tag:blogger.com,1999:blog-18405803250932211762024-03-13T13:37:49.035-07:00SMEs in South AfricaDr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.comBlogger29125tag:blogger.com,1999:blog-1840580325093221176.post-90180690985965614402013-03-10T14:59:00.000-07:002013-03-10T14:59:18.068-07:00The SME mindset - Indians<br />
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<span style="font-size: 13.5pt;">The Indian community in South Africa are an enigma to many other
South Africans. The Indian business community are generally respected as being
great traders. However, with time they have proven themselves as able business
people in big businesses as much as in small businesses. </span></div>
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<span style="font-size: 13.5pt;">They however are
not renowned for sharing their business secrets, even within the Indian
community. I have had students doing dissertations think they would get the
cooperation of Indian business people because they too were Indians. However,
they too were unable to get access to the inner “secrets” of the Indian business
community.<o:p></o:p></span></div>
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<span style="font-size: 13.5pt;">While lecturing entrepreneurship, I have always encouraged
students to start, build and sell their businesses. A business worth RXm is
only worth potential wealth of RXm. It is not wealth. It is only potential
wealth!!! No cash.no wealth. My Indian students will just not accept this as an
option. Not one. As far as they are concerned, once you have created a
successful business, you keep it. I support the “cash is king” system. Start
them and sell them is what I believe will produce the greatest wealth. This allows
for you to then buy or start a bigger business, and create greater wealth, with
reduced dependence on outside funding.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 13.5pt; line-height: 115%;">The Indian community tend to prefer family-run
businesses and I have not met any with partners, other than in the professions. <o:p></o:p></span></div>
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Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-35829943375172561412013-01-09T00:42:00.000-08:002013-01-09T00:46:34.424-08:00The SME mindset - whitesThe first is a series of 4 blogs on the mindset of the four
main race groups as I have observed them in South Africa. The intention is not
to upset anyone but to try give each an insight into the other, in an attempt
to get us moving forward. I have obviously generalised, and therefore ask that
all readers not judge me until they have read all 4 of the blog articles. Then
your comments are welcome.<br />
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However, back to business! Soon after 1994, things started
to change – very subtly. It took me a number of years to notice that it was not
business as usual. Whites started to battle financially in their businesses.
These were SMEs who had previously been great lifestyle businesses. Profit
margins kept shrinking and turnover was not growing in a controlled fashion.</div>
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Whereas in the 70’s and 80’s you could fairly accurately
predict your growth, now you could not! Then the anger began to set in. It was
all the fault of the new government. They did not know how or why it was their
fault, but it was. </div>
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The first event was a new democracy. The joining of the WTO
by South Africa was the second event that started the change. The third event
was not so much an event as a management approach. Labour was cheap and
plentiful, so it was used accordingly. It was easy to hire and fire, and unless
you were a habitual offender the Department of Labour was, if anything biased
towards the employer. This was highlighted for me when I visited Australia in
2000. I was simply visiting family, but I paid close attention to the SME
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What I noticed in Australia was that most of the SMEs I saw
were literally one-man businesses. The best example to compare is the garden
service. A man with a truck arrives. He has a cherry picker and a bobcat on the
back. He offloads, gets the instruction from the client, does the job, and is
done in an hour maximum. Then he is off to the next job. He is literally a
one-man business - a highly mechanised and efficient SME. </div>
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Compare that to the South African model for garden services.
