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Stimulating The SME Sector: What Can Government Do Differently?

A number of SME surveys and reports have identified key barriers to entrepreneurs wanting to start new SMEs or expand their existing businesses. In several instances, changes in policy by government could reduce these barriers significantly, in others they have already taken action.

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The South African Institute of Chartered Accountants (SAICA) commissions an annual Small and Medium Enterprises (SME) Insights Survey with several objectives: To canvass SMEs’ opinions and perceptions, to help SAICA members in small and medium practices (SMPs) to understand ways to better serve the small business community, and to assemble data that will be of use to government policymakers in their quest to enable SMEs as the primary driver of job creation, as outlined in the National Development Plan (NDP).

More than 1 300 small and medium enterprises (SMEs) were canvassed in the 2015 survey, a significant increase on the 800 respondents who participated in 2014. SAICA are calling for SMEs to participate in the 2016 survey and to keep the pressure up on law makers. The link to the 2016 survey is: SMME Survey 2016.

One of the findings in the 2015 survey report indicates that if government wants to achieve NDP targets of 10 million new jobs, with the SME sector responsible for 90% of new employment by 2030, it should be prepared to accept that some things have to be done differently.

The survey results show unequivocally that the SMEs that have been in business the longest generally have the highest turnover, and employ the most people. So although the creation of new SMEs is very important, it is equally important to acknowledge that meaningful job creation only begins when SMEs are achieving annual turnover of R2-million or more.

Related: How SMEs Can Defeat The Red-Tape Bugbear

Given that over 60% of SME start-ups fail within two years, and only 20% achieve long-term stability, the research findings suggest a two-pronged approach by government may be required: To encourage more SME start-ups and to provide them with strong financial access and technical support, and actively to encourage growth in established SMEs that have survived the critical first few years.

Longevity vs turnover for SMMEs

Longevity vs employment in SMMEs

Top reasons for SME failure

Asked what they saw as the main factors behind the failure of SMEs, the survey respondents’ three top factors are revealing: Their debtors pay them late, they are not good at managing cash flow and they do business with clients who don’t pay them.

From all three top responses, it is clear that unreliable cash flow is one of the primary reasons why businesses fail. In a July 2015 report on levels of optimism among South African SMEs, the CFO of specialist SME lender Business Partners, Ben Bierman, said: ‘Cash flow is a constant challenge for SMEs, and late payments or non-payment is one of the largest risk factors impacting a small business’ sustainability.

‘Late payment can be disastrous for an SME’s cash flow – as they are unable to absorb these payment delays as effectively as larger companies do – and can potentially lead to the failure of an otherwise sound company.’

The perception that government at all levels pays late is unsurprisingly then, one of the major reasons why 72% of the survey sample does no business with government at all.

If government is to support and develop SMEs – particularly those that achieve B-BBEE compliance and are majority or wholly black-owned – by channelling its procurement spending to qualifying SMEs, it needs to create a culture of swift payment by government at national, provincial, municipal and parastatal level.

The KPI announced by former Finance Minister Nhlanhla Nene in the 2015 Budget, which will oblige financial officers at all levels of government to ensure payment for services to SMEs within 30 days, could go a long way to removing this obstacle to SME development – as long as it is properly implemented, monitored and enforced by the Treasury.

The fourth factor named as a reason for SME failure in the 2015 SME Insights Survey is that they start with less capital than they need.

Related: Making Government Business More Attractive To SMEs

Combined with cash flow instability, insufficient start-up capital can quickly prove fatal to SMEs. Although government does provide a substantial amount of finance and support for start-ups through entities such as SEFA, the Department of Trade and Industry and the Black Business Supplier Development Programme, another survey by online payroll and accounting provider Sage earlier in 2015 revealed that 96% of South African start-ups receive no assistance, financial or otherwise, from government.

The problem appears to be mainly a lack of awareness of the available government and private sector funding, so a proactive step would be for government and big business to collaborate on educating more SMEs on their capital funding options.

As Ivan Epstein, President for Sage International and Chairman of Sage Foundation said: ‘One of the biggest barriers to the success of SMEs in South Africa is education. It would be a wonderful, positive opportunity to work with government to help SMEs face challenges like regulatory compliance, access to finance, skills development and mentoring.’

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

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Great Bunch Of Entrepreneurs Make Top 10 In The Workspace/MiWay Competition

The top 10 in The Workspace/MiWay entrepreneur competition have been selected.

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After an intense four-month process, the top 10 contenders in The Workspace/MiWay Entrepreneur competition have been notified that they’re through to the next round. These entrepreneurs will pitch their businesses to the judges, who will then whittle down the number of contenders to five, from which the winner will be chosen.

