Tuesday, December 4, 2012

SMEs - lack of growth part of a bigger problem?

I recently viewed a video that was being circulated on email. It showed Gareth Cliff asking questions of a music talent show hopeful. He asked the fellow what he did, and the hopeful essentially described himself as running a small spaza store. Gareth then said "Oh, so you are a vendor" to which the hopeful replied "No, I am a Zulu". While the video was being circulated as a source of amusement, I believe it underlines the serious divisions within our country.

How often do you hear people say I am a South African. Almost never. We are black, white, coloured Indian, Jew, Greek, English, Afrikaans, Zulu, Xhosa, Muslim, Hindu, whatever, but never South African.

In the USA they are Americans even when it is clear from their accents that they have only been there a short while. In Australia the same, In fact almost everywhere it is the same. But not here in South Africa.  When last did you hear a Zimbabwean say they are Shona. 

A Zimbabwean student once said to me, "Before I came to South Africa I was just a human being. Now I am a black person who is subjected to the worst racial treatment possible, from South African black people. You South Africans are not nice people." What an indictment of our society from a 21 year girl .

Until we see ourselves as a single nation we will continue to expend  energy on stupid and unnecessary divisions which add no value to our country whatsoever. Instead of learning and working together, and building strong country bonds between countrymen, we instead focus on dividing and ruling, encouraged by a government that claims to be a non-racial government.

It is time we put paid to this political manipulation, as it only benefits a small minority, and not our country. Then maybe we would have greater efficiency in businesses, less worker hostility to capitalism, and great growth in our country, which means our SMEs would be able to grow too.

Sunday, September 16, 2012

SMEs - marking time!

I attended the conference in Bloemfontein. What a waste of time and effort. The losers - all the black SME owners that attended.

As usual the organisers were more interested in reducing the speaking time of the white speakers and increasing the number of black speakers. Content and the quality thereof was irrelevant!!

In a country where it is an acknowledged fact that the Nationalist government actively conspired to provide inferior education to black people, that the ANC government continue to try and exclude whites from the process of sharing knowledge and skills is just not understandable. The whites in this country are not all racists, and there are many (the bulk) who want to make a difference because they want to and have the skills and expertise to do so. They also understand that we all have a shared destiny, and that they therefore need to make a contribution..

I have no illusion that all white "experts" are great, nor that all black "experts" are not, but the racism was just so blatant.

Many of the speakers were government lackeys who simply trotted out the same old lies, myths and promises. This was not my opinion, but that of some of the more experienced black entrepreneurs at the conference.

It is time that black SME owners started demanding quality speakers with tangible offerings irrespective of race, as opposed to this consistently poor bunch of uneducated, non-expert, government lackey, lying, promising, never delivering bunch they get now.A free lunch and a t-shirt will maybe buy votes, but are unlikely to help the SME owner progress.

SME owners need good and useful information and they need it from the best, not from racially profiled non-experts. Start to demand the best or remain nowhere in the greater economic scheme of things. Nowhere in the world have government lackeys made a useful and significant contribution to SME development.


Sunday, July 22, 2012

SMEs - South Africa marking time?

SMEs are once again in the background. Very little new is going on which is new. There is a SME conference in Bloemfontein 26 and 27 July. Contact the Bloemfontein Chamber of Commerce for details.

The conference appears to be different to the run of the mill, so here's hoping it is.

Another finance related conference will take place in November with the KZN Treasury the possible sponsor. This too should be an unusual conference. I will provide more info as time progresses.

New info will be advised as it becomes available.

Sunday, July 1, 2012

SMEs - what SMEs need to do

SMEs are desperately in need of help and protection - from themselves. While it is easy to sit back and criticise government, especially when they make it so easy to do so, but surely we have responsibilities as well.

How many SMEs take advantage of government efforts to assist business?  How many SMEs complain in writing to government about what is wrong? How many SMEs have identified their weaknesses? Do you know what your weaknesses are?

The fact is that every business has these components:
1. Administration
2. Finance
3. Marketing (excluding sales)
4. Sales
5. Technical skills

The first three can all be outsourced to an external party such as an accountant or a consultant. However, the process of selling and technical skills are the two components you cannot outsource. These the owner of the business has to do themselves or employ people to do it. However, especially in a smaller business, this increases the risk of failure if staff resign. Furthermore early stage businesses can sometimes not afford these employees, so the owner has to do them.