White guy with 10 labourers taking 3 or 4 hours to do the job. White guy shouts
instructions, and labour do the minimum work for minimum wage. I can provide a
host of examples, from professional to artisan. Or white guy sits in truck and
waits until they are done. This is termed management.</div>
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The nett result is that the white business owners began to
resent the new democratic government. However, they were in error. The real
enemy was not our government, but rather our new exposure to the real world of
open markets, globalisation and serious competition. Then there was the added
factor of the Internet. How many book shops went out of business because of
Amazon? I know a few myself!</div>
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White SME owners were just overwhelmed with change. No
Apartheid, black equality, new government, joined WTO, new competitors, the
Internet, globalisation and more. Engaging with white-owned SME owners has made
it quite clear that many have not realised the world in which they have to
compete is now a new world in many ways, and that they have to change – which
they cannot or have not done.</div>
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I am afraid chaps, the easy days are now a part of history,
and it is a true “only the fittest survive” scenario in play. Low margins are a
reality for many businesses. Ever-growing sales revenues are needed to stay
afloat. The Internet and its siblings such as social media, are all forcing
their ways into our lives. Is it yellow pages or Google words? I thought it was
Pieter Dirk Uys who said ”Adapt or die”, but the irony is that it was PW Botha
when he was Minister of Labour. It has never been more applicable to
white-owned SMEs than now. We must change to survive.</div>
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I have seen some of our better and best SME owners operate
and I know we are more than capable. The problem is we need more converts.</div>
Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-23668013589219758542012-12-04T04:33:00.000-08:002012-12-04T04:34:26.718-08:00SMEs - 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. <br />
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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.</div>
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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. </div>
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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 .</div>
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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.</div>
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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.</div>
Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-18324956659135750962012-09-16T04:22:00.000-07:002012-09-16T04:23:42.748-07:00SMEs - marking time!I attended the conference in Bloemfontein. What a waste of time and effort. The losers - all the black SME owners that attended.<br />
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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!!<br />
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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..<br />
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I have no illusion that all white "experts" are great, nor that all black "experts" are not, but the racism was just so blatant.<br />
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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.<br />
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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.<br />
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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.<br />
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PLEASE FIGHT FOR QUALITY PRESENTERS THAT WILL REALLY HELP YOUR BUSINESS.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com1tag:blogger.com,1999:blog-1840580325093221176.post-88052688995772312282012-07-22T05:31:00.000-07:002012-07-22T05:31:45.924-07:00SMEs - 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.<br />
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The conference appears to be different to the run of the mill, so here's hoping it is.<br />
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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.<br />
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New info will be advised as it becomes available.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-20905745843634181982012-07-01T00:40:00.000-07:002012-07-01T00:40:56.302-07:00SMEs - what SMEs need to doSMEs 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.<br />
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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?<br />
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The fact is that every business has these components:<br />
1. Administration<br />
2. Finance<br />
3. Marketing (excluding sales)<br />
4. Sales<br />
5. Technical skills<br />
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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.<br />
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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!<br />
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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!!<br />
