Business incubators have the ability to catapult a business in the right direction through enabling access to guidance, resources, networks and mentorship. However, incubation tends to be thought of as a magic wand, when in reality it only works once a business has gone through certain steps along its lifecycle.
“Often, incubators are seen as magicians where any business can be assisted, but in reality, not every business is ready or ideal for incubation,” says Mags Ponnan, Head of the Business Incubator and Customer Value Propositions at FNB.
There are 3 main concerns that an entrepreneur must satisfy; these concerns must be crystalised before incubation:
1Defining the identity, vision and strategy of the business
This is the earliest stage of the business, where the entrepreneur will need to define the goals of the business and the strategy of the business going forward. This will also determine the identity that the business will project to its potential customers.
2Validation of the business model
The entrepreneur can stress test his business model through a pilot by gauging how well his customers receives his proposed product or service. This will assist the entrepreneur with finding the right product and market fit.
3Implementation of the tested business model
This is usually the trickiest part of a start-up where the entrepreneur will start selling his product/service to the market and will focus on the operational aspects of his business such as revenue generation through sales, recruiting the right team, etc.
Incubation will best work if the business is at a stage where it has created a product or service and has stress tested it, each business model and entrepreneur’s needs and approach will be unique in this regard.
A great business idea is not always enough to turn into a viable business, there are other factors that are best answered when a business affords the market the opportunity to respond to the business.
“Stress testing an idea ensures that you save a lot of money and time in the long run, it also ensures that you maximise any assistance there is to get from an incubator,” adds Ponnan.
Depending on the maturity and needs of the business, the average incubation period can be anything from 1 to 3 years which will also be in line to the incubator’s curriculum.
“We have a lot of businesses that want to get into incubators long before they have tested their products in the market, but the reality is that incubators are not a classroom. They exist to propel businesses from one stage to another along the business lifecycle. In as much as there are early stages incubators, the businesses that get the most out of incubation are those that have been stress tested their business model and shown their customers’ appetite in the market space,” concludes Ponnan.
2018 National Budget: What To expect?
The South African economy has experienced undue economic pressure and decreasing investor confidence.
Pressure was undoubtedly on the South African National Treasury to take active steps to address short-comings and enable growth within the local economy.
“The anticipation of 2018/2019 Annual Budget Speech is growing; with the hope that it will bring improvement in the economy, address key challenges and create tangible solutions for consumers and businesses alike,” says Hugo van Zyl: FNB Fiduciary Specialist.
With the upcoming Budget Speech on the 21st of February; we looked to the past year and highlight a few key financial key points that may still affect consumers this year:
Personal Income Tax
In 2017, minor adjustments were made to this tax bracket last year; with 45% for taxable income above R1.5 million being introduced. This increase in taxes payable for income earners above the R1.5 million income thresholds saw significant pressure on tax payers having to manage an existing budget with lower disposable income.
We foresee that the Personal income tax rate will remain the same for this financial year. With this in mind we encourage tax payers to avoid incurring unnecessary debt and ensure that one’s debt to income ratio is minimized at all costs.
Last year, an additional R5 billion was added to the previously announced R32 billion. Approximately 30% of South African parents save for their child’s education on a yearly basis. With the cost of education rising by about 10% each year, parents are encouraged to continue making provision for their children’s future. In addition, the recent funding announcement for free university education to students from poor households in South Africa will be announced in the upcoming budget together with possible tax increases.
Exercise duty rates for tobacco and alcoholic products
The Sin Tax has increased previously between 6.1% and 9.1%. We anticipate this to also increase as is the case every year. We advise that consumers should consider reducing their consumption to ease budget constraints on their wallets and more importantly, improve their health.
Tax-free Savings Accounts
The annual Tax Free Savings limit increased from R30 000 to R33 000 last year. This was great news for investors and we predict that this will remain the same this year.
The financial year ends on the 28th of February 2018. South Africans still have an opportunity to take advantage of tax free savings, encompassed in the benefit of exemption from taxes like dividends tax, capital gains tax etc. The benefits will give a huge boost to your investment over time. The key to investing is to invest early, stay invested and in time you will reap the rewards, regardless of how much you invest per month.
Dividend Withholding Tax
The rate increased from 15% to 20%, which was put into effect 22 February 2017, and any dividends incurred on or after this date attracted the increased rate. We do not foresee any further change during this Budget speech.
