OBSTACLES ENCOUNTERED BY SMALL ENTERPRISES BOTH LOCALLY AND INTERNATIONALLY.PRESENTED BY

SHAUN GOVENDERCEO THE BUSINESS PLACE

SERIOUS ENTERPRISE DEVELOPMENT WORKSHOP

28 SEPTEMBER 2011

Overview

OVERVIEW

Small enterprises both locally and internationally experience many similar challenges and some very different ones

These shape their structure, modus operandi, rate of success, reason for existence, size and creation of jobs

They vary from legislative to access to funding, government/political involvement, community requirements, availability/lack of skills, resources, infrastructure and markets

Comparisons can be made with SA and some Latin American countries, which become even more interesting when seen against first-world nations and how such obstacles are being resolved

Role of entrepreneurs

ROLE OF ENTREPRENEURS

Entrepreneurs create jobs and are critical to the well-being of society

They drive and shape innovation

They contribute to productivity

They are a catalyst of economic growth and competitiveness

Contribution of entrepreneurs to GDP

CONTRIBUTION OF ENTREPRENEURS TO GDP

Brazil – SMME approx 80% to GDP / job market

US – SMME sector approx 85% to GDP / job market

Sweden – SMME sector approx 85% to GDP / job market

South Africa:

Formal SMME sector less than 30% to GDP / job market

Informal SMME sector…

Why the entrepreneurial route

WHY THE ENTREPRENEURIAL ROUTE

Necessity driven – survivors rather than entrepreneurs

Opportunity driven.

Unsuccessful job seekers

Controllers of own destiny

Freedom and happiness

Common challenges for SMMEs

COMMON CHALLENGES FOR SMMEs

Fear of failure

Lack of access

Low skills levels

Common challenges…fear of failure

COMMON CHALLENGES…FEAR OF FAILURE

70 % feel there are great opportunities for entrepreneurs Entrepreneurs are greatly respected and hugely admired It is great to be an entrepreneur Good career choice

Less than 30% admit they would actual start a business Aversion to risk Regulatory environment

Government policy Employment protection Bancruptcy laws

Common challenges…lack of access

COMMON CHALLENGES…LACK OF ACCESS

Opportunities

SMMEs lack of credibility

Perception of inferior quality and sub-standard service

Tender processes and procurement policies not aligned to SMMEs

Pricing not competitive and lacks economy of scale

Networks limited

Common challenges…lack of access

COMMON CHALLENGES…LACK OF ACCESS…CTD

Funding

Banking system risk-averse and non-developmental

ITC listing

Surety

Lack of credible Business Plans

DFI – processes too lengthy and bureaucratic

Common challenges…low skills levels

COMMON CHALLENGES…LOW SKILLS LEVELS

Lack skills Basic life skills

Attitude Value system Cultural expectations

Artisan training Effective business training and knowledge Financial literacy

Lack educationLack role models and mentors

Drawing on international models…Barcelona Activa

DRAWING ON INTERNATIONAL MODELS…BARCELONA ACTIVA

Created 25 years ago in 1986

Municipal entity

Barcelona Activa started as a business incubator, housing 16 projects

Today a local and international reference in the support of entrepreneurs and the creation of employment

Drawing on international models…Barcelona Activa

DRAWING ON INTERNATIONAL MODELS…BARCELONA ACTIVA…CTD

Participants

Contracts to 1 000 unemployed to learn a trade while working

100 000 visitors per annum

Coaching to more than 1 000 new projects a year

Nurturing of 115 companies through the business incubators

30 000 participants through the employment centre

50 000 participants in technology programmes

Barcelona Activa - key focus areas

BARCELONA ACTIVA…KEY FOCUS AREASEntrepreneurship

To spread entrepreneurship and coach entrepreneurs to take the next step from the business idea to the creation of their own business

