ESD Archives - iFundi

by Alex Kinmont

South Africa’s unemployment crisis is showing no signs of improvement. The unemployment rate was most recently recorded at 29%, the worst it’s been in over a decade. According to the National Development Plan, Small, Medium and Micro Enterprises might just be the solution, as globally they tend to employ 60-70% of the population.

South Africa’s SMEs are failing to do this, providing jobs for only 30% of South Africans. Where are we going wrong and how can we fix it? At our September Community of Experts, we discussed the current state of South Africa’s Small, Medium and Micro-sized Enterprises sector and how we can support it.

Workshop speakers were divided into two panels, starting with two seasoned B-BBEE and Enterprise Development specialists, followed by three up and coming entrepreneurs operating township retail, freelancing services and commercial farming enterprises.

Dzivhululwani Mudau and Garry Whitby – both with big four consulting backgrounds – opened the workshop with expert insights into the SMME development and B-BBEE environment.

Mudau is an Enterprise and Supplier Development professional at Accenture with extensive experience in the transformation space. Whitby is a private sector and livelihood development expert with over 40 years of experience in international development, including SME consulting, in Sub-Saharan Africa and South East Asia.

As a PhD scholar researching the effects of B-BBEE on business effectiveness, Mudau provided an overview of the B-BBEE legislative codes around Enterprise Development and emphasised the importance of changing the mindset of companies from a tick-box mentality to a focus on authentically striving for change. He defined Enterprise Development as working with a company or supplier on a one to one basis to improve quality, performance and sustainability. He shared best practices for corporates to consider in developing their enterprise and supplier development policies. These include:

Developing policy that outlines the financial and non-financial (including sustainable development) criteria that will be used to evaluate suppliers and the conduct that will be expected from them;
Reaching agreement on the governance of Enterprise and Supplier Development (ensure proper resourcing);
Developing a preferential procurement policy that outlines clear objectives and the minimum BBBEE criteria that suppliers must comply with;
Developing an Enterprise and Supplier Development strategy and measurable implementation plan;
Setting aside certain commodities for ESD beneficiaries.

Whitby, an independent enterprise development and livelihoods consultant with over 40 years global experience, expanded on his integrated model of required inputs to support enterprise development. These included five fundamental enterprise skills competency pillars; access to key enabling business support and development services; and a stable and conducive political and policy environment. Whitby, who was one of the pioneers of the Challenge Fund model, noted the importance of involvement of the private sector – especially business associations – in supporting business development financially, through lobbying government and in provision of business development services.

The Entrepreneurs panel opened with Oscar Monama, Chief Operations Officer and Co-Founder of Vuleka, a grassroots economic development initiative. Vuleka is an online platform which facilitates the buying and selling of stock from large corporates and small-scale manufacturers to township-based businesses.

After a decade’s experience in the FMCG market, Monama recognised the enormous potential of the township economy in South Africa. Through Vuleka, he and co-founder, Brian Makwaiba, have found a way to combine tech with grassroots business in a way which is actively building the South African economy. Three years ago they were making their deliveries to their network of township retail outlets with a Mazda 2. Today they have a warehouse with three trucks.

The next entrepreneur to present was Scelo Makhathini, a Chartered Accountant who left a lucrative career in investment banking to follow his passion for entrepreneurship. Makhathini is the Chief Executive Office and co-founder of freelance talent platform, LinkdPro. This online talent matching service was founded based on his experience within the financial services industry, where there was an ongoing need for specific skills sets on a temporary basis. It is also founded on the growing trend towards the gig economy.

As a beneficiary of a corporate enterprise accelerator programme, Makhathini emphasised the importance of ESD programmes in how they can support entrepreneurs who will in turn provide jobs for our unemployed. LinkdPro now serves blue chip clients locally and globally and is poised for growth and expansion.

Our final speaker and entrepreneur was Sonto Mujakachi from Treasure Trove Farms in North West Province. After following an illustrious international academic and corporate career, Mujakachi decided she wanted to do more for the country and food security became her calling. The name Treasure Trove came through delving into her family’s long tradition as commercial farmers and realising its significance and potential. In the last three years, Treasure Trove farms has become a 7 day operation and is one of the top suppliers of fresh produce to brand name retailers such as Pick n Pay, Shoprite Checkers and Woolworths.

