Vol.1 Issue 1 R10 December 2013
HOW EARLY The Township Entrepreneur - Page
Entrepreneurs needs it When eight in ten business ideas falter and crumble within two years, you need someone to help you to build a business that is tough on the inside.
The Township Entrepreneur This publication and its online version is intended as a resource for SME operators and entrepreneurs who seek to create value through a business enterprise. Nicholson Integrated Consulting also provides training and development for SMEs and corporates. Managing Editor: Nicholas Sibanda
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Content Editor: Nickson Sibanda Contributors: Shingai Ngara, Abigail Mahlangu
Published by: Nicholson Integrated Consulting Tel: +27 84 348 8519 Email: firstname.lastname@example.org Fax: (086) 545 5074 Website: www.nicholsonic.co.za The Township Entrepreneur - Page 2
blame apartheid even though we acknowledge its role in limiting us today. African cultures taught skills and innovation early in life. A shift towards â€˜professionalâ€™ skills like management science have crippled the emerging African economies as people tended to be mono skilled and fight for the few spaces at the top. The very thought of leaving school to start a business is frowned upon. Consequently a lot of creative potential is lost as people take careers they don't like just to find and keep a job.
usiness talent, or any talent for that matter is best identified and groomed earlier in life if itâ€™s potential is to be explored to the maximum. South Africa, like other nations in the world is seeking to tap into the potential of its citizens to promote innovative entrepreneurial enterprise that will grow the economy. Over the years technology has continued to be smarter and more efficient. Township business is often lagging behind in terms of converting opportunities. We cannot continue to
It is important for us to begin to stimulate creative problem solving from an early age. We should also equip our children with financial management skills beyond the piggy bank! The home is supposed to be the breeding ground for innovative ideas and the school serve as an enabling environment. The school curriculum must be reviewed with the help of practicing entrepreneurs and opportunities availed for our youths to understand the workings of regional and global markets early on in life.
Making the transition from a job to business ownership.
Learning from the stories of others
The state of entrepreneurship in the townships.
Laying the foundations of literacy Does success depend on the government?
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Some businesses that you can start with little or no finance.
The rising young generation of African entrepreneurs
Strategies for the growth phase of your business
The state of entrepreneurship in the townships Township defined In South Africa, the term township and location usually refers to the (often underdeveloped) urban living areas that were reserved for non-whites. Townships were usually built on the periphery of towns and cities. Today the township is seen as a place of great potential for entrepreneurship. This is true for two reasons; a very high consumption rate and a hunger for upward socio-economic mobility among the masses. Township Business Most traditional business models in the townships were primarily inspired by the segregation of the colonial systems i.e. a restricted entry to lucrative sectors of economy. This led naturally to the rise of subsistence entrepreneurship rather than value based enterprises. Most of these opportunities are not scientifically targeted and as such there is no continuity and value addition to the business idea, leading naturally to its demise. In the post-freedom era, the business engine has been driven by NGO models transplanted from other contexts. This form of entrepreneurship perpetuates this legacy of business that lacks local innovation. Innovation is the lifeblood of entrepreneurship as it provides the entrepreneur two essentials for success, namely; the ownership of the idea and the ability to respond to challenges related to the idea. Challenges A key hurdle is lack of access to business education. Its high cost is often the first deterrent. Limited research and dialogue with business people in this sector is an even more limiting factor. Government and private interventions often focus on upliftment rather than learning. As a result they tend to address the problems of unemployment, low income, poverty etc., rather than inspire creativity and developing capacity to create solutions. The education available therefore amounts only to pamphlets and over-simplified management expectations. The township, because of its social demography lends itself to the invasion of illicit business ‘opportunities’ (drugs, alcohol etc.), which bleed limited precious financial resources from the community. These create other setup challenges such as security and inadequate cash circulation within the community. Although the township presents the conditions of entrepreneurial success i.e. loyalty, customer knowledge, product demand and passionate people, there is an oversubscription to low end, basic skill businesses e.g. the spaza shop, tavern, hair salon and now internet café! This fuels transactional rather than productive businesses.
