Small businesses need to diversify

With the number of small businesses still far exceeding those who become successful, entrepreneurs are continuously looking for strategies to make businesses more profitable. From personal experience I know this can be very challenging especially in the early days and when starting a business and especially when struggling we often will take all the help we can get.

A recent study suggested that small businesses need to broaden the outlook and sell a more diversified range to a wider set of clients.
In an interesting bit of rsearch Loni Prinsloo from http://www.engineeringnews.co.za talks about the findings that points the way towards a more sucesfulbusiness:

SME Survey 2010’ principal researcher Arthur Goldstuck said on Monday that the first recession to hit South Africa in 17 years was instructive and showed that those companies which did not have all their “eggs in one basket” were the ones which weathered the storm more effectively.

“It goes to the reliability of the income stream and the health of the target market,” said Goldstuck.
“When one sector comes under pressure, it helps to have others to carry the business through tough times. Typically, however, if you serve corporations, you are likely to be more resilient and more profitable,” he added.

The survey, sponsored by the National Youth Development Agency (NYDA), showed that 39% of SMEs in established markets had typically done business with corporate customers, but only 31% of businesses in emerging markets had done business with corporate customers.
“There is a strong difference in diversity between established and emerging SMEs, especially in terms of corporate procurement.

“This presents an issue, since black empowerment legislation encourages sourcing from small business and in particular, from emerging small business. That could make a case for more intervention from government in terms of enforcing procurement policy,” said Goldstuck.

“We would like to see continued and accelerated participation from big business in supporting and developing emerging talent to achieve the capacity which is required by the procurement arms,” stated NYDA chairperson Andile Lungisa.

Resources permitting this may be a good idea but it will take time and effort to develop the wider product range and target the wider clients groups. As a lone entrepreneur especially it may be fairly challenging to get to this point but will be very useful as a future goal to work towards.

Foreign donors invest R43,5 million in SA Small Businesses

South African business plans has become extremely popular amongst foreign investors in recent months. In addition to the article in the South African Venture Capital blog which earlier reposrted a boost from foreign Venture Capital funds investing in SA Small businesses. Small businesses with viable business plans in South Africa has already gained more than R43,5 million from foreign donors according to the South African Times


South African small businesses competed against other emerging countries for foreign investment, with foreign donors investing R43,5 million in the country's small businesses this year, an increase of 89 percent from last year, the Small Enterprise Development Agency said on Wednesday. 

The agency said this increase was due to its improved financial management and stable leadership, adding it also meant there was confidence in the agency's role to develop and support small enterprises, chairman Linda Mngomezulu said at its annual stakeholders' meeting. 

The Global Entrepreneurship Monitor report published in May showed that one in eight people started a business in emerging nations such as India, Chile and Brazil, whereas in SA the figure was one in 13 
While the agency could not identify the foreign investors that were supporting local small businesses, SAB Miller, Sasol and Bidvest were examples of local companies which had put significant funds into training programmes and enterprise development. 

Mngomezulu said the agency would 'further roll out plans' to make it a 'centre of excellence for business development'. 

However, according to a survey released by Finscope earlier this month, the growth of small businesses is still slow in SA, with only four percent of entrepreneurs aware of the services offered by the agency. 

Agency CEO Hlonela Lupuwana said the organisation would respond to these challenges by 'strengthening partnerships with provincial and local government agencies and developing a client journey model which prioritises interventions in small businesses'. 

The agency's l earning academy trained 750 people this year, with 70 percent of those starting their own businesses, she said. 

Lupuwana said, however, that the agency did not want to focus only on the number of businesses assisted, but also on producing quality businesses that would have a real effect on economic growth. 

The global economic crisis had proved 'devastating to the vulnerable small enterprise community' but it was at such times that the value of the agency ' was best revealed as creating an environment which prevented the recession from dampening the country's entrepreneurial spirit'. 

