartphone and the software, provided free by 4-Sure. Part of the package includes a service provider ‘scheduler’s’ desktop package that enables job scheduling, field technician allocation and all the information relating to the job to be collated and electronically submitted for payment to the insurer.
“For a sole trader or SME, one of the greatest challenges to building a sustainable business is controlling cash flow. Service providers on 4-Sure do not have to carry an extensive array of raw materials to fulfil allocated insurance claims work. Once they are on site, have assessed the repair work and had it approved within minutes, the service provider is able to visit a 4-Sure approved partner supplier (Builder’s Warehouse, Penny Pinchers, Buco, Plumblink and others) and pick up the required stock.
“They are then using their 4-Sure Mobile App to get the necessary materials and the outlet then bills the insurance company concerned directly through the 4-Sure software for the expenditure. Because of the volumes involved, we have been able to negotiate favourable prices for these services which are now on offer at more than 400 service points across the country. The service provider bills only for the time and labour spent on the job at the agreed rates. Their bills are then submitted using the 4-Sure software, go directly to the insurer and are generally settled within 24-48 hours.”
“As smaller operators are no longer waiting between 30 and 60 days for their money, they are happy to complete routine jobs for a set fee. Depending on the service they deliver and the ratings they receive, they are in control of just how much work comes their way. As a job is loaded on the system and service providers then bid for the work, competition is assured and opportunities for work are equal across the spectrum of service providers – a new paradigm which rewards performance with more work and manages the non-performers off the platform.”
Further value is added to service providers by free access to geo-positioning systems, which not only plots their way to their closest parts supplier but also to the customer’s property. Jobs that appear on their systems also cover the areas in which they choose to operate. As is the case with their Uber driver colleagues, those closest to the customer can make their presence known and compete for the work. Those who feel the costs of reaching the site do not make a job worthwhile simply do not respond to the job alert,” says Moodley.
For insurers, who can track the response times of service providers in real-time and contact them electronically if they are late on site, the major benefit is that the loss of customer contact at the point of handing over a claim to an incident manager no longer exists.
The typical flow of a job is made easier by:
- Insurers were able to use a sophisticated eco-system that is a centralised platform connecting all players in the supply chain, facilitating a seamless claims fulfilment process.
- Customer contacts their insurer via their contact centre, their website, or a digital self-service channel and this claim, is electronically dropped into the 4-Sure to facilitate the claim process automatically.
- A claim’s details being logged directly on the 4-Sure platform instead of being referred to an incident manager. The message enables specific skills, customer location, a time required for service and other factors to be selected so that it can be responded to by competing service providers.
Explains Moodley, co-founder of 4-Sure and one of the innovators behind the home-grown platform that caters specifically for local needs and is believed to be the leading services of its type anywhere in the world:
“4-Sure has succeeded in becoming the first, fully-digital insurance claims platform to provide a truly customer-centric experience. The system is flexible and although the present focus is on non-motor claims, other avenues, including motor insurance and non-insurance opportunities are being investigated and developed,” says Moodley.
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Off The Beaten Track
What Tourism Month means in South Africa and how Mango Airlines is focusing on local opportunities.
This September, being Tourism Month, we have so much to talk about in South Africa, and so many people to engage with, both domestically and abroad. We are privileged to be able to leverage a broad range of destinations – arguably world-class in nature, and they expand way beyond a beautiful mountain, and an ecosystem of game.
The vast majority of leisure tourists, however, remain attracted to the Mother City and various Safari destination, while business tourists tend to stick to hub cities for short durations of time before departing again.
“There is a golden opportunity to expand on the same offerings – while not detracting from them in any way. Our responsibility is to drive tourism into new areas, really emphasising the differentiators that are incredibly attractive to local and international tourists,” said Benediction Zubane, Head of Marketing at Mango Airlines.
“Often tourists visit one of the more well-known sites in an area, and are completely unaware of the other features and destinations close by. We’re seeing a lot of success in township tourism which goes to show how diversifying can really drive new tourism opportunities,” explained Zubane.
According to Statistics South Africa survey on Tourism and Migration, nearly 3.5 million international travellers visited South Africa in August 2017. Top numbers were tourists from USA, UK, Germany, France and The Netherlands, with African visitors primarily coming from SADC countries. Zubane added, “This means there is vast opportunity to begin engaging with travellers in new countries across the globe. We need to become our own best ambassador, talking-up our famous and lesser known destinations, proudly showcases our uniqueness. We should also be tourists in our own country and start exploring the wonders of the Rainbow Nation.”
Mango is passionate about helping its SMEs and entrepreneurial community to successfully overcome the unique challenges facing the tourism industry: “There has never been a more opportune time for small businesses and entrepreneurs to benefit positively from tourism in South Africa, and we hope to celebrate alongside our SME community as they fly high – both literally and figuratively,” he concludes.
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