Business format The 2010 FIFA World Cup is a case in point. Most entrepreneurs targeted the tourist with many indigenised hospitality initiatives. Due to the challenges with the FIFA hospitality company, most people were lost huge investments. However, some who turned to the fans with creative initiatives, reaped significant rewards. One such example was the Makaraba manufacturer, Alfred Baloyi from humble township roots he has made a name for himself as a businessman. He set up a manufacturing factory for his product and because of its unique nature it received international media coverage. The product went out to the world as a unique South African design. The SPB SME Growth Index reveals that the manufacturing sector is dominated by educated whites with a median turnover of R50 million per annum. They have a 50% skilled labour force. It concludes by making the following researched recommendations for SME development; Firstly, the national conversion needs to be informed by evidence. The data available to date on small business has been too vague to make properly informed decisions about policy and support. Second, success tends to harvest success. Small businesses are part of the broader social and economic system of the country. They are sensitive to the environment in which they operate. There are few clear borders between the factors that influence the sector and those that do not, even if some are clearly more important than others. But deficiencies in the education system, for example, will likely manifest themselves in limitations on the performance of small business, and the economy as a whole. Thirdly, small businesses are not charities, welfare measures or systems to generate employment for its own sake. This needs to be kept firmly in mind, and appears easily lost as policy makers have their eyes firmly on the attendant social benefits. Such benefits are a happy by-product of healthy small businesses’ seeking opportunities in a market, not their inherent objective. Small businesses’ potential to grow – indeed to function at all – is no different from that of their larger counterparts insofar as economic decisions must be based on economic incentives. Imbuing small businesses with excessive moral or ideological significance is counterproductive. Small business is business, first and foremost. Spending trends The Township Entrepreneur - Page 4
Township money tends to flow in many different directions. Firstly, in an economy that is skewed negatively against the majority, the little becomes even less in dealing with challenges such as crime, HIV/AIDS and the struggle, upward social migration. For those starting at the very bottom, it is a long climb! e.g. putting large families through basic school will inevitably slow or eliminate any chance of financial prosperity.
which in most cases is administered through government agencies. Often it is nowhere near adequate.
Focus on production Because the heart or entrepreneurship is creativity, a focus on innovation and education is important for the long term development of township business. Industrial zoning and infrastructural development must be prioritised to promote a strong production focused enterprise. Special Glamorized business sectors like women and youth must be given tools to sigThe aspiration to make it big is an unrealistic and frus- nificantly participate in the economy. Lobbying governtrating false image of business. Most township people ment and business to direct resources is a priority. glamorise business and dream of the high life that comes as a reward. They fail to realise that the high lifestyles are Informal Sector a preserve of the few. As a result, the lure of get-rich busi- Researchers argue that much of what is labeled informal would seem to be basic survival activity, creating little in ness is strong and that inevitably leads to a dead end. the way of employment or wealth. Most of these businessGuided financial investment es provide a subsistence existence. Returns tend to be low South African financial institutions have been criticized for and intermittent, security and stability are minimal; workmaking finance inaccessible to SMEs. Their stringent re- ing hours are long, and working conditions are poor. Thus, quirements and high interests are a poser for township the scope and importance of informal activities will tend business. Emerging from an era where small business to parallel the levels of poverty and underemployment in means tiny shop, there is a combination of no infrastruc- an economy. However there is a great potential of a matural collateral and poor financial management. The latter jority of these to reach a tipping point and become formal is the cause for township business’ failure to access formal businesses with substantial returns. finance from the banks. The alternative is donor funding,
Literacy shapes entrepreneurship Entrepreneurship is rising in South Africa. However, most of these entrepreneurs are stuck at micro entrepreneurship level. The transition to Small to Medium (SME) level requires at least a level of literacy. Learning how to read and write is a stimulus for innovative thinking. Education by definition should be a means to an end rather than a goal to achieve. Driving strong literacy campaigns to ensure that entrepreneurs are able to obtain these vital skills. The cost of illiteracy may include some or all of the following: mistakes and rework, missed deadlines, customer complaints, wastage, reduced productivity, incomplete paperwork, resistance to new initiatives, time lost due to accidents and injuries, and high staff turnover. For too long South Africa’s best students have defined success as a college degree and a secure job in government or with an NGO. This mindset must change for us to prosper. Entrepreneurship must be elevated and business creation promoted. South Africa’s next generation must be encouraged to see themselves as entrepreneurs and principled servant leaders – wealth creators instead of job seekers. The best long-term investment a nation can make is to prepare the next generation for responsible citizenship and productive lives. Rigorous quality education, market-driven The Township Entrepreneur - Page 5
training and job opportunities are essential if South Africa’s entrepreneurs are to be equipped to compete in the global marketplace. For this to be a reality, the school curriculum must be revisited from time to time. Instead of addressing only the inequalities of the past—to give equal employment opportunity, it should seek to bring equal empowerment. Lack of financial literacy is the key challenge facing many entrepreneurs aspiring to move from the micro enterprise sector to SMEs. Due to lack of correct information to bargain and negotiate with financial institutions, entrepreneurs receive relatively less support in terms of financial assistance to develop their respective industries. While many service providers seek to enhance financial literacy, those who have difficulty with reading, writing, maths or communication are left out.
DO SOMETHING ABOUT IT! Illiteracy is not an incurable condition! Don’t be shy to ask for help Take an evening or weekend reading and writing class Practice by reading regularly Take a basic financial literacy course
When you are starting out, you need not stress about the basics. Get our easy starter package to help you hit the ground running. DEAL INCLUDES; Identity design; Logos, Business cards, Flyers, Presentation folders, email stationery, Brochures, Business profile, Business forms, Pull up banners, lite website and more. Call us today.
