Steven Cohen, Head of Sage One International (Africa, Australia, Middle East and Asia), comments on the sudden increase in Artisan businesses in South Africa considering the fact that nearly one in five beers consumed in the US today is a craft brand, or that specialist coffee shops sales in the US have tripled to nearly $50 billion since 2002.
Around the world – from the trendy east of London to the hipster capital of Montreal’s Mile End – the so-called ‘flat white economy’ continues to rise. It comprises the thousands upon thousands of artisan entrepreneurs selling craft beers, ethically sourced coffee and organic, gourmet foods to consumers who crave healthy, sustainable and authentic eating experiences.
Artisan entrepreneurs started their rise after the 2008 recession. Just consider the fact that nearly one in five beers consumed in the US today is a craft brand, or that specialist coffee shops sales in the US have tripled to nearly $50 billion since 2002. And the trend has been picked up in South Africa, with more and more Small & Medium Businesses across the country serving customers with locally sourced ‘farm to table’ food and handcrafted products.
Like their counterparts in North America and Europe, they are creating enormous economic opportunities for themselves while supporting local producers and giving consumers alternatives to big producers and retailers.
So how is this done?
Just think about how The Neighbourgoods market has revitalised its surrounding area in Braamfontein. This is one reason why we should support the rise of such businesses: They position themselves at the heart of the community. They support other small businesses and are effective job creators because of their focus on making high-quality goods with human care and love rather than mass producing products with machines.
The 702 winner this year, The Munching Mongoose, is a great example. This company scours South Africa to find the best local produce from small scale farmers and producers. Having secured high-quality produce, it delivers farm fresh milk, eggs, cheese, bread and an assortment of fruit and vegetables directly to its customers.
Other artisans nominated include Baseline, whose owners believe that bad coffee should not happen to good people and Las Paletas artisan lollies, which are made in small batches with fresh fruit, herbs, nuts and real dairy. What these businesses have in common is that they are founded by people with a passion for good food, environmental sustainability and healthy living.
Will you face challenges?
The Munching Mongoose has thrived, thanks to a receptive market, its exceptional customer service and the reach of the Internet. However, Brad Meiring, co-founder says that it hasn’t always been plain sailing.
“Logistics has been a big challenge for us as we operate a delivery service and many of the small scale producers we work with do not have great business systems in place. This makes reliably sourcing goods and receiving them at an expected time difficult,” he adds.
For Kyle Dods from My Place Gourmet Group, the big challenge is switching to paying VAT: “We’re now in a position where we have to add VAT, which in some cases adds an additional R10 to our product. These price increases in turn affects our customers.”
It is mandatory for a person to register for VAT if the taxable supplies made or to be made is, in excess of R1 million in any consecutive twelve-month period.
The artisan entrepreneurship space is challenging and having a passion for good food isn’t enough – you also need to be ready for long, hard hours spent pursuing your dream.
The most successful artisan businesses succeed by finding a niche, creating a personality for the business and building great customer relationships. They have a well thought out strategy about how to grow and scale a business that is based on the values of handcrafted care and the personal touch.
What’s more, it’s important to look at how you will earn a healthy margin off goods that will be more expensive to make or source than the mass-produced alternatives. How do you balance quality and price to ensure profitability? How do you keep people coming back, even if you’re not the cheapest supplier on the block? Traditional business disciplines such as tight inventory management, market research, hard-hitting sales and good customer relationship management are all key to success.
Artisan entrepreneurs are thriving and delivering great service to their customers, but clearly, we could be doing more to help them grow. Like most small businesses, they would benefit from less tax and regulatory red tape, better access to finance and more support from bigger businesses.
That said, advances such as online software and services, cheaper transportation and growing interest in locally produced goods all bode well for the future of South Africa’s artisan entrepreneurs.
At Sage we started small and have grown beyond what seemed imaginable and take pride in our customers being able to do the same. South Africa’s artisan businesses are on the same trajectory – far beyond simply selling goods in neighbourhood shops and flea markets – they are small business heroes who are helping to grow our country’s economy.
Top Sectors For SMEs In 2019
“As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”
While the South African economy has been underperforming for a number of years, the first positive signs of turnaround started to become visible by the second quarter of 2018, and by the end of the third quarter, data supplied by Statistics South Africa showed that the economy had indeed grown by 2.2 percent, compared to the previous quarter. This uptick is expected to have a positive effect on business confidence in 2019.
This is according to Jeremy Lang, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), who says that certain business sectors have already seen an increase in opportunities for small businesses and start-ups.
“While these sectors will not be without challenges, the following four industries are likely to offer the best opportunities for small and medium enterprise (SME) owners to grow their enterprises in the coming year.”
The World Travel and Tourism report 2018, revealed that the direct contribution of the travel and tourism sector to South Africa’s GDP has been projected to rise from R136bn in 2016 to R197.9bn by 2028 – set to make up a total of 3.3 percent of the country’s total GDP, says Lang.
