PRESENTATION : SA SMME CONFERENCE

THURSDAY, 26 OCTOBER 2006

BIRCHWOOD HOTEL

BENONI

National & Provincial Priorities

National Goal:• Halving poverty and unemployment by 2014

Provincial Priorities:• Enabling faster economic growth and job creation• Fighting poverty & building strong, sustainable

communities• Developing healthy, skilled and productive people

Fundamental Assumptions

• Entrepreneurs create and build the future• They can be found in every walk of life• A few entrepreneurs can make a difference; but when

there are many, a region or community simply takes off• Most have become entrepreneurs in spite of the system

and not because of it

Defining the Entrepreneur

• Joseph Schumpeter (1934) describes entrepreneurs as “responsible for the change of the economy using new technologies or upgrading an old one”.

• Peter Drucker (1979), enlarge the definition and focus it on opportunity. Endeavor is not just about creating a enterprise, but doing it allied to a real opportunity.

• Louis Jacques Filion (1986), define entrepreneurs as being the kind of people that conceive, develop and realize visions.

Market Challenge

1. Why do people not start businesses?

What are the barriers?

• Fear of taking risk• Educational limitations• Apartheid legacy• Cultural elements

Market Challenge

2. Why do businesses fail?• Access to capital • Under capitalisation• Poor management• Poor record keeping• Access to markets• Over estimation of market• Quality of people

Market Challenge

3. How do we foster improvement?(grease the wheels of enterprise)

• Info and advice• Mentorship• Training• Facilitation• Incentives• Finance• Affirmative procurement

ASGI-SA Key Constraints

• Barriers to entry & competition in sectors of the economy• Regulatory environment and burden on SMMEs

Addressed through:• Encouraging establishment, growth & sustainability of

SMMEs• Procurement quotas for SMMEs• Making finance & other opportunities accessible to

SMMEs

ENTREPRENEURS

ENTREPRENEURSWHO HAVE

TO BE PUSHED

ENTREPRENEURS WHO RESPOND TO SUPPORT AND HELP

ENTREPRENEURS WHO JUST

“GET ON WITH IT

THE ENTREPRENEUR AXIS---------------------------------------------------------------------------------------------------------------ENTREPRENEURIAL STRONG ONTALENT LIES BURIED ENTREPRENEUR

TEMPERAMENTCHARACTER THEMES

THE SUPPORT INFRASTRUCTURE

PEOPLE IDEAS

SECTOR Education and TrainingResearch and Development Property Finance

Business Support

Community Development

FACILITY School; Industry;Business incubator;

Seed and venture

Sub-contractors Housing;

College; university; innovation centre capital labour pool Schools;Unversity; and garage science, Hospitals;

Training facility; technology Recreation;Entrepreneur School and business Transport;

parks Telecoms

ACTIVITYCourses and Programmes

Technology transfer

Premises and Support Equity

Training; advise and networking

Amenity provision

EXISTING ENTERPRISES

Reasons for Business Failure

Poor

Management

of Financial

Activities 34%

Labour

Problems 6%

Staffi ng

Problems 9%Sales &

Marketing

Problems 11%

Poor

Bookkeeping

& Records

12%

Inflation &

Economic

Conditions

12%

Lack of

Management

Competence

16%

Non-Financial Support Interventions

• Financial Management Support– Accounting/bookkeeping– Setting up a debtors/creditors system– Setting up a stock control system

• Technical Support– Assistance with IT hardware and software– Product testing & development– Feasibility Stidies– ISO Accreditation– Factory Layout

• HRD Support– Assistance with setting up HR policy & systems– Setting up a payroll system

Non-Financial Support Interventions

• Operational Support– Business administration– Mentorship & coaching– Assistance improving turnover

• Planning Support– Business Plan– Productivity Improvement Plan

– Business Turnaround Plan

• Legal Support– Joint venture agreements– Purchase agreements

Financial Support

To provide financial support to SMMEs efficiently and timeously including but not limited to the following:-

- Guarantees

- Bridging Finance

- Debtors Factoring

- Re-Financing

- To facilitate access to capital from financial institutions and other institutions such as Khula, NEF, Umsobomvu etc.

- Incentive

General Finance Programme

Pilot (R50 000 – R2 000 000)

To provide both long and short term debt finance for the following:

- Start-ups

- Expansions

- Acquisition of assets

- Working capital

Leverage Programmes

TO FORM STRATEGIC PARTNERSHIPS

- Joint Funds with major banks

- Guarantee Schemes

INVESTMENT CRITERIA

GEP GENERAL FUND GEP GUARANTEE/ JOINT FUND

Ownership SA Citizen SA Citizen

Business location Gauteng Gauteng

Finance Required

- Minimum- Maximum

R 50, 000

R 2, 000, 000

R 20 000

R 1, 000, 000

Industry Focus All sectors (preference will be given to industry targeted through GDS Strategy

Tenders/ Contracts

Minimum Requirements -Business Plan-Projected Financial Statements-Economic viability-Entrepreneurial involvement-Black Owned/Managed-Demonstrate commitment

Criteria to be determined by concerned parties

Funding Questions

Question Answer

What is the money needed for? The answer yields the loan amount needed.

Is it a short term or long-term need?

The answer determines the length of the loan.

What will you give up for the capital?

The answer determines what sort of requirements the owner must adhere to in order to get the money.

What rate of return can be expected from the success of the business?

The answer indicates how much interest on a loan or return on investment a business can afford to pay.

FUNDS

TIME

Gestation

Prototype

Roll-outInception

Growth

Expansion

Maturity

Fixed Expenses

Variable ExpensesStartup

Collateral

Debt

FoundersAngel InvestorsVenture CapitalGovernment Agencies

Equity

Breakeven

Business Plan which addresses:1. Technical Risk2. Market Risk3. Growth Risk4. Financial Risk5. Management RiskSkills Development Business Services

Business Development Life Cycle

Vision• Africa’s leading enterprise development and business support

agency.

Mission• To enable entrepreneurs.

Values• Professional• Accountable• Focused• Accessible

Vision, Mission & Values

To facilitate increased SMME participation in mainstream economy and

their contribution to economic growth, development and employment in Gauteng

Our Goal

Provide efficient and timely financial support to develop SMME’s

Provide efficient and timely business development support to SMME’s to increase professionalism of SMME’s

Contribute to the creation of an enabling environment for SMME growth and sustainability

Identify business opportunities, enhance business facilitation and business partnerships

Facilitate increased SMME participation, including women, youth and people with disabilities in the province’s growth sectors, and GPG’s priority socio-economic development projects

Ensure efficient and effective management of GEP

Our Strategic Priorities

Thank you