SMME BEE Development Conference 2008
The Association of SADC Chambers of Commerce and Industry (ASCCI) presented this conference for the third time this year. It has become a highlight of the small business calendar and feedback provided by those who attended in previous years suggests that the latest one was the most successful by far. Delegate numbers supported this assumption. The impressive main hall of the Grace Bible Church in Soweto was filled to capacity and high-powered speakers drawn from the church, politics and business treated delegates to a series of exciting presentations.
Having attended the event, we would rate it as the most practical small business event of the year. Unfortunately, although several speakers mentioned franchising as an aside, it was not the focal point of deliberations. This is a pity because as we shall point out later in this article, franchising could be the key that unlocks seemingly closed doors with relative ease.
Speaker after speaker elaborated on the hurdles budding entrepreneurs have to contend with and members of the audience nodded their agreement. We contend that carefully designed franchise structures, perhaps developed along the lines of Social Franchising, could help level the playing field. If asked, we’d be more than willing to make practical guidelines available.
Promising road ahead
Before we report on the proceedings in detail, a summary of our overall impressions will be useful. We were especially heartened to find that:-
- The people are pro-business
Everyone present at the event did not just give up a Saturday to find out more about either becoming an entrepreneur or expanding an existing business. They listened intently to speaker after speaker and their enthusiasm was palpable. This indicates a shift in mindset from prior years when South Africa was found wanting in the entrepreneurship stakes; it also bodes well for the future.
- The Church is pro-business
Pastor Mosa Sono who opened proceedings and led those present in prayer made it very clear that God is prepared to help those who are willing to help themselves. He reiterated that entrepreneurship is the way to go.
- Government structures are pro-business
- ANC Treasurer General Matthews Phosa who represented government and delivered the keynote address expressed the opinion that the future of our country depends on the development of a strong middle class. He stressed that it would be unrealistic to expect government or big business to create the number of jobs required to rectify social imbalances. According to him, only the small business sector can achieve that.
We found it reassuring to learn that the Treasurer General is an accomplished entrepreneur in his own right. This indicates to us that the interests of entrepreneurs enjoy solid representation at the highest level.
- Mr Devan Naicker, Deputy CEO: Strategy of the Services SETA, reiterated his SETAs willingness to support the development of small business. He explained the New Venture Creation Programme they present as well as a new initiative designed to help small businesses become BEE compliant.
- Academia is pro-business
In their presentations, Ezanne Swanepoel, CEO of the Global Business School of Entrepreneurship, Sipho Mseleku, CEO of the ASCCI and Prof Thami Mazwai, Head of the Centre of Small business Development, University of Johannesburg, made it abundantly clear that academia is aware of the role small business plays and committed to providing support.
- Our neighbours are pro-business
Both Mr Simon Phafane, President of the Lesotho Chamber of Commerce and Industry, and Mr Obert Sibanda, President of the Zimbabwe National Chamber of Commerce and Industry, conveyed good wishes and expressed the hope that cooperation between small business bodies throughout the region and their respective members would continue to go from strength to strength.
With so much goodwill around, we cannot help but win!
A highlight of the day was the launch of the Global SME Business Toolkit. This is a collection of short articles that deal with a variety of topics of interest to new and established entrepreneurs. The CD that forms part of the kit contains templates and other useful materials. This is truly a one-stop solution for many of the problems an entrepreneur is likely to come across.
Down to business
Members of the small business community are a funny bunch. They will listen intently to beautifully crafted speeches, especially if those who deliver them clearly speak from the heart. After a while, however, they tend to grow restless. In their minds, time is a limited commodity and they want to know in concrete terms what they can take away from the event. They were not disappointed on this score either.
Speaker after speaker alluded to South Africa as the land of opportunity. More specifically, they explained the many business opportunities that exist, just waiting to be exploited. The following are just some of the projects that were presented:
- FIFA 2010 World Cup
Tumi Dlamini, Head of Legacy at the 2010 Organising Committee, explained that while the committee had originally set itself a target of allocating 30% of procurement to BEE-compliant enterprises, they have exceeded that. The actual figure now stands at 42% and they are keen to grow it further!
In any event, business can’t just be had from the Organising Committee but also from FIFA and several other organisations that are involved in this massive event. Then there are the over 500 000 tourists that are expected to arrive.
Gauteng alone will host 28 matches, including the opening and closing events. In-between soccer matches, people need to be transported, fed, accommodated and entertained. They will also want to purchase souvenirs. This creates incredible opportunities for entrepreneurs prepared to plan ahead to ensure that they will be ready to benefit from the opportunity when the time comes.