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SALBA MANAGEMENT CONSULTANTS Black Business Supplier Development Programme (BBSDP)
Has your business been in operation or trading for One (1) financial year? Does it have Fifty-one per cent (50%) black majority shareholding? Do you have a Valid Tax Clearance Certificate? Is your business turning over between R250 000 to R35 million per year? If you answered YES to all five (5) questions above, this is your chance to access the following Grant from BBSDP:
Grant to a maximum of R1 million: R800 000 is earmarked for tools, machinery and equipment on a 50:50 cost-sharing basis. R200 000 is earmarked for business development and training interventions per eligible enterprise to improve their corporate governance, management, marketing, productivity and use of modern technology on a 80:20 cost-sharing basis. The Black Business Supplier Development Programme (BBSDP) is a cost-sharing grant offered to black owned small enterprises to assist them to improve their competitiveness and sustainability to become part of the mainstream economy and create employment. To fast track the process, please bring the following documents: Financial Statements (up to 3yrs), Valid Tax Clearance Certificate and IT14 form from SARS. If you don’t have these call us we can help.
Other Services: ACTURIAL, INSURANCE, TRAINING, RECRUITMENT AND LABOUR BROKING, FINANCIAL CONSULTING, RESEARCH AND OTHER RELATED FIELDS OF CONSULTANCY For enquiries call Sindiswa on 083 7600 932 Email: email@example.com http://www.salbamc.co.za The Township Entrepreneur - Page 6
The one activity that gets us nowhere Opportunity By many standards, South Africa is a country with more opportunities like no other in Africa and most parts of the world. The superb infrastructural development and access to global markets are keys to entrepreneurial success. South Africa emerged as the only African country which provides financial incentives for its people in the SME sector. It is this lucrative opportunity that brings many foreign nationals into this country, most of them make it very well.
challenge. Herein are people who seek a lifestyle they cannot afford, and they will use their power and connections to leverage that advantage. South Africa has tended to focus on the subsistence version of entrepreneur where entrepreneurial capacity is only at micro level. Nationalization The debate in the recent years around nationalization and affirmative action, betrays the loopholes that exist in government policy. Locals seek to benefit from wealth they have not generated. This expropriatory nationalization has a dead end. The government is certainly wrong in assuming the ‘sole provider’ role to its citizens and encouraging them to be over dependent through measly grants. In the same breath, entrepreneurship is not pure ingenuity that thrives in the desert. It is creativity with support that taps into communal resources. It is ideas thriving out of solidarity.
Mindsets It appears though that, although the government, through its agencies has availed millions, this investment ends up being utilized by those already thriving and the rest lies in the bank accounts awaiting to be used. The entrepreneurial mindset is alarmingly underdeveloped among South Africans. An average South African is in the post struggle crisis. They are still awaiting the delivery of the better life for all as Protest culture promised in 1994. This obviously includes The abuse of freedom is a cardinal right in houses, water and even toilets! South Africa. We have been left baffled at the toyi-toyi antiques that have crippled whole Needless to say, any government that can de- industries. Legitimate union bodies have lead liver that can only give you below standard, strikes to make sectors ‘ungovernable’. Such basic necessities. That is not the life that we an objective goes against culture of entreprestruggled for. A wise president once chal- neurship. We need to seek ways of getting rid lenged his fellow countrymen to ask what they of poverty rather than use it as a tool for pocould do for their country before asking what it litical mileage. could do for them. That is the space that entrepreneurs play in. They see change as a chal- The government is certainly liable for the lenge and other nationals as links to new mar- poor state of entrepreneurship in this counkets. try, but the biggest culprits are you and I who have not utilized the opportunities the govCorruption ernment has availed to us as citizens. So when Governments always get the rap for state asnext you feel like mourning, ask yourself what sisted corruption. However, in a poor and you can do for your government! struggling economy corruption is a perennial The Township Entrepreneur - Page 7
The exciting transition from formal employment to leading your own business enterprise. By Shingai Ngara
The allure is very exciting; the move from corporate constraints to entrepreneurial adventure. And indeed it is quite an adventure. It is important, though, to understand what the transition really means: Employment is financially liberating and, typically, psychologically challenging.