“There has been great excitement over the past four months. As every single new entry came in, we would clap our hands and cheer,” said Mari Schourie, CEO of The Workspace. It was a tough job judging all the entries to reach the top 20 submissions, she said, before having to find the top 10.

“We’ve had really strong entries submitted by people with good business knowledge,” said Schourie. “You can see the willingness to work hard and the great amount of effort they have put into their initiatives.”

Schourie said judges saw “wonderful ideas and fabulous business minds and quality people with big dreams shine through the entries”.

The top 10 are:

  1. Loyal 1
  2. Dwyka Mining Services
  3. Minatlou Trading 251
  4. Sindis Best for all
  5. Convergence Three
  6. Zinde Zinde
  7. Matla Risk Management
  8. Artsort Trading
  9. Iconic Talent Agency
  10. Nthedikgwadi Transport Services

Related: How to Name (Or In Some Cases, Rename) Your Company

Schourie said she wished she could tell President Cyril Ramaphosa, who supports the growth of small business as an economic driver, “the ideas and the passion that these business owners have is inspiring and should be focused on more”.

The prize on offer – worth over R350 000 – will help set-up the winning entrepreneur for a period of 12 months, giving them a boost to help build their business.

Morné Stoltz, Head of Business Insurance at MiWay, said the theme that ran throughout the entries was that entrepreneurs wanted to make a difference and contribute to positive change in South Africa. “Many of the submissions focused on technical and developmental fields,” he said.

“Entrepreneurs recognise gaps in the market and see the potential for growth. Getting into the top 10 was not at all easy.”

Stoltz said South Africa had a “great bunch of entrepreneurs” and that standing together to give them a platform to launch was an exciting opportunity. “To grow our economy we need to help with skills development and give whatever assistance we can,” he said.

Part of the finalists’ road to the top includes a skills development programme for the top 10 entrants ahead of their important date to pitch their business plans to the judges.

As Schourie pointed out, it is vital to encourage South African citizens to act on their dreams and passions because “it can be a great success; they just need make that leap”.

Dates to watch:

  • 21 June: Top 10 skills development programme
  • 3 July: Top 10 pitches
  • 6 July: Top 5 announcement
  • 20 July: Final five workshops
  • 10 August: Final five pitches
  • 13 September: Winner announced

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Top 22 Start-ups Chosen For Final Selection Days – Startupbootcamp Africa

After receiving 1,004 applications from all over the world, the SBC team in conjunction with the programme’s corporate sponsors have narrowed the applicants down to 22 top-tier tech start-ups that will be invited to the Final Selection Days on July 11th and 12th at PwC’s headquarters in Cape Town.

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SBC Africa received 1,004 total applications from 77 countries on 5 continents. The start-ups that applied were exceptionally impressive and have gained more traction in the market than the applicants for the 2017 cohort. The talent in Africa is phenomenal and the corporate sponsors and SBC team dedicated 2 weeks to narrow it down to the Top 22 to be invited to Final Selection Days.

“It’s been an intense process due to the exceptionally high calibre of start-ups applying to the programme from across the continent,” states Philip Kiracofe, co-founder and CEO of Startupbootcamp Africa. “From 1,004 applications we have managed to narrow down to 22 of the most creative teams tackling daunting African problems. One of the key differentiators for start-ups that participate in the SBC Accelerator is the opportunity to secure commercial contracts with our sponsors. In order to make it onto our Top 22, each start-up has been chosen by at least 2 sponsors for potential proof of concept projects. The 2018 cohort is already shaping up to be a milestone moment for Africa.”

Related: How to Name (Or In Some Cases, Rename) Your Company

Zachariah George, co-founder and Chief Investment Officer of Startupbootcamp Africa added, “The investment community across Africa is taking note of the significant traction and access to market that being an alumni of a global accelerator programme like ours provides. We are excited to further galvanize venture capital funding into tech startups through significant de-risking of business models and customer validation with our corporate partners globally.”

From the 22 teams that have been invited to the SBC Africa Final Selection Days, 10 will be selected to join the 2018 cohort. Over the span of the two Final Selection Days, the startups in attendance will have the opportunity to present their pitches to high-profile corporate sponsors, investors, thought leaders and industry experts and will have the chance to sit down with mentors and sponsors alike. At the end of Day Two, the Top 10 will be announced and will be welcomed to the Cape Town-based Accelerator that kicks off in August. During the 3-month period, they will have the opportunity to scale at an incredible pace and seal pilot and proof of concept deals with the corporate sponsors to the programme.