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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.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-53222043784854187812012-06-04T11:55:00.002-07:002012-06-04T11:55:54.028-07:00SMEs - a South African SME wish listSMEs 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.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-78555554656918654772012-05-27T14:22:00.000-07:002012-05-27T14:22:14.201-07:00SMEs - chambers of commerce in South AfricaIn 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.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-82828367460771566372012-05-23T14:56:00.001-07:002012-05-23T14:56:25.146-07:00SMEs - 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.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-91040411638690259392012-05-08T01:07:00.001-07:002012-05-08T01:09:13.032-07:00SMEs - finance for South African SMEsThere is an interesting new website for businesses seeking funding in South Africa and it can be found at this <a href="http://www.business-funding.co.za">website</a>Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-11085917501451985822012-04-29T15:15:00.000-07:002012-04-29T15:15:40.327-07:00SMEs - why so many start-ups failI 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.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-19047749538550452412012-04-28T10:23:00.003-07:002012-04-28T10:49:08.770-07:00Can 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.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-79749283747679212172011-03-17T13:49:00.000-07:002012-04-28T10:51:25.925-07:00How many SMEs?Everyone would like to know exactly how many SMEs there are. Do you include micro enterprises in this question? In South Africa the numbers bandied about vary from 1,000,000 to 3,000,000. There is no definitive answer however. The Cipro data is badly skewed due to political interference, with numerous dormant cooperatives, closed corporations and companies. No one knows how many sole proprietorships exist in the formal sector, and even less idea of informal sector "businesses". Many cities and towns have discontinued licencing of businesses, and so no one can do a census. From a research and economic development perspective it is a nightmare. The only realistic assessment of the number of economically active businesses possibly lies at SARS, the tax man for the uninitiated. However, they have steadfastly refused to divulge this information or provide access to researchers. So much for transparent democracy, which obviously contributes to the general failure to create jobs. Researchers cannot design interventions without an insight, which we cannot get. However, there a host of other reasons that contribute to the lack of information, such as the large number of state employees with sideline businesses. <br /><br />Botswana were very organised with a database of just over 13000 businesses classed as SMEs. If you assume, without any real research or statistical validity, that Botswana, Namibia and Lesotho have similar population numbers, and Swaziland approximately half that number, a fair estimate for all these countries would be 45000 SMEs. Mozambique, Zambia and Zimbabwe all have bigger populations but do not necessarily have economies that are as developed, and i would therefore hesitate to make a guess for these countries. If you assume they have double the number of businesses you would estimate 135,000 in total for the countries surrounding South Africa. But this is guesswork and not research.<br /><br />However, it does help to contextualise South Africa with business numbers in the millions compared to 135,000 to say 250,000, with approximately equivalent populations of say 50 million people. <br /><br />I hope this answers the reader question in this regard. However, further input would be welcome in refining this response.<br />
I do have exact data on some countries which is available commercially.<br /> RobDr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com2tag:blogger.com,1999:blog-1840580325093221176.post-3456397510589689232011-01-03T09:11:00.000-08:002011-01-03T09:48:36.080-08:00SMEs – SMEs struggling in South Africa. Why?Many white-owned businesses have struggled since 1994. Many new businesses owned by all races since 1994, have found it difficult to establish themselves and grow. <br /><br />Obviously the pre-1994 white-owned businesses allocate blame to the change of government. While this is a logical conclusion to draw, how accurate is it? There is no doubt that this had an impact on those businesses who had previously been a supplier to government, as government made an attempt to make their purchases reflect the country’s demographics.<br /><br />However, what many of these business people have forgotten is that soon after 1994 South Africa rejoined the WTO. Furthermore, many businesses that had previously not been trading in South Africa due to anti-Apartheid trade restrictions, suddenly appeared at the front door to trade in South Africa and to use South Africa as a stepping stone into the rest of Africa.<br /><br />Yes, globalisation had arrived! The problem is that very few South African SME business people have realised this. They still think they can continue to run businesses suited to lifestyle entrepreneurs without changing their businesses. They are still trying to understand why their profit margins have dropped and remain low. This is purely about globalisation. Thanks Walmart. While consumers may be happy with lower profit margins, SMEs are not. Low margins demand much higher volumes to stay in business. <br /><br />The questions that this raises are whether these SMEs have increased sales volumes, have they tried to bypass the volume solution by becoming niche players in order to reduce the impact of the high volume/low price competitors? While my comments are based on anecdotal research, it appears to me that not many have changed how they do business. They all seem to be focused on the good old days instead of the future. <br /><br />SMEs need to accept that they need to carve out a niche for themselves or scale up. The problem is that South Africa offers an incredible lifestyle opportunity, and this can distract attention away from the important issues. The problem is that our new SME owners have arrived bearing similar attitudes and expectations, and are wondering why they cannot make it. We all need to change our thinking going forward, because whether we like it or not we are part of the global village.