Entrepreneurship is psychologically liberating and, typically, at least initially, financially challenging
We know the numbers that come to mind: entrepreneurs fail 14 times on the average before they succeed it takes 10 years to become an overnight success 95% of people who try to build a business fail outright and give up never to try again
These facts are not presented in order to discourage entrepreneurship. Rather, they are given to encourage the understanding of the transition that the individual needs to make in order to make the Exciting Escape from Employment to Entrepreneurship. The individual needs to undertake a journey of entrepreneurial leadership conversion in order to successfully embrace the adventure of entrepreneurship. Even if the individual is working in the same discipline the nature of entrepreneurship is fundamentally different to employment and she needs to adjust herself accordingly. The Corporate Manager maximizes profit by comprehending objectives from her superiors and controlling business processes through overseeing day-to-day functions of a team through delegating tasks. She is then rewarded through bonuses and share-schemes in relation to the shareholder value she has created. The Entrepreneur, on the other hand, visualizes transformation or innovation and creates new products, services and processes through risk-taking and taking personal responsibility for success in significant uncertainty then inspires others to their best potential to realize the vision. She creates multistakeholder value to society through new products and services, an exciting team culture for employees and business profits. Her reward comes through ownership of her time, the change she has made in the world and the wealth that she creates for herself. In the exciting escape from employment to entrepreneurship an individual moves from a job to a lifestyle. What she does defines her and consumes her because it is something The Township Entrepreneur - Page 8
4 HURDLES TO GETTING STARTED WITH YOUR BUSINESS
Many entrepreneurs never get started with their great ideas. There are several reasons for this;
from which she draws incredible fulfilment because it is her own creation. Regular working hours and annual leave are a thing of the past; at least in the initial stages. The cash flow uncertainty in the early stages is made very difficult if she is single. It is extremely psychologically challenging to not know where rent and food are going to come from before the business generates cash. The way that most likely will ensure success is if her support systems are behind the change to entrepreneurship. It is usually best to have a supportive spouse or family member in full-time employment to remove the worry about the basics not being met – emotionally, psychologically and financially. A fundamental change that the individual needs to make is to completely reverse her understanding of risk and failure. A corporate manager reduces risks and tries to eliminate failure in order to meet targets. In order to make the transition to entrepreneur, she must now embrace taking calculated risks and learn to look at failure as an exciting opportunity to learn, grow and get better. Failure in the eyes of the entrepreneur is a positive teacher and not a negative judgment. And it is in these risks and growth from failure that the adventure begins in earnest. The entrepreneur develops a certain tenacity that maintains the exciting vision of what they want to create regardless of what is happening around them or what discouragement they may receive from others. Entrepreneurship is ultimately one of the most powerful journeys of personal growth in which an individual learns to stand on their own terms and make their own contribution to the world. Shingai Ngara designed the Entrepreneurial Leadership Conversion curriculum for the Lead and Inspire School of Leadership Email: Shingai.firstname.lastname@example.org Cell: +27 76 586 6803 The Township Entrepreneur - Page 9
Hesitation Out of fear of the unknown and other factors, dreams lie untapped until the opportunity has passed. It is important to note that as an entrepreneur you are able to develop a capacity to take risks and launch out without assurance. That is often where the opportunity lies. Money Issues Some people will not start until they have all their financial ducks in a row. Often the opportunity comes with no advance warning. A wise man once said; “It is better to be prepared and not have opportunity than to have an opportunity without preparation.” It is in being ready with your business plan and execution strategy that you are able to convince someone to invest financially into your dream. Do those things that cost you no money and then look for it. In business logic, money follows a dream. Busyness Some people always try to run a business ‘on the side’. It is true that there are opportunities that can succeed with limited focus. However, most ventures require that you invest adequate ‘time capital’ before you can expect them to work. If you are employed elsewhere, you might want to consider taking leave to focus on laying the foundation for your business. I have had clients who come to consult for a while and then drop off because of busy schedules. Sad to say, but such businesses often falter or struggle. Vanity This one is almost the number one reason for entrepreneurial ventures that never see the light of day. The entrepreneur is so obsessed with their dream or vision that they never cease to admire it. They talk about its potential and the great opportunities that it will generate, but never really get it started. This is how vain we can be, especially in the light of super impressive entrepreneurs. We are reduced to mere fans and day dreamers.
