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.

PLEASE FIGHT FOR QUALITY PRESENTERS THAT WILL REALLY HELP YOUR BUSINESS.

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.

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.

SMEs in South Africa - is tendering good for SMEs

How important is government business and large business for SMEs?

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.

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.

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.

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.

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.

Let us create sustainable SMEs not one-order wonders!

SMEs in South Africa - the recession challenge

According to the economists, we should shortly see the recession slowing its downward trend, flattening and by the new year growth should begin to return.

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.

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.

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.

So hang in there, be innovative and use this time to grab market share from incompetent competitors.

SMEs in South Africa - a big opportunity

Last week we looked at one of the biggest obstacles to SME development in South Africa. This week we look at some of the big opportunities available to SMEs in South Africa.

One of these opportunities are the government funded activities such as marketing assistance. The government funds many interventions which have been shown to be of enormous financial benefit to the SME. To get a handle on these, go to the DTI website at http://www.thedti.gov.za and spend some time reviewing all the opportunities available to you for accessing government funding to help your business. You have to work at this as government itself markets these amazing opportunities very poorly.

Another opportunity is the broad base of useful information and research available from South African universities, South African Department of Statistics, SARS and the DTI. Look at their websites and the university libraries to identify information useful to you and your business. Remember that knowledge is power, and therefore you need to gain as much useful and current information as is possible. Look particularly through dissertations prepared at the local university as it is normally research based upon local businesses.