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com2tag:blogger.com,1999:blog-1840580325093221176.post-78046968063130217182010-12-31T08:05:00.000-08:002010-12-31T08:07:50.431-08:00SMEs - SMEs and labour market rigidityLeft wing governments often resort to protection of their labour forces. This is generally necessitated by political rather than economic imperatives. This leads to rigidity in the labour markets and has a number of negative consequences.<br /><br />SMEs are generally unable to pay top prices for their staff members, and by default feed from the bottom of the labour barrel. They cannot offer perks such as pensions, medical etc. Therefore when it becomes too difficult to acquire, retrench or fire staff, they simply keep it tight. They try and reduce staff before the new legislation comes in. They tailor everything to existing revenue streams. They simply do not have any of the assets necessary to handle the situation. They do not have money for legal employees, or legal advice. They cannot pay minimum salaries. <br /><br />Rigid labour markets have a negative impact on economic and job growth. SMEs are equally affected by this situation. As they close ranks in order to reduce staff, so they reduce their ability to grow their businesses. Everyone is a loser, including SMEs.<br /><br />South Africa has been particularly heavy handed in this regard and are about to add even more to this hamfisted approach to economic development. The new round of labour legislation is a potential nightmare for SMEs and large businesses.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-55746144809231958932010-12-31T06:58:00.000-08:002010-12-31T07:04:52.898-08:00SME - types of opportunitiesThe starting point for me with writing this document was Prof Mark Casson from the University of Reading on the UK.<br /><br />As an economist he wanted to know how many opportunities there were and who decided who got which opportunities.<br /><br />I did a little desktop research as I found the question intriguing. My research revealed the following. Opportunities vary in complexity. Therefore the skills, knowledge and experience needed to sell fruit to people at a taxi rank in a developing country is minimal. However, at the other end of the scale, identifying two companies for a merger, and then succeeding in achieving a merger between the two, requires a high level of skills, knowledge and experience.<br /><br />So the first thing to note is that opportunities can be graded from extremely simple through to extremely complex. Similarly, the simpler the opportunity, the more of them there are, and the converse is also true for complex opportunities.<br /><br />The second thing to note is that as complexity increases so too does the profitability in respect of both % and actual value. While you may be selling oranges at the taxi rank for US $1, the merger could be a US $10bn deal.<br /><br />Therefore the question must be asked as to whether you are looking for simplicity or complexity when looking for a new business opportunity?<br /><br />Bear in mind that your ability to handle complexity will be informed by your education and experience. <br /><br />How complex is your business or your new idea? Here in South Africa there are too many copy cat entrepreneurs. They are lifestyle entrepreneurs simply looking for an easy buck. I have seen very very few business plans that have made me sit up and say wow. However, we can do it, and this is evident when we look at the number of world leading products designed in South Africa.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-7141675559268371502010-12-31T06:31:00.000-08:002010-12-31T06:38:01.306-08:00SME - types of entrepreneurResearch indicates a number of different types of entrepreneur. These include survivalist entrepreneur; salary replacement entrepreneur; lifestyle entrepreneur, small business manager, franchisee, copycat entrepreneur, franchisor, inventrepreneurs, serial entrepreneur, portfolio entrepreneur, angel funder and venture capitalist.<br /><br />However these can be grouped into three (3) groups of people who act in a similar manner.<br /><br />The first is the survivalist. The survivalist is often associated with informal sector survivalist businesses, but could also include the formal sector person forced through circumstances into self employment. This could be someone who has been retrenched.<br /><br />The second group is the lifestyle entrepreneur. They vary in a number of ways, but generally are the same “animal”. For some the “lifestyle” is about working the hours they want, or the type of business (maybe a hobby) or about maintaining a lifestyle which includes holidays, and toys such as motorbikes, cars, caravans, boats etc. All of them have clearly defined “rules” on how they run their business. These rules are written in stone most of the time. Do not ask these entrepreneurs to work late or weekends.<br /><br />The third group are the high growth entrepreneurs. These are the entrepreneurs who generate large profits quickly, normally create the bulk of new jobs in an economy, and are able to retire young. Notice I said “able to”; many do not and start the next business soon after they harvest from their business.