Mujakachi pointed out the difficulties of being an entrepreneur, and explained the risks she took when she used her own cash to finance the start of her business. She shared about a storm that hit her farm in its first year and wiped out all her crops and how this ordeal taught her to be resilient and not give up. Her key pointers to aspiring entrepreneurs are to focus on integrity and quality. Today, Treasure Trove farm is preparing to enter the global export environment.

Enterprise and Supplier Development can have huge impact on the South African economy. Our SMMEs currently form around 98% of enterprises, yet they only employ less than 30% of the population. Globally, SMMEs employ between 60 and 70% of the population, illustrating their enormous potential.

If ESD programmes can build up our SMMEs to meet global standards, such as the examples of the entrepreneurs profiled, they can have huge impact on the economy. As Mudau and Whitby point out, the focus areas should be on market access and funding and the integration of technology. If corporates focus more on supporting enterprise development initiatives, not only will they meet their B-BBEE requirements but they will be contributing towards building up small enterprises and the economy. With some training and some mentoring, Small, Medium and Mico-sized Enteprises can fulfil their potential and provide jobs to more people.

For a copy of the presentation, click here.

For more information on our New Venture Creation qualification, click here.

by Alex Kinmont

The National Development Plan is government’s answer to South Africa’s social and economic crises. The Plan aims to eliminate poverty by the year 2030 “by drawing on the energies of its people, growing an inclusive economy, building capabilities, enhancing the capacity of the state, and promoting leadership and partnerships throughout society.”

Small, Medium and Micro Enterprises (SMMEs) are a major component of this plan. Global trends show SMMEs as forming the vast majority of formal businesses, and employing between 60 and 70% of the population. Where South Africa’s SMMEs form 98,5% of enterprises, they only employ less than 30% of the population.

South Africa’s unemployment rate has most recently been recorded at 29%, the highest it’s been since 2008.

So how do we better use the globally-recognised potential of SMMEs to improve our employment?

The first step is to better understand South African SMMEs in terms of current statistics.

Truthfully, we know very little about Small, Medium and Micro Enterprises in South Africa. Our reports on SMMEs differ drastically:

The Small Enterprise Development Agency (SEDA) is an agency within the government’s Small Business Development department and their 2018 report stated an estimate of between 2.3 and 2.5 million SMMEs in South Africa.

A year later, the Small Business Institute, a non-profit organisation and member of Business Unity South Africa (BUSA), estimated only 250 000 SMMEs.

Either South Africa lost over 2 million SMMEs in a year, or the numbers were wrong.

Regardless of which institute has the right estimate, it is enough to show how little South Africa knows about its small businesses.

If we don’t even know basic statistics about our SMMEs, how can we hope to be effective in nurturing them enough to employ more of the population?

Over half of South Africa’s unemployed are youth. With their unemployment rate sitting at 40%, it is just about double the rate of adults.

Why are our youth unemployed? Education specialist Nick Spaull believes the problem to be lying in primary school education where the reading and mathematics levels are far below 50%. If we are not giving our youth a decent foundation in basic skills, how can we expect them to cope in any working environment?

Part of the National Development Plan focuses on the younger generation, taking on a “youth lens”. Some of its objectives include open access to two years of early childhood development, boosting teacher training, literacy and mathematics levels above 50% and overall improvement of the school system.

The first step towards improving the lives of South Africans is to improve their education, giving them a stronger foundation from which to search for jobs. From here, we need to improve job opportunity, something which SMMEs have significant potential for.

Half of South Africa’s small enterprises fail within two years of starting up, due to lack of finance and “the inability and inexperience of their owners,” says the former Head of Small Enterprises at Standard Bank, Ravi Govender.

South African government and large corporates need to invest in small businesses, focusing on training and mentoring. If small enterprises are failing because of a lack of finance and guidance, then there is hope if those in positions of power take a stand.

If we concentrate on training and funding small businesses, then these businesses can fulfill their potential in providing jobs.

Where our SMMEs are currently employing only 30% of people, if we meet the global standard in terms of our SMMEs then these small business will double their job creation, making way for a rise in employment.

As ambitious as the NDP may be, SMMEs in South Africa have the potential to change our economic landscape. We need to understand them better. If we use our positions of influence to fund and train our country’s small businesses, then our SMMEs will succeed, thus employing more people, reducing the unemployment rate and providing a future for our youth.

For more information on our New Venture qualification, read here.

ESD

Experts and Entrepreneurs on Enterprise Supplier Development

Why SMMEs are so Important in South Africa, but Need Work