But the admin, finance and marketing are also critically important, and outsourcing should be seen as a temporary status. It is imperative that business owners gain at least an understanding of these areas of expertise, such that they can interpret and make decisions upon the information provided by the accountant or consultant. Would you like to drive a car at speed with a blindfold on, and some one telling you when to turn and when to brake. Unlikely that you will enjoy the experience!

So the contribution SMEs can make is to improve their skills, as well as those of their staff. I am always reminded of the story and the CEO who was big on staff training. At a meeting with fellow CEOs in his industry, one of his peers mentioned the fact that they loved the fact that he trained people so well as they helped the industry to find good people. They then asked him why trained when he knew they might leave. His response was that if he did not train them, they might stay. Think about it!!

So in conclusion, the best thing SME owners can do is to realise their limitations and then ensure they reduce these by gaining sufficient knowledge to at least understand things, even if they are unable to do them.

Monday, June 4, 2012

SMEs - a South African SME wish list

SMEs in South Africa are expected to deliver a lot by government. This blog looks at what SMEs would like, and in the next blog I will look at what SMEs need to do to make it work. SMEs would like to see a simple national licencing system. There would be no fees. There would simply be a national database of businesses. You can link into a licencing website and register yourself and print out your licence. Total time 5 minutes. If you have no Internet access, you can go to any government office any where and they will register you and print out a licence. Why? Well then we can find out how many other signwriters there in in the area. It would help with planning by government. It would help entrepreneurs to identify opportunities. It would stop over-trading within certain sectors. There would be a single registration at SARS or CIPRO which would get your business registered for everything related to government. Total time 5 minutes and print our all your own registrations, including SARS, SDL, UIF, PAYE, VAT, Exporter, Importer and anything else we need to register for. Make the statistics on imports available on a website that a normal human being can operate. It would allow for a reduction in the trade deficit as entrepreneurs identified manufacturing opportunities by being able to see the products being imported and at what price. You can do this in the USA, by port and airport. Training and mentorship coupons should be available on registering of a business. You print them out and take them to a service provider OF YOUR CHOICE to redeem them. Yes there will be people who abuse the system. But you only ever get one set of coupons linked to your ID, so it does not matter how many businesses you establish. A whole lot more people will take advantage than abuse the system. It will also get rid of institutions that add little to no value now, and that simply consume money without any value add such as the NYDA, to name but one of many more. It will be a whole lot cheaper and will have a greater efficacy. I get so many black entrepreneurs who refuse to go to government offices because of the poor quality of service and the poor customer service ethic. With time, by analysing the trainers and mentors who are redeeming their vouchers, government will quickly be able to identify the good ones and dicey ones. Let SARS do the redemption and ensure payment is done within 7 days, so that they have no reason to cheat government. A national SME chamber. Government needs to see this SME chamber established. They must fund it for 5 years to get if off the ground. BUSA, SACCI, AHI and all the others have no real SME focus. No matter what they claim. Get a few people together and thrash out a starting point, then let it happen. It is important. Make it clear that this is the last chance for SMEs to do their own thing. Kick start the SME Council which was established in law to advise the President. For once leave out the politics and the politically aligned academics. Bring on board strong SME owners, strong SME academics, outspoken people on the SME topic. Get rid of political yes men who add no value, and get this committee up and running properly for once and for all. There is a reason we are making no progress in matters entrepreneurial. A key component of this committee must be advising the President on matters relating to entrepreneurial education, where the country is so bad that it is scary. I know just the man to run this successfully, and no it is not me, nor is it any of the other people currently involved in chambers of any kind. Finally, take every law, and do a complete impact assessment on it, purely in the context of the impact on SMEs. Unintentional consequences of many South African laws have to be sorted out as a matter of urgency. A long list of these issues is already available.

