Transcript Siseko se-Afrika Enterprise Business Model

SMME as a Driver of Economic
Transformation in South Africa: Critical
Analysis of Strategies, Programmes
and Institutional Arrangements
Vuyo Mahlati
Africagrowth Conference, Cape Town
23 October 2008
TRANSFORMATION IMPERATIVE
“Our country requires an economy that can meet
the needs of all our economic citizens – our
people and their enterprises – in a sustainable
manner. This will only be possible if our
economy builds on the full potential of all
persons and communities across the length and
breadth of this country. Government’s objective
is to achieve this vision of an adaptive economy
characterised by growth, employment and equity
by 2014”.
Source: DTI - South Africa’s Economic Transformation: A Strategy for BroadBased Black Economic Empowerment
SMME DEFINITION
"small business" means a separate and distinct
business entity, including cooperative enterprises
and non-governmental organisations, managed by
one owner or more which, including its branches or
subsidiaries, if any, is predominantly carried on in any
sector or subsector of the economy mentioned in column
I of the Schedule and which can be classified as a
micro-, a very small, a small or a medium enterprise
by satisfying the criteria mentioned in columns 3, 4 and 5
of the Schedule opposite the smallest relevant size or
class as mentioned in column 2 of the Schedule; (vii)
Source: NO. 102 OF 1996: NATIONAL SMALL BUSINESS ACT, 1996
NATIONAL SMALL BUSINESS ACT, 1996
• Draws from 1995 White Paper on National Strategy on
the Development and Promotion of Small Business
in South Africa
• Main Problem - Primary objective (agency focused – not
small business strategy). According to act:
“To provide for the establishment of the National Small
Business Council and the Ntsika Enterprise Promotion
Agency; and to provide guidelines for organs of state in
order to promote small business in the Republic; and to
provide for matters incidental thereto”.
• 2004 Amendment Establishment of Small Enterprise
Development Agency
MAIN PROBLEM
• Absence of/Incoherence/Poor clarity and consensus on:
– Comprehensive Economic Policy or National Development Framework
– Micro-economic Policy
• Configuration of Institutional Mechanisms
–
–
–
–
–
–
Policy vs Implementation (National vs Province vs Local)
Public vs Private
Wholesale vs Retail
Finance vs Non-Finance Support
Generic vs Specialized (Sub-sector)
Developmental vs Commercial
• Fragmented Supply Side Measures (Within DTI, among sector
depts, Tiers of Gvt & Parastatals)
• SMME alignment with Industrial Strategy and Economic Structure
• Failure to foster Stratification and Graduation for targeted and
effective support
Integrated Strategy on the Promotion of
Entrepreneurship and Small Enterprises (2006)
“Strategy covers the entire continuum of needed
support from pre-start-up and start up assistance
measures to growing enterprises and
enterprises in distress”
• 3 Strategic Actions:
– Increase supply for financial and non-financial
services
– Creating demand for small enterprise products and
services
– Reduce Small Enterprise Regulatory Constraints
What is the Driving Imperative for SMME ?
Are SMMEs a vehicle or instrument for:
• Enterprise Development for Economic growth
• Survival and Employment Creation
• Economic Deracialization and Black Economic
Empowerment
• Poverty Relief ?
OR
SMMEs as an engine of economic growth and
development and a strategic lever/catalyst
for socio-economic transformation
Sloman Model
Source: Sloman J. (1992)
SMME AND COMPETITIVENESS
• Globalization of markets
• Globalization of capital investment
• Globalization of value chains
• Increasing knowledge and skill intensity of
competition
• Value migration to the service component of the
value chain
Source Porter 2007
STRATEGIC LEVERS
• Legislation (BBBEE, Preferential Procurement)
• Progressive Policies and Programmes for
increased access to:
– Skills Training (Technical and Business
Management)
– Finance
– Markets
– Land
– Water rights/access
– Product Innovation
BUSINESS PYRAMID
At the bottom of the pyramid businesses focus on survival as they struggle to make a decent profit
Private Limited Co’s
Public companies
Private Limited Co’s
Few CC’s, Partnerships
CC’s, Sole propriety,
Cooperatives
Unregistered business
00000
00000
00000000
0 0 00 0 0 0 0 0 0 0 0 0
0 00 00 00 00 00 00 0 0 00
000000000000000000
00000000000000000000000000
000000000000000000000000000000000
000000000000000000000000000000000000000
Source: Dreamplus
Big
small/
medium
Micro/
small
DFI mandates - focus areas
Tourism
TYPE OF USE
Housing
Infrastructure
Business Finance
Other
BUSINESS SIZE
Micro/Small
Medium
Large
Source: Deloitte 2006
RHLF
Retail
NDA
IDT
Manufacturing
NHFC
Mining
NTSIKA
NTSIKA/
SEDA
Housing
DBSA
DBSA
Agriculture
Land
bank
bank
SECTORS
KHULA
KHULA
Focus
IDC
Institution
Small
Micro
<100 Empl.