<br /><br />Where do you fit in?<br /><br />The South African government has not recognised this current research, and consequently are not fine tuning their SME development strategies accordingly. This is a pity, as the job creation we so desperately need in South Africa is not being achieved as a result. It is time governments all over the world start consulting with SME specialists in order to understand the research findings in this area of expertise. This will assist in creating better SME development interventions.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-44250615718418130082010-06-21T05:43:00.001-07:002012-04-28T10:52:15.986-07:00Have we got over the global recession?The economist at KZN treasury presented evidence to show that South Africa generally lags the global economy by 6 months, and the KZN economy lags the South African economy by a further 6 months. <br /><br />So if we assume that December 2009 was the estimated time when the global recession was turned around, then KZN can expect to turnaround by the end of 2010. So KZN business people, just 6 months more to suffer, or so the experts say. Watch this spot :)Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-43471493301181323432009-10-24T14:32:00.000-07:002009-10-24T15:03:36.369-07:00SMEs - Will SMEs flounder or flourish in South Africa under ZumaSouth Africa is going through immense political turmoil at present. Labour and the Communist Party are wanting a greater say in government for bringing Zuma to power. Labour is demanding the end to labour broking, of which government is an enthusiastic user. Umkhonto we Sizwe are attacking moderates like Kader. The ANC Youth League and it's leadership, using the term broadly, are demanding the nationalisation of the mines. Netshitenzhe has resigned. Trevor Manuel is under pressure to go from these same players. Look at our FPI.<br /><br />Talk about supping with the devil. Zuma must be regretting his choice of partners I should imagine.<br /><br />Labour broking is a direct consequence of labour market rigidity that has its roots firmly embedded in the unbelievably complex and labour friendly legislation in South Africa, which is further complicated by the CCMA who believe it is their duty to always award money to labour, even when finding in favour of business. Never mind the impact on inward FDI.<br /><br />The efficiency of SARS in tax collection is sadly not recognisable elsewhere, mores the pity. Policies are uninformed by reality, and becoming more and more socialist as the days progress. Purchasing by government does not focus on sustainable business creation. I could go on and on, but the message would remain the same.<br /><br />The fragile embryo stage SME component of our economy is very much like the humpty dumpty story, sitting on the wall. The question is how it will land, soft or hard. There is ample evidence that entrepreneurship prefers a free market (or close as possible) in order to grow and create new businesses and jobs. <br /><br />However, the closer we move towards socialism, the more like we will have omelette instead of boiled eggs. <br /><br />This means that the SME sector is under serious threat from these people, and as businesses we need to understand the seriousness, and tell Zuma that he has our support to follow the capitalist line, as opposed to the socialist line. He can get the votes he needs without these living antiquities and uninformed posers that claim to be the leaders of various fringe organisations.<br />RobDr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-89180896105380347652009-07-12T14:33:00.000-07:002009-07-12T14:43:21.042-07:00SMEs in South Africa - why is finance difficult to accessSMEs in South Africa do struggle to raise start-up finance from banks. The question is why?<br /><br />There has been little, if any, in-depth research into why banks are not lining up to lend to this large, risky, yet very profitable market.<br /><br />I myself am hoping to research the following suggestion in order to see if it has any validity. The suggestion is that a major contributory factor is that SME and entrepreneur are being interchangably used in South Africa. <br /><br />There is a continuum of entrepreneurial endeavour suggested by Burch, and I believe that the SME owner is not synonymous with being an entrepreneur. Some SME owners may well be entrepreneurial, but it is not a given.<br /><br />Consequently, banks have no tools with which to assess these SME owners, which makes the loaning of finance to them extremely difficult.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-53909099574584068342009-06-21T12:09:00.000-07:002009-06-21T12:19:53.260-07:00SMEs - the new Companies ActThere is a new version of the South African Companies Act on its way. This is a highly modified version of the previous Act, and is supposedly coming into action later this year.<br /><br />A key change which is interesting from a number of respects, is an attempt to introduce the equivalent of Chapter 11 in the USA as I understand it. The intention is to help businesses that get into trouble to get through the difficulties they are experiencing by giving them some temporary protection from their creditors.<br /><br />The current system is prohibitively expensive and not particularly helpful to SMEs. <br /><br />I am busy reviewing this new version of the Companies Act and will hopefully be able to shed more light on this particular topic in the next week or two.<br /><br />However, it will require that the business be an incorporated business, in other words a company, remembering that the Closed Corporation will also disappear and become a simple form of company, on which I will also provide more information.