eason Tshabalala is an upcoming entrepreneur in the lucrative construction sector. He is the founder of a thriving small construction firm in Johannesburg. Reason is a tiling specialist with a flair for beauty. From a small startup taking odd jobs from bigger contractors, REASCON has grown to be significant player in the sector with projects worth over half a million rand in their portfolio. Starting REASCON was formed out of necessity. Starting as a general hand, Reason had come to discover his own flair for tiling. He then went on to register his own business and pitch for his own projects. REASCON did well for several years relying on basic referrals and built a small team of semi skilled personnel who had a wide range of experience in the industry. Challenges As is the case with all small business owners, challenges came with expansion. Dry business spells and sometimes limited capacity to deliver on time. Sometimes it was the inexperienced staffer messing the clientâ€™s expensive tiles! There were times when the staff were not paid after the project, because the project pricing was erroneous and there was no money. Help In 2010, REASCON sought the services of Nicholson Integrated Consulting to seek a total organizational turnaround. The first thing we did was to help develop their corporate branding. We then conducted an organizational audit. We discovered that although they were in business, they had no business plan. They had no marketing plan, or a strategy for growth. So they effectively scavenged for whatever project could be available to make ends meet. The result was much frustration and many missed opportunities. Looking forward After a series of consulting sessions, they had finally developed a business plan whose strategic forecast spanned a five year term reviewable annually. Their HR plan saw a restructuring of their staffing. Although working from a home office, they were able to separate the business from their household affairs. Two years on, they are stable with a growing portfolio. A toast to success! The Township Entrepreneur - Page 10
The Township Entrepreneur (TE) caught up with the owner Mr. Reason Tshabalala (RT) and filed the following interview; TE: What inspired you to go into business? RT: God is the first inspiration. I also wanted to be financially savvy and to be my own boss. TE: What mistakes impacted your business negatively in your starting years? RT: .Lack of management skills and funding. I was also unable to plan properly. TE: How did you get your business noticed at first? RT: I believe that it was the quality of the work we offered our clients. Thereafter, we had clients referrals from satisfied clients. TE: What kind of projects have you managed in the past? RT: Building houses from plansâ€”we also have done double storey projects, renovations tiling and plumbing work. TE: Why did you seek the services of a business consultant? RT: I wanted to understand my clients and also advice on what seemed to be a vicious cycle of doing very well and then falling into the doldrums over and over. In fact, we had attended several workshops and finally felt it was going to add value to have ongoing support. TE: Have you ever felt like quitting? RT: Yes. A lot of times. Running your own business means all the problems of the business are yours. You cannot just go home and find them fixed tomorrow! TE: At those times, how did you find the strengths to go on? RT: I would refer mostly to my faith in God. The rest would be my personal desire to bring my dream to fulfillment. TE: What are your expansionary goals? RT: I believe that with hard work and determination that I have, we are going to expand internationally and we are looking at establishing ourselves in property development. TE: How have you developed your staff team? RT: We have a few permanent staff. We mostly rely on short term contract staff. We pay well and try making them feel valued and empowered and that they have a future in the business. TE: What is your business philosophy? RT: Know what you are doing and do it to the best of your ability.
TE: How has the business impacted your family life? RT: Obviously things have advantages and disadvantages. Personally, the demands of the business have kept me away from my family.
TE: How much has leading the business with your wife grown you? RT: We do not spend equal time on the business. It has been time well spent. It helped us dream together and celebrate the successes together.
and Electrical Installations.
TE: Any words for someone who wants to start a small business? RT: Have a dream, calculate the cost and then follow it.
Directors: Reason & Nandipha Tshabalala Biggest Project: R800 000 Key services: Plumbing, Construction, Tiling, Employees: 6 (12 on Contracts) Inspiration: Our faith and vision to succeed Philosophy: Know what you are doing and do it to the best of your ability. Contact: 011 051 7259/ Cell: 073 039 9527 Email: email@example.com
Reascon Construction is a registered contracting firm and gives quotations for Building, electricals, plumbing, tiling, extensions and property development of any scale. The Township Entrepreneur - Page 11
In business logic, money follows the idea The biggest challenge for most of our clients is money. People cannot start a business because they have no funding. So they look to the bank, the government agencies - and even loan sharks! Computer Maintenance How many techies are there in the world? How many homeowners actually have a technical person they can call when there is a problem? It means computer maintenance needs to be done by someone, thus one of the best new small business ideas is to start a computer support service if you are technically savvy. There is space to compete with the Nerds. Cleaning Services Yes, most of us do not like to clean, but consider new small business ideas like this one. Cleaning is a gold mine. It is possible to make a decent amount in an hour through a cleaning business. You can clean after Utilizing skills learned in previous jobs, university ed- events, peopleâ€™s houses and even laundry cleaning. ucation, and life in a business format can pro-vide a Energy Efficiency Consultant person with a small business whether it is a home Many want to cut costs, but do not know where to based business or retail shop. start. A person with construction or utility backCreche You do not require a license to run a babysitting service as long as the numbers of children are kept to a low number specified by the government. As one of the new small business ideas just about anyone can start a crĂ¨che or after care. It is a way to stay at home with your own kids.
grounds can help lower energy costs in homes. A small business idea like this one may be skill specific, but it can help someone when work slows in construction to get more business.
Recycling Service As new small business ideas go this is one of the best out there. There are still plenty of companies without a great way to recycle, especially electronics. Starting Gardening Very few people enjoy gardening or have the time to a recycling service therefore means a great way to do their own. New small business ideas like garden- earn. With new small business ideas where anything can be recycled for a small fee, it is possible to make ing or landscaping allows you to utilize equipment you have at home in order to cut grass, plant flowers a hand-some amount. and trees, and do other garden work that can bring in decent sum of money. Errand Service Many people are busy, so many of the new small business ideas include helping out busy individuals like running an errand service. An errand service takes the shopping lists, dry cleaning, paying bills, and other errands people have and complete it for them. You too can start your own Q4U service. The Township Entrepreneur - Page 12
Taking charge of their destiny Johannesburg, Yaoundé, Harare, Maputo or Nairobi, London, Beijing or on the web, the setting is irrelevant. There is a rising generation of African entrepreneurs. These young people are intelligent and agitated. They do not believe the lies of the education systems that raised their parents generation. They are vying for their space in the marketplace and they compete with international standards.