Medium
100%
Turnover R150000 <10 Employees
Corporate
Sector
TWO ECONOMIES OF SOUTH AFRICA TODAY
UPPER CLASS
Standard Bank
92% <R8000p.m.
Mainly White Males
First National Bank
ABSA
MIDDLE CLASS
78% <R3500p.m.
Nedbank
All Races
74% <R2500p.m.
Etc.
IDC
DBSA
Landbank
Khula
Etc.
LOWER MIDDLE CLASS
Mainly Black
Mainly Urban
No Employees
•Institutions/agencies:
serve primarily the welloff and employed
•Skills and HRD training
Clear career tracks from
secondary school to
management
•Business culture:
promoted by private
sector
48% <R800p.m.
POOR LOWER CLASS
Mainly African
Deregulated
Commercial
Lending
Industry
Mainly Rural
0%
•Legal instruments: well
developed and are fully
accessed by the
institutions
•Resource base: massive
available resources with
substantial backing from
the state
35% <R400p.m.
Survivalists
•Regulatory Environment:
well developed and
state supported
NGO
Financial
Initiatives
14% No income
POOREST OF THE POOR
Mainly African Female
Business Communities
Social
Responsibility
Social
Grants
Financial Services
•Regulatory
Environment: Hardly
exists
•Legal instruments:
Poorly developed and
inhibits development of
CBOs and NGOs
•Institutions/agencies:
Almost non-existent
•Skills and HRD training
No career opportunities
•Resource base: Very
poor and almost no
state backing
•Business culture: Nonexistent and ignored by
private sector
Source: WDB
Value Proposition
• Critical : Clarity on driving imperative drawn from a
Comprehensive Overarching National Development
Framework
• Coordinated Planning and Implementation
• Maximize the Procurement potential in both public
and private organizations
Action Steps
• Joint Visioning based on adequate assessment and
analysis of existing Initiatives and Gaps
• Segmentation and Stratification of Interventions to suit
identified opportunities and challenges
• Defined and monitored outcomes and benefits
A MODEL FOR ENTREPRENEURSHIP SUPPORT
Prof Nieman
Entrepreneurial orientation
Culture
Role models
Education
Work
experience Personal orientation
Enterprise culture
Supportive Environment
Infrastructure Finance
Laws
Training
Policy framework
Co-operative Environment
Institutions which are actively
involved and assist with new
org development
Entry of entrepreneurs
+
Acquired abilities
Inherent abilities
Products / Services
Results of entrepreneurship
 Economic growth occurs
 Incomes increase
 Tax base is enlarged by a greater
number of new firms
 Living standards improve
 Technological development occurs
 Investment opportunities arise
 Job opportunities arise
Prof Nieman
Group portfolio
Postbank
POST OFFICE SAVINGS BANK
Customer value delivery system
Source: South African Post Office
South African Post Office SMME Opportunity
Diverse Sub-sectors – Business Unit and Value Chain Based that include:
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Letterbags
Refurbishment of mini containers
Refurbishment of roll containers
Refurbishment of locks
Signage
Post boxes
Construction and related trades
Cleaning
Security services
Catering
IT roll –out and maintenance
Stationery
IT Consumables
Recruitment
Clothing, textile and interior décor
Events management
Value-adding service industry
SAPO SMME DEVELOPMENT PROGRAMME
Manufacturing Support 2007-2011
Traditional suppliers
Source: SAPO
Products / Services
SMME
Development
Participants
BEE
Status
Business to Date
Letter bags
100%
R 3,410,571.90
Refurbishment of Mini
Containers
100%
R 0.00
Refurbishment of Roll
Containers
100%
R 1,343,994.04
Operator chairs
100%
R 0.00
Post Box Locks
100%
R 3,172,058.30
Refurbishment of locks
100%
R 3,172,058.30
Post Box Locks
100%
R 3,172,058.30
Corporate Clothing
100%
R 3,918,147.35
Signage
100%
R 50,150.00
Thank You!
[email protected]
For SAPO
Opportunities
Call 012 401 7000
[email protected]
The critical link for competitive and
equitable economic performance
011 603 2500