The SBC Africa Accelerator is anchored and endorsed by heavyweight corporate sponsors RCS, BNP Paribas Personal Finance, Nedbank, Old Mutual and PwC.

“We’ve seen an increase in the quality of start-ups applying to the programme. The awareness of the value of the programme has increased and the success of the first year of the bootcamp speaks for itself. More mature start-ups are also seeing the benefits of participating in Startupbootcamp Africa,” comments Stanley Gabriel, Head of Innovation at Old Mutual.

The Top 22 start-ups invited to the Final Selection Days come from 7 different countries. The numbers are as follows: 8 from Nigeria, 5 from South Africa, 3 from Uganda, 2 from the Ivory Coast, 2 from Kenya, 1 from Ghana and 1 from Ireland.

Related: Entrepreneurship Is All About Overcoming Obstacles

The names of the start-ups invited to Final Selection Days by country:

  • Nigeria: Bankly Technologies, Biyabot, CredPal, FriendsVow, Kudimoney Bank, Medikal HMS, NebulaPay, and ZEEZZ Planet Solutions.
  • South Africa: Brandbookalytics Big Data, ifileme, LÜLA, Prospa, and Akiba Digital
  • Uganda: CoinPesa Ltd, RoundBob Uganda, and Swipe 2 Pay
  • Ivory Coast: Digitech Group, and DISTRICASH
  • Kenya: Kakbima, and MPost
  • Ghana: Inclusive Financial Technologies
  • Ireland: Pago Payments

It has been an incredible 3-month scouting journey for SBC Africa and now that the Top 22 have been announced, the Final Selection Days is the only hurdle left before the Accelerator officially kicks off on 13 August 2018.

There are high expectations for the Top 10 of 2018 and if the quality of the start-ups at this stage is any indication, 2018 is set to be a great success for the African tech and innovation ecosystem.

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She Works Hard For Her Money – So Pay Her On Time

Sage research finds that female entrepreneurs suffer more negative effects from late payments than men. Charles Pittaway, Managing Director of Sage Pay, comments on the importance of equal pay for equal work.

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Women fight inequality and discrimination every day. They fight for equal pay for equal work. They challenge gender stereotypes in their careers and personal lives. They question unfair social and political norms. They unify under passionate causes, evidenced recently by the #MeToo and #TimesUp campaigns.

With female business builders making up nearly 40% of the global workforce – and heading up 72% of micro-enterprises and 40% of small enterprises in South Africa – any kind of discrimination is unacceptable from a cultural and economic point of view, especially when it involves failure to pay what is owed.

The impact of late payments on small businesses has been widely discussed as an issue that must be eradicated for all entrepreneurs, regardless of gender. But inequality still exists and more needs to be done to eradicate it.

Recent research by Sage highlights that this discrimination doesn’t just impact women in large corporates. Indeed, it identified a worrying trend: female entrepreneurs are more likely to suffer from late payments than their male counterparts.

South Africa was among the six regions (out of 11) surveyed by Sage that reported higher instances of women business builders being paid late. Businesses run by female entrepreneurs in South Africa report that 18% of invoices are paid late and 10% of invoices are written off as bad debt.

Small businesses cannot absorb these costs nor the lost hours spent on admin – amounting to R564 000 in South Africa. The result can be disastrous: in the next 12 months, 1 in 4 female entrepreneurs will prioritise chasing late payments to be more cost efficient, and ironically will become less productive. If these businesses are not paid on time, they will also struggle to pay bonuses and suppliers, and will be forced to delay investments in their businesses.

Related: Watch List: 50 Black African Women Entrepreneurs To Watch

The fact that late or non-payments is a more common occurrence experienced by female entrepreneurs is part of a wider problem. Women report more instances of sexist comments, disregard for their business ambitions and lack of female mentors as significant underlying reasons why there is now a heightened cultural stigma around chasing late payments amongst female entrepreneurs – more so than men.

In South Africa, the stigma extends past culture, with 40% of Small & Medium Businesses failing to follow up on late payments to protect client relationships. Time and resources are also challenges, with 24% of small businesses saying they don’t have a dedicated resource to chase payments and 13% saying they don’t have time.

There is no place for bias in business – all entrepreneurs should be free to pursue their ambitions without suffering the consequences of these cultural barriers that are encountered far too often – regardless of gender.

Now is the time to disrupt and challenge these harmful stereotypes and create a force for good, making sure that small businesses – the engine room of all economies – are paid what they are duly owed for the services they deliver to our economy.

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