Sunday, May 27, 2012

SMEs - chambers of commerce in South Africa

In respect of SMEs, the chamber of commerce situation in South Africa is interesting. There were four original Chambers of Commerce ion South Africa. South African Chamber of Commerce and Industries (SACCI formerly SACOB),AHI, NAFCOC, and FABCOS. While none of them ever limited membership to any particular race or cultural group, SACCI was always perceived to represent the English white businesses, AHI the Afrikaans white businesses, and NAFCOC and FABCOS black businesses. Today SACCI and AHI actively seek membership from all race groups, while NAFCOC and FABCOS tend to only attract black members. Government attempted to force a merger of these bodies, under the BUSA/CHAMSA umbrella, and failed dismally. BUSA still exists but it has little to no interest in SMEs. The national South African Chamber of Commerce & Industries does nothing for SMEs and they have no interest therein at all. However, their constituent members, the local Chamber of Commerce, are generally comprised of 70+% SMEs. A number of these such as Pietermaritzburg, Durban, Bloemfontein among others do fantastic work for SMEs. However, they have experienced a large decline in membership, I would imagine due to retirement and emigration. They are the local representatives of the IP rights for the name Chamber of Commerce, which is an internationally protected trademark as I recall. The national Afrikaanse Handels Instituut is very small, and generally their members are also members of the local Chamber of Commerce, and tend to be more of a cultural organisation for Afrikaans business people.Their membership numbers are very small, and they have much fewer members than the Chamber of Commerce's. Another Chamber of Commerce is Minara, which targets Muslim businesses, and was only established in 2000. Then there is a plethora of new chambers of all of whom claim membership in the thousands. It is not clear what real value they add, and whether they really do have the membership numbers they claim to have. Time will tell whether or not they are money making scams for the organisers. However, the membership will make that decision for themselves based upon a sense of value received. The established chambers of commerce are only interested in big businesses, and there are a number of reasons why this is so. However, the new chambers have little if any interest in matters related to representing SMEs and SME issues to government. There one or two who claim to be acting on behalf of SMEs and attempting to engage with government, but based upon the extremely vitriolic comments from some of them, they are more likely destroy SME relationships with government than build them. All these Chambers combined have at most a combined membership of SMEs in the region of 60 000 to 70 000. However, consensus indicates that there are at least 1.5m to 2.5m SMEs in South Africa. This tells it's own story. Does the SME community need a decent representative body to represent their interests in respect of the private and public sector? Absolutely! Is it available now? No! Will it happen in the near future? Unlikely! Why not? Because as with all things in South Africa everything is segmented into narrow interest groups. There is no need for religious, racial, cultural, sectoral segments within the SME group. There is only place for a single SME group.

Wednesday, May 23, 2012

SMEs - are government hindering or helping?

SMEs in South Africa will find that they are in a bitter sweet situation here in South Africa. Against government: 1. Rabid unions 2. SME insensitive bargaining councils 3. Poor government marketing of what they really do offer SMEs 4. Poor payment 5. Regulatory overload and red tape 6. Rigid labour markets 7. Slow decision making and implementation 8. An inactive Presidential SME Council that fails because of political appointees 9. BEE legislation that helps no one. 10. Too much stick and not enough carrot. Make the Nats look open minded. For government 1. Massive amounts of capital 2. Numerous interventions to assist SMEs 3. A desire to help The problem is that on balance I believe the overall impact is negative, but could easily be swung around if there was a political will to do so. If SMEs are so important, who is more valuable to the government? SMEs or the unions? I believe the SMEs are.

Tuesday, May 8, 2012

SMEs - finance for South African SMEs

There is an interesting new website for businesses seeking funding in South Africa and it can be found at this website

Sunday, April 29, 2012

SMEs - why so many start-ups fail

I never stop being surprised at the overall low level of quality of start-up business ideas/concepts in South Africa. Way too many people are being pushed and pulled into the world of entrepreneurship, and yet they would not even survive in a protected franchise environment as a business owner as opposed to an entrepreneur. Research has shown that a clear harvest plan and business model are the two key starting criteria for a successful business. Anecdotal evidence I have accumulated over the years points to the validity of this research. I find it depressing that so many people know so little about starting a business. I think a large contributor to this poor situation is due to the extensive role of government in SME development. Would-be business owners are seldom evaluated properly, mainly because the evaluators themselves are incapable of assessing them. Development capital is handed out by accountants and bankers without any view to the entrepreneurial metrics, and a major emphasis on credit and financial metrics. I believe that the identification of the correct opportunity is half the battle won. A business essentially requires the following activities to occur in order to exist: 1. Sales management 2. Technical skills management 3. Admin management 4. Financial management 5. Marketing management Marketing, financial and admin management can all be outsourced. Marketing consultants and accountants are a dime a dollar. The technical skills and the ability to sell the product or service are however a whole different story. So if the correct opportunity has been identified, the would-be business owner has the technical skills and the ability to sell, who cares whether his financials are correct. Do them for him!! Manage them for him. However the problem is that here we will try to make every SME owner an accountant and business plan writer. No one is evaluating the OPPORTUNITY. This is where they fail - before they even start!!! This is why so many markets are so heavily over-traded. Sign writing, taxis, hair salons, funeral parlours, loan outlets spaza shops, garden services, pool services, etc. That is why so many fail. I do defer here to a number of private sector organisations who do this well such as Business Partners and GroFin. However, they are the exception rather than the rule. There are others that I have not named, so please do not abuse me. We need to change our focus in order to create more success and fewer failures. We will consider the harvest plan in the next article.