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-5411816333639621952009-06-14T03:41:00.000-07:002009-06-14T03:57:39.236-07:00SMEs in South Africa - is tendering good for SMEsHow important is government business and large business for SMEs?<br /><br />I believe it is very important, but there are riders here which must be considered. The purpose of government allocating business to SMEs, is to try and grow the SME sector, as growing SMEs are key players in job creation.<br /><br />But how can these SMEs keep growing unless they receive continuous business. Sustainable SME creation and growth is completely dependent on continuous business from the buying organisation. But government and large businesses are strong believers that tendering is the best means to purchase the products and services they need. They feel the need to remain impartial in the purchasing process. Yet they espouse supply chain management as their credo. Supply chain management expressly guides the buyer to choosing suppliers that enhance the efficiencies of the buyer at every level. So surely tendering is in contradiction of this credo. <br /><br />Is tendering an anachronism from the past? Is it not time for government and large businesses to treat the purchasing function in the true spirit of supply chain management, and stop resorting to tendering practices that “are objective” when in fact subjectivity is exactly what is needed.<br /><br />If government policies are to achieve the goal of creating and growing SMEs, and large businesses are to find the efficiencies they desperately seek in their supply chain, through the use of SMEs, then we need to return to subjective purchasing practices.<br /><br />Government and big business are equally as guilty in the South African context. I have heard senior people openly admit to simply keep changing supplier in order to supply orders to anyone who applies to be a supplier. This is counter-productive and in my mind counter-intuitive. <br /><br />Let us create sustainable SMEs not one-order wonders!Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-7481280511126108172009-06-14T03:20:00.000-07:002009-06-14T03:34:12.270-07:00SMEs in South Africa - the end of Closed CorporationsThe Companies Act is about to undergo a major review. This has a number of good aspects and as with everything else in life a number of bad. The questions is whether or not you have a clue about this Act and how it will impact on you?<br /><br />Too many businesses simply allow the government to do what they like, without providing feedback, whether positive or negative. It is imperative that you read the legislation and decide for yourself what the impact will be on your business. <br /><br />So go to the following website link and review the Act. http://www.michalsons.com/wp-content/uploads/2009/04/companies_act_71_2008.pdf <br /><br />Understand the impact.<br /><br /><br />If you have any problems with the Act then let us know on rob@smorfitt.co.za and we can forward your input to the government.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-47599694907729217602009-06-07T08:50:00.000-07:002009-06-07T08:58:09.071-07:00SMEs in South Africa - the African opportunitiesAs suggested in my blog 2 weeks ago, the African markets present a big opportunity for South Africa.<br /><br />I saw some data which says despite the recession, Africa should still achieve 6+% GDP growth this year, albeit that it is off a low base. South African trade data show an increase in South African / Africa trade already, as well as the expected decline with USA and Europe.<br /><br />The big corporates are already trying to penetrate these markets, but SMEs can do so as well.<br /><br />There are a number of Africa oriented business magazines around. Have a look and get yourself informed. I purchased "African Business" and found a lot of useful information.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0tag:blogger.com,1999:blog-1840580325093221176.post-84252854244536715362009-06-03T09:56:00.000-07:002009-06-03T10:13:03.739-07:00SMEs in South Africa - the recession challengeAccording to the economists, we should shortly see the recession slowing its downward trend, flattening and by the new year growth should begin to return.<br /><br />Key issues I believe will be the the following. The increasing price trend in commodities will need to continue. This will depend on the BRIC countries getting their growth above 7% again.<br /><br />Government will need to keep the economy stimulated with infrastructural spend. Despite the deficit we are currently nursing, this is an ideal tool for stimulating economic activity in South Africa. The Government has a large budget to spend, so it will be crucial that the political appointment of senior officials is stopped with immediate effect, and business principles employed to ensure competency. Unskilled people cannot spend this amount of money effectively. A suggestion would be to get big business to perhaps second senior executives to assist in running these departments until the recession is reversed.<br /> <br />Similarly, banks are going to have to start lending. They cannot continue with their tight-fisted approach for too long as they need the profit. This is a global problem, but until they start lending on cars and houses, it is unlikely we will see the recession begin to reverse. So when you see car sales and house sales start to pick up, you will know we are on the right track for a reversal.<br /><br />So hang in there, be innovative and use this time to grab market share from incompetent competitors.Dr Rob Smorfitthttp://www.blogger.com/profile/14937177151678400747noreply@blogger.com0