- Supplies and services for the city of Tshwane
So keen is the City of Tshwane to build its database of BEE-compliant suppliers that they will be holding a workshop to attract new entrants. The workshop takes place on 6 November 2008. Attendees will learn what opportunities are available to SMEs and how they can access them.
- City of Soweto
Soweto could serve as a laboratory for the development of sustainable small businesses that are owned and operated by PDIs. Given its population numbers, it is obvious that this township offers massive untapped potential. However, according to Thami Mazwai of the Centre for Small Business Development at the UJ, research has shown that 76% of all monies spent by Sowetans leave the township. In other words, it is spent in formerly white areas see text below.
A worthwhile initiative
According to Thami Mazwai, the capital flight that is in evidence in Soweto triggers a brain flight people with skills leave Soweto to live where the money is. To address this, the Centre for Small Business Development offers an entrepreneurship course with a difference. It is tailored to the needs of specific business sectors and highly subsidised, but conditions apply.
Up to now, tailored programmes have been presented to groups of 20 owners of taxis, hair care salons, B&Bs, Taverners and NGOs. More are being developed. The attendance fee is R15 000 but applicants receive a 90% subsidy on condition that they complete the programme. Should they drop out, they have to pay the full amount.
This organisations capital expenditure budget (CAPEX) for the next five years is R350 billion; their annual operating budget (OPEX) is another R60 billion. Neither figure includes the cost of the refurbishing of mothballed turbines, nor does it fully reflect the fact that Eskom has to double its generating capacity by 2025.
It is clear that the potential is massive but what chance is there for a budding entrepreneur to access them? In a word: plenty! Take Eskom, for example: you don’t need to manufacture turbines to make it onto their list of accredited suppliers. They need lots of services and supplies including cleaning, catering and security.
The major banks are another example; in addition to the usual range of services that every large company needs, they require office furniture, equipment including note counters and, as one speaker pointed out, plenty of printing paper.
While the representatives of large companies pointed out that untold opportunities exist for small entrepreneurs to make their mark, they expressed one common concern. Many small suppliers tend to overextend themselves. They take on more work than they have the capacity to handle. As a result, they either miss delivery deadlines or fail to adhere to minimum quality standards, sometimes both. This is not the way to build sustainable business relationships.
Access to finance
Not surprisingly, many budding entrepreneurs cited lack of access to finance as an obstacle. Representatives of the various funding institutions dismissed this out of hand. They told delegates that while money is in plentiful supply, entrepreneurs who are capable of drafting a realistic business plan and able to convince sceptical funders that the money will be repaid, with interest, in full and on time are in short supply.
Funders are looking for the following five Cs:1
- Concept is the idea viable, does it have a clearly identified target market and does the promoter of the idea know how to access it?
- Character is the promoter of the idea a person of integrity? (An ITC listing is not automatically a negative it’s how the matter is handled that counts.)
- Capital the promoter must bring some own cash, otherwise, his/her commitment would be suspect.
- Collateral progressive bankers don’t lend based on collateral alone but they do draw comfort from its availability. In deserving cases, there are ways around it.
- Capacity can the promoter demonstrate that he/she has the skills and the necessary staying power to see the concept through?
Franchising can help
This is where we at Whichfranchise see a great opportunity for franchising.
- It is a little recognised fact that the spirit of Ubuntu2 is at the core of every bona fide franchise relationship. After all, no franchised network will be successful in the long term unless the majority of its franchisees are successful.
- The combination of the win/win scenario, brand awareness, skills transfer and initial and ongoing support make franchising the ideal tool for the harnessing of the entrepreneurial energy that is evident throughout Soweto and our land.
- The standing of a recognised franchisor’s brand would go a long way towards addressing corporate customers concerns regarding capacity and quality.
- Although franchisors will ordinarily not provide finance to franchisees, or guarantee loans granted by third parties, franchising creates the potential for a three-way partnership between the franchisor, the franchisee and the bank. This provides comfort to the bank and may reduce the need for own contribution and the provision of collateral.
Taking franchising into the townships
This is a massive topic, and one that requires much education at various levels. We at Whichfranchise believe that it needs to be debated until workable solutions have been found. We’d be happy to provide a platform for further debate. Email your ideas to email@example.com and we’ll take up the challenge.
1 Eric Parker’s Road Map for Business Success elaborates further on this concept.
2 Franchising in South Africa the real story explains the relationship between franchising and Ubuntu; it also charts the way forward.
Both books are published by Frontrunner Publishing and are available from good bookstores countrywide.