We predict a possible increase in the VAT rate as it can raise large amounts of revenue. Between 2015 and 2017, the general fuel levy increased by 30c/l. We expect an increase in the fuel levy; but the extent of the increase will depend on whether the VAT rate is increased.
Capital Gains Tax
An increase in the annual inclusion for individuals and special trusts is expected.
Chantal Marx; Head of research FNB Securities says that, “The MTBPS painted a very negative picture of the South African fiscus in October last year, and from an investment perspective, we will be very focused on how government plans to make up what is expected to be a significant revenue shortfall. However, the expenditure component will be equally important.”
Possibilities to increase revenue:
- Disposing of assets like government’s share in Telkom.
- Increased taxes:
- A possible increase in VAT. If this is the case, there could however be some relief for grant recipients through higher grant increases as well as the zero rating of certain items.
- Fiscal drag (not adjusting tax brackets to compensate for inflation).
- A possibility of a further increase in the marginal tax rate for the highest income earners.
- Given the stronger rand, treasury could use the opportunity to raise the fuel levy.
On the expenditure side, the line is even finer and there is very little government can do to limit the states’ spending bill. The wage bill is expected to grow a little ahead of inflation and grant payments could increase to provide relief for possible VAT hikes. Capital expenditure growth is anticipated to remain negative in real terms.
We anticipate an improvement in deficit targets relative to the MTBPS on the back of revenue raising measures. This will signal a return to fiscal consolidation which is likely to be bond friendly, particularly if enough is done to avert a Moody’s downgrade.
Of course, equities tend to be a bit of a balancing act. On the one side higher tax rates and continued pressure on fixed investment expenditure from government could have a near term dampening growth impact. On the other side however there are a number of underpins for equities. Valuations may be supported by lower risk-free rates (government bond yields) and if South Africa avoids a downgrade from Moody’s, the SARB may feel confident to cut interest rates.
“Given potentially higher business and consumer confidence flowing from fiscal discipline, the longer term growth outlook for the economy is likely to improve and this will ultimately filter through to a better corporate earnings outlook,” concludes Marx.
Comment by Paul Makube, Senior Agricultural Economist at FNB Business says that “the current budget speech comes on the backdrop of renewed pressure on the agriculture industry to accelerate transformation as well as severe drought that is currently ravaging the Western Cape. Confidence in the sector nose-dived last year and further investment has been subdued.”
Makube expects further details on financing models that are envisaged in partnership with the Banking sector as well as the increased allocations for the Department of Agriculture, Forestry and Fishing (DAFF) and the Department of Land and Rural Development (DLRD) for agriculture support and fast racking land reform. The ruling party has prioritised land reform through its resolution on expropriation and it is therefore expected that this will be a bigger focus for the budget.
The quantum is difficult to predict given the tight fiscal situation.
Jesse Weinberg, Head of the SME Customer Segment at FNB Business says “Ideally we would want to see continued focus on supporting and growing SME’s in South Africa with funding and reducing compliance requirements, as we have seen in previous budgets.
“Ideally we will see a continued effective channelling of funds through to government programmes, and an increased emphasis on the various programmes and departments working together to deploy these funds. Another theme that we are hoping to see coming through is the focus on reducing regulatory and administrative burdens on small businesses which often presents obstacles that hamper their ability to operate and grow. These include both tax and government compliance requirements,” shares Weinberg.
Please visit the FNB Blog to view the 2018 Budget preview from the FNB Economics team: https://blog.fnb.co.za/2018/02/2018-budget-preview
#SONA2018: Upbeat Address Offers Inspiring Message For South African Entrepreneurs
Small & Medium Businesses in South Africa are likely to take inspiration from the upbeat tone of President Cyril Ramaphosa first State of the Nation Address.
Small & Medium Businesses in South Africa are likely to take inspiration from the upbeat tone of President Cyril Ramaphosa first State of the Nation Address and its positive outlook on how smaller businesses can play a major role in spurring economic growth and addressing the challenge of unemployment, says Pieter Bensch, Executive Vice President, Africa & Middle East at Sage.
“We are pleased to hear the new president of South Africa acknowledge that the growth of our economy will be sustained by small businesses,” says Bensch. “It is especially heartening to hear that he is committed to building a small business ecosystem that assists, nourishes and promotes entrepreneurs.”
“Entrepreneurship doesn’t happen in a vacuum – it is the result of collaboration between big business, government, business builders, universities and other stakeholders to build the skills, infrastructure and support systems entrepreneurs need to succeed.”