Saturday, April 28, 2012

Can SMEs deliver on government expectations?

SMEs in South Africa, like those all over the world, are perceived to be the saviours of government economic policy failure. SMEs will save jobs, create jobs, boost GDP growth, and stimulate innovation among a host of other thing expectations. Are these expectations realistic? The following comments are based upon my interaction with SMEs across all race groups in South Africa, and are not an opinion but rather anecdotal evidence of what I see and hear among SMEs. It all depends on how it is contextualised! The first question has to be whether or not SMEs can deliver on these expectations? In my opinion absolutely. The next question is whether there is room for government interventions in order to assist SMEs to achieve these expectations? Once again the answer is a big yes.However, there are two types of intervention, the functional and the selective. Selective interventions do have their place. They are used to boost particular sectors for strategic reasons. But more important are the functional interventions. These are those interventions which help to level the playing field and make it easy for all citizens to be able to enter the market. Here I am afraid the South African government has not delivered what they could have. I am not going to attempt to understand or critique their logic, but will review where the biggest problems lie for SMEs. The first problem is the inability of SMEs to hire and fire. Many entrepreneurs of all race groups deliberately focus on businesses that require no staff in order to avoid the complex labour system and the CCMA. The CCMA guarantees you that whether you win or lose you have to pay the ex-employee money. It is merely a legalised extortion system for workers. The incompetency of many chairpersons often leads to cases going on Appeal to the labour court to get bad/illegal decisions overturned. All this costs money that SMEs seldom have, so why go there. This is forcing more and more entrepreneurs into the import/export or services-based business so they can avoid staff. The impact of this is vast. This whole situation is exacerbated by the fact that you then have to comply with bargaining councils and the like who set wages at levels that are unrealistic for SMEs. This stops SMEs entering the manufacturing sector, where they have traditionally introduced the greatest innovation. There is unlikely to be innovation in importing and exporting or services! The second problem is access to finance. While the National Credit Regulator denies this, I have been informed directly by funders that their reluctance to lend to SMEs is directly related to the National Credit Act. I am not a legal expert, but these organisations have them aplenty, and believe it is a problem. So how was it addressed? They no longer lend on the basis of equity, but purely on the basis of cash flows. By default this excludes SMEs wanting to grow, from accessing growth finance on the basis of future cash flows. So how will they grow if they cannot access growth finance? Red tape in the form of the many forms and returns required. A previous report calculated the cost to business of red tape in South Africa was R70bn. I await their new report with interest. The latest addition was CIPC who now also wants information that they could be getting from SARS, but because SARS will not share information we all have to pay CIPC to capture our own information again. The whole BEE ting has been a disaster from the beginning. A few have got rich, the rules change faster than underwear and is generally a nightmare. The industry that has developed to issue certificates is so rabid that an accounting audit of Anglo American must be easier than getting a BEE certificate for a small business. Unexpected and unplanned outcomes of legislation abound in this country. Even the DTI are not always consulted on legislation in advance. Take the example of the Department of Health. They want to ban alcohol advertising. The industry spends in excess of R400m per annum on advertising. Where will the people get new jobs when this revenue disappears out of the advertising industry. So a few thousand people must lose their jobs and what goes with that, in order to save a few people who quite likely are not worth saving? We all drink and smoke by choice. SO leave us to our choices and their consequences. My father has sugar diabetes, but insists on eating sweets and chocolates. It is shortening his life but it is his choice. Must we now ban sweets and chocolates advertising to save diabetics? No they must make a choice. When this thinking is taken to the nth degree it becomes ludicrous. Where does it end? Banning smoking from public areas such as restaurants and aircraft is fair comment because people who do not smoke have no choice. But people who do smoke continue despite all the inconvenience. I have yet to meet someone who gave up smoking because they cannot smoke in a restaurant anymore. Legislation does not change human nature. Essentially, the environment is not conducive to SMEs existing, developing or growing. Throw in globalisation and the concomitant pressures for SMEs that this brings, and then add in a state that sees everything in terms of race and a big stick. It is time our government shoved the stick into a cupboard, got rid of all the unnecessary legislation, and created a carrot environment. History has proved that governments that use a carrot approach generally fare better than the big stick government, and normally last longer. Our government ignores the fact that while there are 2m workers who might vote for them, there are also 3m businesses who might have voted for them if they made life easier for business in general. A mixed economy that leans too close to the command side invariably results in collapse, one way or the other. Buy some carrots - please.