Businesses To facilitate the future of recently created businesses by generating co-

operation networks and contributing to the improvement of their competitivenes

Human capital To increase the professional opportunities that accompany emerging

economic sectors, new work cultures and new occupations

Barcelona Activa - key focus areas ctd…

BARCELONA ACTIVA… KEY FOCUS AREAS…CTDEmployment

To adapt the professional profiles of the people looking for work or wanting to improve their occupation, and to foster labour inclusion of those collectives with greatest difficulties, by responding to the needs of the companies

Cibernarium Collaboration project between EU and Latin America co-ordinated by City of

Barcelona

To develop electronic services, the use of Internet and the information society skills of citizens

To diminish the digital divide between citizens

Innovation To make innovation the engine for generating initiatives and talent in

Barcelona

Barcelona Activa - key focus areas ctd…

STRUCTURE OF SMALL BUSINESS ENVIRONMENT IN SA

Challenges in the small business developmental environment in South Africa

CHALLENGES IN THE SMALL BUSINESS DEVELOPMENTAL ENVIRONMENT IN SA

Little/no consolidation of small business development services in SA

Few rural or peri-urban service-provider sites

No clarity in the mind of the client on the services available

Little or no tracking of client progression through services

Institution reporting often on outputs rather than outcomes

No dovetailing of services in the system

Lack of cohesion of services resulting in loss of benefit to the client

no shared information + lack of collaboration = inefficiency x lack of strategic alignment

Breakdown of entrepreneurial organisations in SA

BREAKDOWN OF ENTREPRENEURIAL ORGANISATIONS IN SA

The Business Place stats

Sole proprietor – 45%

Close Corporation – being phased out - 40 %

PTYs 3%

Partnerships – 2%

Co-operatives – 10%

Official stats…

Latest trends in emerging economies…growth of co-operatives

LATEST TRENDS IN EMERGING ECONOMIES…GROWTH OF CO-OPERATIVES

India

Brazil

South Africa

Challenges with co-operatives in South Africa

CHALLENGES OF CO-OPERATIVES IN SA

Literacy level among members

Financial

Purchasing power

Pricing

Profit sharing

Personal income vs business income

Working capital

Challenges with co-operatives in South Africa

CHALLENGES OF CO-OPERATIVES IN SA…CTD

Marketing

HR systems

Guidelines on roles and responsibilites

HR policies and procedures

Operational processes

Interventions for small businesses in South Africa

B-BBEE codes…ED

B-BBEE codes…ED

3% of NPAT towards Enterprise Development

Trend in SA

Money available vs money really spent

Recommendations

RECOMMENDATIONS

Funding

Corporate SA

Policy

Entrepreneurs

Eco-system

Skills and training

Recommendations

CASE STUDY…

Making businesses procurement ready

presented by

Shawn Theunissen

Head of Corporate Social Responsibility for Growthpoint Properties and founder of Property Point

Recommendations

ENTERPRISE DEVELOPMENT

New entrants into the market economy

Minimisation of the divide between informal and formal economy

Stimulation of economic growth

Procurement opportunities

Job creation

Recommendations

INFORMAL BUSINESS NEEDS

Finance MarketingCapacity buildingOpportunities

Recommendations

RESEARCH FINDINGS INFORMAL SECTOR

Compliance Legislative Technical

Business Structures Financial Management Human resources Business development Marketing Growth strategy

Personal development

Recommendations

FORMAL ECONOMY…BARRIERS TO ENTRY

Compliance

Stringent procurement requirements

Relationship and reputation

High risk

Recommendations

Recommendations

IMPACT

Number of interventions 80

Number of SMMEs attending 1 290

Number of jobs created 216

Value of procurement contracts R24 719 093.00

Questions…

QUESTIONS AND DISCUSSION

Shaun Govender - CEO The Business Place

www.thebusinessplace.co.za

Shawn Theunissen - Head of Corporate Social Responsibility for Growthpoint Properties and founder of Property Point

www.growthpoint.co.za

your gateway to entrepreneurship