Bensch adds that the CEO Small Business Fund – which currently stands at R1.5 billion – is an outstanding example of how government and big business can work together to nurture entrepreneurship. “I was excited to hear that government is finalising a small business and innovation fund targeted at start-ups and that it also has plans to reduce the regulatory barriers for small businesses,” he says.
“These sorts of interventions could help us to dramatically improve the success and survival rate of South Africa’s small and start-up businesses.”
President Ramaphosa tackled the burning crisis of youth unemployment when he mentioned the launch the Youth Employment Service initiative, which will place unemployed youth in paid internships in companies across the economy.
“Skills in the ICT sector remain a challenge and big business must play a central role supporting government as far as possible through internships and learnerships. This, along with existing initiatives such as the Employment Tax Incentive, could play a major role in upskilling young South Africans – enabling youngsters to play a role in the digital economy, while supplying the skills every business needs to be globally competitive,” Bensch says.
Adds Bensch: “Our new President’s speech was pragmatic, but he also looked towards the future. Industry 4.0 is likely to change the skills employers will be looking for, how entire industries will operate, and the nature of work itself. It was great to hear President Ramaphosa talk about science, technology and innovation as opportunities for our country – we need to seize the chance to put South Africa right at the forefront of the digital industrial revolution if we are to unleash its full potential.”
LaunchLab Fellows – Great Opportunities For Aspirational Young African Students
The Stellenbosch University LaunchLab officially kicked off their Fellowship Programme on Monday, 5 February.
The Stellenbosch University LaunchLab officially kicked off their Fellowship Programme on Monday, 5 February with 12 students filled with aspirations of elevating their own lives through gaining valuable connections with LaunchLab start-ups.
Through this platform the LaunchLab hopes to inspire, guide and unleash the critical mass of problem solvers, at Stellenbosch University, guiding them along the path to discover their purpose in entrepreneurship and make an impact.
The core focus of this programme:
The core focus of this fellowship programme is to invest more in building a tribe that feels included in what we do. The key tag line within this initiative is ecosystem development, focusing on the following aspects:
To Foster Collaboration
Young people need support networks that can help them communicate, draw inspiration and gather resources to take action. These networks include not just their peers who share the same interest, but mentors and others who support their cause. To facilitate the emergence of a global community and network of young people that are committed to changing the world.
Knowledge Generation and Sharing
As young people gain experience and move on to other things in life they often take their valuable experience with them, leaving others to relearn the lessons of the past. To ensure continuity of learning, it is important to have mechanisms for capturing the lessons from the past as knowledged resources as well as to share that knowledge as widely as possible. With the help of our willing residents we can use the fellowship programme as a vehicle for knowledge sharing and importation within the ecosystem. The fellowship programme can act as a knowledge sharing pipeline.
Feeder for Incubation
If this programme is fully endorsed and supported we would have finally answered the questions around having a feeder program for our incubation program. The fellowship programme would be structured to function as a feeder program for our mainstream incubation program. The aim would be to Identify talents that can participate in our ideas programme and make their way up within our incubation programme.
Opportunities identified for LaunchLab Fellows
The following key activities will be covered in the fellowship program.
- Product development/makerspace activities
- Monthly meetups and breakthrough innovation impact stories
- Assist at LaunchLab events
- Participation in global startup events and challenges
- Work with LaunchLab startups
- Become contenders for our Corporate Innovation Challenges
- Free training and skills acquisition programmes.
Related: 9 Top Tips For Young Entrepreneurs
What will LaunchLab Fellows have access to?
- Commercialisation of product or technology
- Interaction with SU technologies
- Work in teams with the aim of commercialising world class technology and driving it to become a successful business
- Introduce innovative flagship products that are relevant to the need of existing or new corporate clients
- Access to LaunchLab development partners on products on which they are currently working
- Develop your own new and interesting solutions, and showcase them to relevant members of our community
- Participation in LaunchLab programmes
- Participation in LaunchLab talks
- Assist at LaunchLab events
- Provide adhoc support as interns or volunteers for startups, thereby gaining valuable experience.
Who are the LaunchLab Fellows?
The LaunchLab Fellowship Programme is open to the following category of people:
- Stellenbosch University students
- Problem solvers
- Researchers and engineering students
- Students from other universities where we are networked who are able to be in Stellenbosch
- International students from global knowledge regions.
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