“They’re not going to sit there and wait for governments to come and do things for them. As a matter of fact, they’re not going to sit there and beg for foreign aid, because they can see that every social need in Africa is a business opportunity.” George Ayittey — Economist, Ghana
They no longer dream of getting straight “As” and the cushioned life of the middleclass. They are ambitious and have big dreams for their lives, people, society and nations. Their buzzword in change. They challenge the status quo and innovate consistently. These are called the Cheetah Generation.
“We begin to say no to poverty and begin to redeem the dignity of the citizens by virtue of creating business opportunity.”
They are asking for equal opportunity rather than help. Many odds are against them, but they realise that the continent will never develop through aid and the generosity of the West or anyone else.
“The donors, we are tired of them. All those years, the aid, it has come, come, come. We are still poor… Give us the market and give us the standards. We’ll meet it.”
These entrepreneurs believe that they are as good as their counterparts from other parts of the world. It is our desire to have their voices inspire the many other fellow Africans to action. We believe like them, that the change that we desire is going to come from us. We have quoted some of the champions of this cause below;
The Township Entrepreneur - Page 13
Eva Muraya - Entrepreneur, Kenya
“The highest level of charity is when you can help someone get on their own feet, use their own God-given abilities to provide for their family.” Peter Greer - Microfinance & Effective Charity CEO, USA
Ebow Graham — Free Markets for Microfinance & SMEs, Ghana
“We've got to start looking at the Africans that are doing things, whether it’s for profit or non-profit, that are innovative, in the world-class stature, because I want for Africa to look at that and say, “That’s what I’m aiming for!” Magatte Wade — Beyond Microfinance for Africans, Senegal
All quotes are from Poverty Cure © www.powertycure.org
The unhealthy pursuit of success A look at the many SME websites and other platforms betray our unhealthy obsession with material success. The rise of ‘izikhothane’ culture threatens the potential of SME development in South Africa.
Bling culture South African society has adopted an unhealthy Bling culture. The izikhothane phenomenon is destroying potential for growth in the sector. (youngsters from the locations who compete in splashing money and even burning cash!) Your average South African young entrepreneur is driven by big dreams of fast cars, cigars, exotic whiskies and golden wristwatches. When business is seen as a means to a glamorous lifestyle, it loses its purpose. Business should first and foremost seek the good of other people. Moderation is a healthy virtue we need among the successful. Relationships Business activity must always be seen as a means to a better quality of life rather than a goal to be achieved. When the relational aspect is lost, business turns exploitative and other people become the fuel we burn to achieve our goal. There is an unhealthy focus on the millions in many entrepreneurial writings and talks in South Africa today. Relationships—an improving quality thereof, should be the bottom line.
Health The script is all too familiar: A guy has made it. He is the rags to riches story—then he is into drugs and alcohol and other things. Or he now lives in the office and works a 25 hour day. Then he is sick and dies or goes into depression. Looking after oneself is a critical requirement for success. A healthy lifestyle always includes a good balance of time and activity. Environment So there is an opportunity to make a killing. There are rules, but we can bypass them by making someone look the other way. Or we just do it when no one is looking. Many businesses prosper at the expense of other people by over exploiting resources or polluting the environment. True success is responsible for the environment. Community Success is meaningless if it does not benefit others. Sadly many entrepreneurs live in untold luxury and lift no finger at the squalid lives of their community. They love to be envied. How sad. Mutual There is a sense in which you cannot prosper without others. Therefore it is important to think about other players in the field who contribute to your success. The Township Entrepreneur - Page 14
Size depends on how you think Why do others make it big and others fail in the same environment? Businesses that have succeeded are based on ideas, ideas that are clearly written down in simple language. For you to succeed you have to stretch your thinking cap, and renew your mind from what your immediate environment has conformed you to be. You can breakout, and breaking out needs you to push from within your cocoon and comfort zone. How often have we witnessed immigrants flourishing with the ideas we dreamt we could do. With no access to funding and support structures that we get, yet they still succeed where we fail? Are they of a different pedigree than us?
Never outsource your core business. Do it yourself. Don’t hire people that you do not need to do what you could do yourself. Why share your income when you can keep it. You don’t have to feel big by employing people you don’t need. What value does your idea add? People and businesses do not buy out of sympathy. They buy into ideas that will simplify their lives and help solve problems? What solution is your idea adding? Even if you are a preferred supplier add value.
