Brenda Ndlovu
Wanted: the next Mark Shuttleworth. While South Africans are touted as naturally entrepreneurial, a closer analysis of the country’s small, medium and micro enterprises (SMMEs) reveals that many of these are not entrepreneurial by design, but rather by necessity.
For small businesses to have a tangible impact on the local economy and generate sustainable jobs that enable import replacement, we need to somehow cultivate a culture that encourages individuals to identify opportunities or gaps in the market – and capitalise on these.
Shawn Theunissen, the head of corporate social responsibility at Growthpoint Properties and Property Point, says business incubators have a critical role to play in this regard.
Instead of replicating existing SMMEs, incubators need to encourage entrepreneurs to find their unique selling point and carve out a niche in the market.
Like the professions of teaching and nursing, entrepreneurship is arguably a calling.
In South Africa, however, where unemployment levels remain stubbornly high and social grants remain comparatively low, it has become a necessity for many.
As such, a relatively large pool of SMMEs is predominantly survivalist, reflecting our country’s past legacy, current socioeconomic challenges and our population’s lack of formal education in many instances.
While survivalist enterprises fulfil a certain role in the economy, their very nature does not encourage job creation.
These SMMEs typically support the entrepreneur’s hand-to-mouth existence. Operating in areas saturated with similar offerings, the entrepreneurs usually run the businesses themselves – with their takings each day dependent on their individual sales prowess and, more often than not, willingness to undercut their competition.
Price becomes the differentiating factor between these SMMEs for the most part, which keeps margins very low and limits the ability of the enterprise to grow or support additional staff.
For South Africa’s SMME sector to deliver on its promise of creating jobs and stimulating economic growth, the country needs to find a way to move away from survivalist thinking and rather promote opportunity-based entrepreneurship, especially among its previously disadvantaged communities.
The challenges in creating this type of culture are, however, significant.
Education plays a big role in identifying opportunities in the market – to understand the possibilities of an idea, one has to be exposed to the sector in which one wants to play. This makes the role of business incubators and enterprise incubation programmes critical.
Incubation programmes have the potential to level the playing fields and elevate incubated businesses to a far more opportunistic space by virtue of their intervention.
In order to achieve this, they need to ensure that their selection criteria enable them to identify the “gems” among their applicants.
Criteria must include an evaluation of the business idea in terms of its innovation and ability to create new, sustainable jobs.
Incubators must focus on creating a pool of SMMEs that don’t compete against each other, but rather are equipped with the skills and expertise they need to challenge larger market players.
Because the ultimate objective of the incubation must be to foster opportunistic behaviour among the entrepreneurs it assists, an incubator or enterprise development programme must partner with the SMME to discover and develop its unique selling point.
This is critical, especially in cases where the SMME is trying to break into an industry where there are fairly low barriers to entry, such as the corporate cleaning or security sectors.
By differentiating the business from its competitors, one automatically gives it a platform from which to do business, and gives it a far better chance of securing funding. One simultaneously trains the entrepreneur to “see” business opportunities in a new way.
If one considers that an opportunistic entrepreneur typically starts more than one business in his lifetime, then one soon sees how this type of approach by an incubator can open the door to a number of successful and sustainable SMMEs being created.
An incubator’s intervention and support offering must furthermore foster the growth of the local industry in which the SMME is operating, enabling import replacement wherever possible and ensuring that the business can compete effectively in the open market. This is once again enabled by defining and differentiating its unique selling point.
When it comes to enabling an SMME’s sustainability, incubators also need to pay attention to the model used. In the case of an enterprise development programme like that used by Property Point, one of the benefits it offers entrepreneurs is a chance to appear on Growthpoint’s supplier list.
The process of incubation works towards an SMME being able to meet certain key criteria.
Of critical importance, however, is that the incubation model does not stop there, it must give these entrepreneurs a means of accessing the industry at large.
Unless it does this, one runs the risk of simply replacing X number of jobs when contracts change at the organisation, as opposed to creating new jobs and stimulating the economy.
For South Africa to reach its entrepreneurial potential, we have to find a way of encouraging the opportunists in our midst to step up and take advantage of the gaps they have identified in the market. Business incubators and enterprise development programmes are critical enablers of this process.
By selecting entrepreneurs who display opportunistic potential and developing them accordingly, incubators will be able to better shape and influence the current SMME landscape, ensuring that these businesses create new and sustainable jobs, and enable the economic growth of our country.