“Although this sector experienced some setbacks in 2018, such as the drought in the Western Cape and stricter visa regulations for children entering the country, both the water restrictions and visa regulations have been relaxed and the sector is once again poised for growth,” he says.
Statistics South Africa has credited this industry with being the biggest driver of growth in the country’s GDP, having expanded by 7.5 percent in September 2018, says Lang. “To bolster this, Government has made a concerted effort to stimulate small business growth in this area with initiatives such as the Black Industrialist Programme and the SA Automotive Masterplan.”
He adds that businesses in the manufacturing sphere could therefore likely see significant opportunities in the form of outsourcing contracts and new partnerships with large corporates.
“The debate around land expropriation has occupied most of the discussions surrounding the agricultural sector in 2018, with some questioning growth prospects of this sector. However, this industry has a lot of growth ahead of it, as demonstrated by its 6.5 percent growth over the last three months of 2018,” explains Lang.
“Further to this, the industry is also already taking significant advantage of seven climatic regions in South Africa, with the export of a wide variety of high quality fruit and vegetables increasing substantially,” he points out. The recent outbreak of foot and mouth disease that has resulted in the suspension of the country’s FMD-free status will however significantly impact meat exporters.
In terms of opportunities for SMEs, he says that these may most likely be found in the rural and underdeveloped regions, where the need for resources like efficient transport, state-of-the-art cold storage, better irrigation and private power generation will be key to making agriculture projects more productive and competitive in the export market.
Data and information technology
Connectivity and information technology infrastructure are both crucial to business and employment growth in South Africa, says Lang.
“With many municipalities and the Western Cape government committing to providing all of its residents with free data as part of a plan to expand public Wi-Fi network access, it is clear that this is also becoming a high priority on a state level.”
It has also been reported that South Africa is awaiting the arrival of three international data centres, and large players in the communications sphere, including Vodacom, Telkom and Vumatel, are making huge strides in drastically growing the country’s fibre optic backbone, he adds. “As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”
In conclusion, Lang says that as South Africa’s economic growth has started to turn around, business owners should keep their ears to the ground as 2019 is highly likely to be a year of opportunity.
Herman Mashaba To Talk On City Of Jo’burg Job Creation Initiative
Herman Mashaba to talk on City of Jo’burg job creation initiative at 2019 Business Day TV SME Summit.
Leading organisations at the SME Summit
SME Insurance Checklist For New Year
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers, advises SMEs to consider the following factors when reviewing their policies.
Business owners who are planning for the year ahead should not overlook the importance of reviewing their insurance policies to ensure they are adequately covered against insurable risks.
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers says, every year businesses face unique challenges ranging from credit and market risks, technological disruptions, compliance, operational and regulatory risks, amongst others. As a matter of precaution, insurance policies should at least be reviewed or updated once a year.
He advises SMEs to consider the following factors when reviewing their policies:
- Employee movements – if there are any employees who have left or joined the company, ensure that your policy is updated accordingly.
This type of cover normally depends on the role and contribution of the employee to the business. For instance, directors may be covered for Key Person Insurance and Directors & Officers Liability insurance.
- Protest Actions – this year is the national election year and leading up to elections we can expect to see an increase in the frequency and severity of protest actions, riots and strikes. Thus, it is essential to ensure that adequate special risks cover is in place from the South African Special Risks Insurance Association (SASRIA).
SASRIA provides cover to both individuals and businesses against special risks like civil commotion, public disorder, strikes, riots and terrorism at affordable premiums.
- Cyber risks – it is essential to communicate with your insurer or broker and find out if there are any new risks that your business should be protected against. Cyber incidents continue to be a major risk for businesses especially in the SME sector. Over the last couple of years there has been a major increase in the number of reported cyber incidences.
More businesses are now facing increased cyber threats due to their increased dependency on technology, relating to their internal and customer data being compromised by fraudsters. It is therefore essential to have some form of cyber risk insurance cover and/or enhancement of data security protocols.
- Regulatory changes – every year there are a number of regulatory changes that impact businesses directly or indirectly, which may result in fines and penalties for non-compliance.
- Natural catastrophes – the increase in the frequency and severity of extreme weather conditions, coupled with intensifying natural catastrophes will continue to have a significant impact on businesses.
Businesses should ensure they are adequately protected against these risks to avoid incurring sever financial losses.
- Business changes – should a business consider moving to a new location, purchasing new premises or venture into new business activities, these types of changes could have a major impact on its risks profile. As a result, the policy needs to be updated accordingly.
- New and Enhanced products – An innovative culture has taken over the insurance industry and ever so often we see the introduction of new products or the enhancement of existing products. Get in touch with you broker to advise you on any new products that might add value to your existing insurance portfolio.
“Reviewing your policy regularly gives you peace of mind knowing that you can focus on running your business effectively, without worrying about unforeseen risks,” concludes Maupa.
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