Associate: Indalo Business Consulting
I am often outspoken about the need to unlock South Africa’s economic growth by enabling entrepreneurship.
The reality of the matter is that, while every company has dreams of becoming the next big thing (Microsoft, Apple or Amazon), most entrepreneurs establish their business with the goal for supporting their families, not to take over the world. This means that most of South Africa’s entrepreneurial future will be small, medium and micro sized enterprises (SMMEs).
The success rate of these enterprises is shocking. A lot of work needs to be done to enable the success of these companies and the candidates to facilitate this are not yet ready to put their hands up.
Low success rate
I recently read an article on ewn.co.za which points out that five out of every seven SMME businesses will not be able to survive their first year of operation. This is one of the biggest challenges that need to be addressed.
This news came about at a recent round table discussion where funding was highlighted as the major reason for failure among SMMEs. The EWN article points out that the panellists in the round table discussion concluded that a greater effort to form partnerships between the public and private sector would ensure that SMMEs received practical and relevant support, which was accessible. SMMEs play a big role in addressing the major challenges of unemployment and inequality in our country, but we are not doing well, said Cova Advisory Director Tumelo Chipfupa.
One of the factors that we cannot look past is the fact that SMMEs are a major role player when it comes to job creation. At a time when Government is under pressure to create jobs, support for the SMME sector is more crucial than ever.
We need to get to the root of the financial support problem because it has many facets. Securing finance will be a problem, but the issue is broader than this because if a company manages to secure finance, do they know how to use it effectively? Mentoring and coaching entrepreneurs about financial management and optimising cashflows is available through Government Agencies like SEDA?
Tourism stumbling block
Many SMMEs in South Africa are community based. This is important because it may be the only source of employment within the community. The SMME may also be providing a service to the community which is desperately needed.
Many townships have built their livelihood on tourism as visitors to our country want to experience South African culture. However, the Covid-19 Pandemic has had a detrimental impact on these communities. I recently read an article in The Sowetan which pointed out that a popular shisanyama eatery in Gugulethu, in Cape Town, had to close down because of Covid.
The article points out that without an influx of tourists, we have no business at all. Local people used to come and enjoy themselves too, but now they simply order food and go home. People don’t appreciate the sit-down experience anymore, which makes things hard.
We have all had a fair amount of adjusting to do when it comes to Covid, but it is sad that businesses like this cannot continue their legacy. One of the biggest questions at the beginning of the Covid Lockdown was how South African businesses could create an experience that is directed at South African citizens. If we cannot get international tourists, we need to encourage our own citizens to support local businesses. This may need some innovative marketing, which is a specialised skill that may not be readily available to these small businesses.
If the business rescue industry is about job preservation, why does this only apply to distressed companies? Do Business Rescue Practitioners have a role to play in companies that are not yet distressed but need a helping hand to guide them on the right path?
Technology is important
the last challenge that needs to be addressed is closing the technology gap. If Covid has taught us anything, it has shown us that consumers are begging for innovation and are interested in companies that have a digitised e-commerce operating model.
Are SMMEs equipped for this? We spoke about the spectrum issue in our previous article. But even if spectrum and data was readily available, do SMMEs have the skill set to grow their online businesses?
An article on entrepreneur.com points out that the future of SMMEs is bright and that they may be the biggest contributor to the economy by 2030. The growing contingent of more confident start-ups will change the face of our economy between now and 2030. For starters because they are more in tune with what their customers need, particularly compared to large corporate dinosaurs.
The article adds that South African tech companies will continue to eat away at large companies’ revenues, profits and presence simply because they offer customer-focused solutions that provide end-users with an experience, not just a product or service.
As time elapses, start-ups in South Africa, and the rest of the continent, will become bolder, gutsier, and more daring. Fintechs especially will continue to disrupt the status quo, which is what they are already doing.
Again, Business Rescue Practitioners have a role to play. We need to equip ourselves to become leaders in this field so that we can pass on our knowledge with confidence.
Changing mindset
We are all looking for new business to increase our revenue. Often, large corporates – who are distressed – are seen as low hanging fruits that are ripe for picking. While this may be the case, we cannot ignore small companies.
Consumerism is moving away from larger corporates to smaller companies who use locally sourced products. We need to ensure that there are enough of these companies around to care for this need. How can we, as Business Rescue Practitioners, put our hands up to change South Africa?
Charles Phiri is an Associate at Indalo Business Consulting
