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The Botswana Gazette

Page 17

Wednesday 22 - 28 February 2017

SMME FEATURE PAGE 17

Wednesday 22 - 28 February 2017

SINCE 1984 The Botswana Gazette

Budget presents opportunity for entrepreneurs

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he 2016/17 budget was read at the opening of parliament recently by the Minister of Finance and Development Kenneth Matambo. As with every year in February, the budget reading evoked a lot of emotions and reactions from commentators and the public. The speech which represents a first reading of the budget allocation for recurrent government expenditure and national development funding for the year is always a point of interest for entrepreneurs as they seek opportunity from spending plans for the next 12 months. After Matambo’s the first reading, the budget paper will be vigorously debated by legislators, going over each and every allocation in the budget. The contents of the budget as it stands are that government will reserve a total of P57.1 billion for 2017/18 expenditure. P16.52 billion of this will go to developmental spending. Given these figures and allocations, entrepreneurs both big and small can look to carve out some business from the

budget. For instance, for the first time, this year’s budget will allocate a sizable budget towards all 57 constituencies of the country. The amount of P 10 million according to Matambo will be given to each constituency for developmental purposes, a move that will enable constituencies some autonomy in minor projects. Whilst the details on controls on these funds are yet to be clear, there lies an opportunity in the provision of services, especially with specific constituency needs that one may have identified previously. Entrepreneurs have an opportunity to harness business directly at constituency level. The minister highlighted that some projects will continue under the previously launched Economic Stimulus Plan (ESP). The ESP as it has come to be known has been funding development of staff housing, storm water drainage, sidewalk repairs and other miniscule services. The budget allocation for developmental will be mostly focused on infrastructural development to enhance electricity and water supply. The North South Carrier 2 TO PAGE 18

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SMME FEATURE

Wednesday 22 - 28 February 2017

The Botswana Gazette

Tough times ahead: Why SMEs need Budget presents to readjust FROM PAGE 17

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he writing has been on the wall for a while now. The economy is not looking too well. Given the recent BCL shut down which resulted in job losses at two mines and other supporting companies; the retrenchments taking place across corporate Botswana including parastatals- it’s a tough time for many SMEs in the country.

(NSC2) pipeline will be a priority area for development in order to address the insufficient water supply in the southern part of the country. This should present relief for enterprises since water cuts have led to a lot of down times for many companies. It has also led to increased unplanned costs as many have had to invest in water reticulation systems within their premises of operation as backup to unreliable Water Utilities Corporation (WUC) supply. The same can be said for electricity supply which the minister highlighted will be efficiently addressed, hopefully reducing the reliance on generators which come with associated costs during power outages due to constrained national supply.

Firstly with companies downsizing, spending is usually rationalised to reduce costs. This means that procurement and purchases from companies becomes significantly reduced to save money. Given this scenario that is probably playing out in most large scale organisations in Botswana, it is the small to medium enterprises that usually suffer first. One sign of trouble for many SMEs who supply either services or goods to large scale organisations and government is that many of their clients are moving from 30 day payment up to 90 day payment plans. This in turn drastically affects the cash flow of SMEs. Given that these SMEs need to pay suppliers, employees, rent and tax, main Value Added Tax, it means that they are constantly under pressure to hold on to cash for as long as possible in a bid to avoid a cash crisis. The second issue is with long payment plans and reduced business, it means that the SMEs are now faced with a situation where they might being unable to pay upfront for their goods resulting in them having to establish over drafts with their banks or go into debt in order not to stop work and to avoid risking non-deliveries.

The minister further highlighted that government was moving full steam ahead to revitalise the Selibe Phikwe SPEDU region following government’s provisional shut down of the BCL company and mines after it said that it had become over burdened by debt and a slump in commodity prices. This should come as a positive especially for enterprises affected by the sudden closure which caught them off guard.

SMEs are increasingly under pressure to re-evaluate their cash flow management strategies to survive the headwinds that have been hitting the economy in the last year and a half. There is pressure to also streamline and manage debt. Whilst 3 years ago the economy was on a good growth projectile, a lot of SMEs which were doing well leveraged their businesses to acquire more assets including buildings and vehicles. Most of these were purchased on debt under the expectation of a growth trend continuing and business growth. So given the present situation, it is only prudent for these businesses to streamline their debt exposure and where possible sell off excess assets to both sure up their operating capital but also pay off debt accumulated during the ‘good times’.

The 2017/18 budget is one of the most critical national budgets in recent history as it will see the country going through structural economic challenges. Mineral revenue continues to prove unsustainable while unemployment and general national wealth dwindles. So it will imperative for entrepreneurs to put their best foot forward to benefit from this year’s budget.

