Mainstream franchise market remains expensive and beyond reach of SMEs, says Ndabeni-Abrahams

The Department of Small Business Development Minister Stella Ndabeni-Abrahams. File: GCIS

The Department of Small Business Development Minister Stella Ndabeni-Abrahams. File: GCIS

Published Oct 27, 2023


The Department of Small Business Development had an interest in franchise business models that gave access to markets for the country’s small and medium business sector, the department' minister, Stella Ndabeni-Abrahams, said yesterday.

Giving the keynote address at the the Franchise Conference held by Franchise Association of South Africa (Fasa) yesterday, Ndabeni-Abraham elaborated on small business and franchise initiatives recently signed with Fasa and other government entities.

She said for this sector to succeed, the country needed to provide a far more comprehensive business support system and drastically improve access to effective participation of small, medium and micro-sized enterprises (SMMEs) to the economy.

For the majority of potential entrepreneurs, the mainstream franchise market remained expensive and beyond reach. “This requires deliberate efforts by stakeholders.”

She said: “I have listened to many stories wherein franchising ended in tears. In my view, this is where Fasa and ourselves as government come in to make sure that industry benefits all stakeholders and to ensure that the model is guided by a set of ethical and mutually beneficial standard practices, most importantly to help mitigate inherent risks.

“There is nothing frustrating like having someone spending sleepless nights, coming up with a great idea only to be messed up by people in the process," Ndabeni-Abrahams said.

She said that as a department, they continued to ensure that there was a finance system that was better aligned to the needs of SMMEs, including cooperatives. This as a South African SMME and cooperatives funding policy has recently been gazetted.

Ndabeni-Abrahams also encouraged entrepreneurs to participate in LED (local economic development) forums to help guide municipalities in their LED strategy and spatial planning.

The ministry said it would be going to Nedlac with this policy. It said that key to the proposal it had made in it was the establishment of a fund of funds because according to the International Monetary Fund, South Africa has a credit gap of R350 billion.

Fasa CEO Fred Makgato said since everyone was complaining about unemployment and lack of investment opportunities, the board of Fasa had taken the decision that it should find a department that they could work with to create jobs for young people, women entrepreneurs and people with different abilities.

He said the journey started when he met with Ndabeni-Abrahams in Umtata where he told her that they wanted to create franchise awareness in rural and township areas.

Makgato said they decided to work hand in hand with the government because they were worried about why franchising was not being taken seriously by the government.

He said the minister had given a directive that the department worked with them to ensure their economic contribution aspirations were realised.

“Those included training. How do we get our people trained to become entrepreneurs especially within the franchising space. Secondly, how do we get our people ready to get into franchising? We noticed that there is this skills gap where our members look for suitable franchisees but the problem is that they cannot get suitably qualified entrepreneurs to take on the opportunity,” Makgato said.

According to a recent survey by Margaret Constantaras, researche- in-chief at Research EQ, who oversaw the survey commissioned by Fasa and sponsored by Absa, the estimated turnover generated for 2023 was R999 billion, a 36% increase over the 2019 figure of R734bn, reflecting the increased number of large franchisors participating in the survey.

This amount does not include revenues from listed companies operating in the franchise market. An estimated turnover of R999bn for the franchising industry as per the research was equivalent to 15% of the total South African gross domestic product.