Don’t buy into trends: Chose the market that is right for you and that will allow you space to grow. Market choice impacts everything and it will be key to differentiator whether your business booms or fails. ReYou don’t need funding to start a business search will give you simple techniques that will You need an idea, a good idea, an idea that can help you pick the right market and also guide grow. Ideas attract funding. Refine your idea you if your idea is feasible. No product or serand then you will be able to gain the funding vice meets all markets. you need. How do you make money? Right Thinking The purpose of any business venture is to make Rome was not built in a day so they say. So be money. If you cannot explain in simple terms patient with yourself, take time to mature and how you will make money from your business it research your ideas. But how do you make sure means you have no capacity to exploit that. you invest your time and money in the right Take this example. John buys bulk electricity idea, when so many new business initiatives from the municipality at 60c per unit and resells fail? There is a lot of basic groundwork and stra- it to his tenants at R1,10. For every unit he tegic thinking you can do to increase your makes 50c. He makes money buy putting a chances of succeeding. mark up on the product. Each person has been conditioned differently and the challenges and life we lived has brought about the idea of who we are. Here are a few tips to think about to help you;
Know your limitations. Use right bite sizes so you do not choke. You cannot equally explore too many ideas at the same time. Successful people do fewer tasks and do them well. If you need to diversify acquire new skills, seek mentors and acquire new knowledge. The Township Entrepreneur - Page 15
Brand yourself. People do not buy from someone they do not trust and respect. Learn how to garner the respect of present and future clients by leveraging your already existing expertise.
Strategies for the growth phase Starting a business is easy but growing it is one of the hardest exercises that any entrepreneur can face.
By Abigail Mahlangu quate financing and the management of funding, their ability to keep records and manage employees, also the ability to market and sell their products and services. These are just some of the decisive elements that determine the health and wellness of SMMEs. Entrepreneurs may not have the same ambitions. Some are the consequences of a need for survival and there is a strong likelihood that their enterprises will remain small businesses. Entrepreneurs with a strong desire to succeed however, taking on the right opportunities and making the right decisions have a higher probability of growth.
South Africa is currently home to 5,979,510 small, medium and micro enterprises (SMMEs), all playing a vital role towards the overall achievement of job creation in the country. The successes of these enterprises are however greatly influenced by the entrepreneur’s personal abilities.
Growth is pertinent yet very complex and because of its complexity it is important to narrow it down by first asking how growth is defined.
The definition of growth may be seen as obvious but as one with academic affiliations, the Collins Dictionary is considered. Growth being defined as “an increase in size, number, significance, value strength etc”. Note it is an increase in various asReality demonstrates that about 70% of the startpects of the business and not just one aspect. Deups in South Africa fail within the first three years fined by Sandra Perks in the book managing of their existence, and therefore the contribution growth, growth is an increase in: to employment is negligible. The Global EntrepreFinancial indicators such as neurship Monitor (GEM), a monitor that measures Turnover and compares entrepreneurial activity of 183 coun Investments tries including South Africa, predicts nine out of ten Profits failures of start-up initiatives in South Africa. Thus Assets the vast majority of SMMEs do not reach their full Value of the business potential and fail to grow, resulting in lost jobs and Having to make strategic changes such as wealth for the region in which they are based. Mergers and acquisitions Aspects such as the ability to break into markets Exploiting new markets influence SMMEs greatly. SMMEs often tend to be Developing a new product clustered in supply-driven markets filled with com Changing the organizational form petition, and need to be encouraged to build en Acquiring partnership or alliances terprises operating in demand-driven environHaving to make structural changes such as ments. Other hindrances include; access to ade Including different layers of managers The Township Entrepreneur - Page 16
(increasing reporting relationships) Increasing employee responsibility Need to formulate internal systems Need to outsource certain functions
Organisational changes Developing processes and utilizing them Organisational culture Lastly the image of the company Becoming a more formal business Increase in professionalism Upgrading to bigger or nicer premises Replacing old asset with new ones Often emphasis is placed only on growing turnover but as illustrated above growth can be defined in broader terms. It is important to understand this because to grow turnover effectively means growth needs to take place in other areas of the business as well. For example, It is impossible to grow your turnover and not increase the way you deliver your services or the number of units you sell. Increasing the number of units you sell means either hiring more sales people, or improving your systems to sell better or manufacturing more. Growth in turnover does not come on its own which is what makes growth complex- everything needs to be constantly moving. Is a successful business a growing a business assuming that success is defined by being around for a long time and feeling financially secure? A company that has been existing for almost 10 years had employed 5 people and paid good salaries over the years. When assessed and analysed to see if the company had grown, it transpired during the analysis that the company had not grown instead it had been able to consistently deliver to the same clientele and meet its financial obligations over a long period of time. When the owner was asked why he volunteered for this assessment his response was that he feels as though his company is stagnant and not growing. The Township Entrepreneur - Page 17
What is crucial to understand about growth is that one does not often stumble across growth. Growth needs to be thought through and planned. It is a business decision like all other business decisions. Businesses don’t just grow! It is also important to know that growth is a process which itself has various stages that will lead the business to maturity. The question that often gets asked is how do I know if I am in a growth phase. A simple response is that when you find yourself beginning to think about structural changes in your business, hiring people or upgrading your image or perhaps seeing the need to draft processes for your business then you could be in early stage growth. It is at that point when you begin to feel like what you have is not enough to take the business forward and more is needed. At that point, you need to begin to plan for what is required and how will it be financed. Don’t expect for it to just happen. To grow or no to grow is a question that must be answered! Once businesses have passed the three year mark and are established having had a successful start up. The next challenging phase posing threat for failure is business growth. Next editions will cover: Challenges faced in growth phase and how to overcome them Growth Strategies, which one to choose? Developing a growth plan and financing it. Abigail Mahlangu is the CEO of Tushiyah Advisory Services who partner with organizations to support their programs. Tushiyah is well aware of the challenges facing entrepreneurs, and addresses these challenges through specialized business management training, mentoring and coaching, encouraging entrepreneurship by mobilizing and up-skilling ordinary South Africans to deliver extraordinary business results. For more information on the services of Tushiyah, visit their websites on: www.tushiyah.co.za
Some incredible life lessons from an 8 year old that are strikingly similar to many real life business experiences.