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It is a strenuous time to be running an SME in this economy and only good management and foresight will ensure survival in these tough times.

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The Botswana Gazette

SMME FEATURE

Wednesday 22 - 28 February 2017

Page 19

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SMME FEATURE

Page 20

Wednesday 22 - 28 February 2017

The Botswana Gazette

Growing entrepreneurs need support

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lobally there has never been a greater time for development and nurturing entrepreneurs. As many have observed, the reality of the millennial generation is a deconstructed job market. This has presented both challenges and opportunities. One challenge is that permanent employment is becoming an

increasingly tough find, the opportunity is that given the tools available, such as global connectivity and trade, the time is ripe for entrepreneurship development. In more developed economies, entrepreneurs are recognised and considered the backbone of national enterprising. They provide

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Entrepreneurs are also great wealth creators for themselves and their communities. As enterprises grow in leaps and bounds with local support, there is usually some sort of borrowed capital that is invested in them. This capital used for growth is likely from the community through financial institutions. As the business grows and the entrepreneur honours their debt obligation at interest, they help grow the wealth of the society around them.

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products and services that are much needed in their own communities and as a consequence employ people from the same public. Given their risk taking nature, entrepreneurs have the ability to start businesses with uncertain terms whilst being able to readjust and rework their products and services to satisfy the market. This is the trait that enables enterprises to grow from corner businesses to multinational organisations.

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It is for these reasons that every nation should be pushing to develop as many entrepreneurs as possible, especially millennials. The Botswana government has for several years increasingly given attention to the need to development entrepreneurs as part of an economic diversification drive. Through several government agencies and funds, entrepreneurial support has been on the rise. A challenge to continued support has been raised by many benefactors of some of the state programs put in place. This challenge provides an opportunity for the private sector to step in and assist in the development of entrepreneurs in Botswana. Support can be in the form of developing local procurement policies within organisations, giving mentorship and guidance to entrepreneurs to providing easier market access and finance for growing enterprises.


The Botswana Gazette

SMME FEATURE advertisement

Wednesday 22 - 28 February 2017

Page 21

Why entrepreneurs fail Modiri Mogende Statistics have always shown that half of all enterprises or start-up businesses fail within the first 2 years of trade and 9 out of 10 will not make the 5 year mark. It is a startling statistic when one looks at it; however it is an everyday reality in many economies across the world. The fact is that going into business or being an entrepreneur is one hell of a risk.

Cash flow management problems Even the great Phil Knight learnt the hard way in Nike’s founding days. In his memoirs, Shoe Dog, about the largest sporting brand in the world, Knight expressed frustration about how despite exceptional sales of Nike shoes in the early 70s and 80s, they still struggled to keep the business afloat. He wrote that their biggest challenge despite selling over a million dollars in shoes was cash flow management, a problem that led to several close calls on the doors of the business. At that point Nike was at odds with its bankers and had no choice but to go public for capital. Moral of the story is, had Knight and his fellow Shoe Dogs not wised up to their cash flow troubles, there would be no Nike sneakers to wear today.

Lack of passion Entrepreneurs are opportunists. Not in a bad way but they are usually people who seek opportunity and in many cases, of any kind. It is not uncommon to find a company that literally does everything. This usually means that there are possibly many things they could be enterprising in which they are however not passionate about. This at times leads to failure as they are less likely to be patient

with a project they are not in love with. So clearly “money chancing” is not always a great idea compared to building a dream you are passionate about.

Bad talent It is common knowledge that many a times the entrepreneur is an ideas man who does not possess critical skills needed to get their enterprises going. This is where human resource comes to play. Hire good talent and the business is likely to make it beyond that 5 year dooms mark, hire bad talent and then its surely doomed from the get go. Bad talent does not necessarily mean that you have lazy workers; it could simply be an issue of misplacement or misalignment of people within the business.

Brand positioning Marketing a company or product is not just about how loud you are, not always about how visible you are or even how much you spend on being known. A lot of times it’s about how impactful you are to those who you target. Many entrepreneurs have brilliant ideas on what they do could that could be a hit, however, many lack the research to back up their claims and dive in without a full understanding of their brand positioning which will in turn affect product uptake and consumption. In many cases it’s crash and burn experiences which either forces adjustments to the brand or a total shutdown of the enterprise. These are a few but critical reasons why some entrepreneurs have failed. It is however in the spirit of enterprise to learn from failure and continue pushing the hustle.

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