Most of us get to learn about money later in life after several financial disasters or after experiencing some hardship. However, the piggy bank is a great starting point for learning how to manage money. These principles easily translate into lifelong financial management skills and position your child as a better entrepreneur. Saving The ability to set priorities, delay gratification and prepare for eventualities. Saving should never be motivated by fear and insecurity. When kids learn how to save as a principle not out of necessity, they are likely to do well. Spending Money gives us power when we spend it. Kids should lean how to budget and handle money with respect. We are all too familiar with the kid who rushes to the kiosk to buy sweets with every 50 cents they lay hands on. This kind of behavior encourages financial recklessness and it must be discouraged early. Teach your child to decide in advance and justify why they want to buy something. Decisions Financial decisions are to be carefully made. If your child buys just because they can afford, they are likely to waste money. Teach them how to judge products by their quality and benefits and not merely features. Investment Investment is almost a swear word for most people. This is because we always assume that investment in stashing money away in bonds or stocks or buying a house. However, there are many relational ways of investing e.g. Improving communities and youth development are some of the ways that we can invest our money. The principle here is that your child learns that the money is not theirs alone and sharing it is equally important as making it. Banking Teach your child how to use a financial service such as banking. Most banks can open a bank account for a child with the help of a parent. The Township Entrepreneur - Page 18
JOIN OUR SME TRAINING PROGRAM At Nicholson, we believe that the greatest challenge for entrepreneurship is not access to information or even funding. These are widely accessible now than any other time in the past. However, it is the practical skills of managing a viable business i.e. translating the knowledge to expertise that is a real challenge. HOW IT WORKS Entrepreneurs and Mentors matched in breakout groups of 5 based on skills and challenges. 3 sessions, 1 hour each. Lunch and snacks in between. Sessions followed by a Briefing where panel of entrepreneurs engage with audience. Closing the day with an open networking session. Inspiring talks throughout the day from experts. Contact us today for more information. www.nicholsonic.co.za
The Township Entrepreneur - Page 19
Beyond Banking Walk in to an Enterprise Development Centre and receive assistance, advice and support to build and grow your business into a successful and sustainable operation. Absa is committed to addressing the unemployment and poverty challenges faced by many South Africans. With over 12 million South Africans reliant on small and medium-sized businesses for their livelihoods, more focus needs to be placed on the growth and development of these businesses. The Enterprise Development (ED) business unit within Absa aims to create and promote entrepreneurship to ultimately contribute towards job creation and the sustainability of small and medium-sized businesses. The Enterprise Development unit has a greater vision, which also involves taking a view on future clients. This provides an understanding of what needs to be done to attract, grow and retain these clients and also to assist them to overcome any possible challenges they may be confronted with. By investing in our clients, Absa Enterprise Development is changing the South African business landscape, one entrepreneur at a time. Locations: Gauteng, Johannesburg +2711 689 1940 Polokwane 70 Hans van Rensburg Pietersburg Centre, Polokwane +2715 290 5500 Mpumalanga, Nelspruit +2711 846 8882 Kimberley Shop 201, 1st floor 51 Phakamile Mabija Road Jones Street Mall, Kimberley +2753 807 7000 Durban 127 Alice Street, Durban +2731 309 5330 Pietermaritzburg 204 Peter Kerchhoff Street, Pietermaritzburg +2733 264 3860 Free State 1st floor CBD Branch 64 Maitland Street , Bloemfontein 051 407 0000 Eastern Cape 1st Floor Absa Bank 484 Govan Mbeki Avenue , Port Elizabeth 041 502 1111 Khayelitsha Shop 16 Khayelitsha Mall Walter Sisulu Drive , Cape Town 021 360 2660 Email: ED@absa.co.za
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Group The Township Entrepreneur - Page 20
Published on Jan 10, 2014
An information resource for SMEs, entrepreneurs and small business owners. It covers startups, growing small to medium enterprises. We share...