She acknowledged that the agency needed to raise awareness about its services. Consequently, the agency intended to develop high-profile visible projects, hire more staff at branches around the country and bump up delivery of its products and services.


SEDA who on a regular basis fund a wide range of business plans and ideas in SA is encouraged by the support from foreign investors.

Supporting more than 14 000 small businesses

Latest figures suggest that various government incentives with services like business finance and business plan support have helped over 14 000 small firms in the last 12 months alone. SEDA, with the help of well chosen alliances such as SA Business Plans and the South African Investors Network is delivering on its promise of supporting the economy of South Africa through helping small business owners everywhere.

A recent article on the SouthAfrica.info website explains:

South Africa's Small Enterprise Development Agency helped over 14 000 clients with services ranging from business planning and registrations to cooperatives support and access to markets in 2008/09.

In all, 199 830 potential and existing small businesses accessed the agency's services through its 42 branches countrywide, an increase of 7.3% over the previous year.

Briefing a National Council of Provinces committee in Cape Town this week, Seda CEO Hlonela Lupuwana said that out of those, 46 695 clients' needs were assessed and 14 373 were helped.

The Seda technology programme assisted 835 small businesses with a total turnover of R129-million, through its network of 27 incubators, and also helped to create 224 new small enterprises, Lupuwana said.

Its Community Private Public Partnership programme, which offers support to co-operatives and community-owned projects, has also been revived.

In-house advisors
Seda had decided to limit the use of consultants to the supply of more technical services, and to 20% of all services offered by Seda, with the remainder being offered by in-house advisors, Lupuwana said.

Last week, a group of 25 Seda business advisers embarked on a seven-day visit to Taiwan, where they were expected to gather more diagnostic skills and training on helping business owners.

Another group of 25 advisers were expected to visit Brazil later this year, Lupuwana said, adding that the visits were a cost-effective way of supporting advisers as Seda only had to pay for "minor expenses".

Forging partnerships
Lupuwana said a random survey of 902 clients had shown that 80% of clients found that Seda's assistance had a positive effect on their business.

This support had come amid limited resources, and despite a six-month moratorium on the provision of all services by the agency to small enterprises.

The limited budget – the agency received R331.2-million for 2009/10 – was a "major problem" in terms of meeting the agency's targets.

Lupuwana said the key to widening the agency's support on a limited budget would be the partnerships it could forge with key partners such as provincial and local governments.

In the Eastern Cape, for example, a number of municipalities had donated buildings and paid for rent so that Seda centres could be set up there.

Source: BuaNews

SA Business Optimism Grows

Good new for South African business owners and Business Investors is that the report in the Times this week that business confidence in South Africa is on the up. If you are anything like me you may also be growing tired of the constant press of down turns and slow economic sow downs, so this news comes as a welcome respite.

From my own conversations with small business investors and SA entrepreneurs, opinion has been divided on the effect of the slow down. Many small businesses are growing and feel little effect apart from that they have been reading about in the press. On the other side there are also a number of businesses who are very much aware that consumers are careful with their spending. I do still believe that many businesses have their future in their own hands and a forward looking innovative approach seems to still be baring fruit for numerous business owners and entrepreneurs. The article from the Times can be seen bellow.

SOUTH African businesses are optimistic about the country’s economic climate.

These were the findings of the June Business Confidence Index compiled by the South African Chamber of Commerce and Industry, and which measures confidence in the economic climate.

But the report cites the recent 31.3percent electricity tariff increase by Eskom as one of the most significant threats facing business.
It said that by May 2010 the price of electricity will have gone up by 62.5percent.

The index recorded a score of 83.1 that, while far below last year’s June level of 92.6, was the highest recorded for 2009.
In March, the index was at its lowest at 78.9 before making gradual improvements in April and May.

Out of the 13 indicators, six had a positive impact on the index. These were liquidation levels, exports, vehicle sales, construction projects, precious metals prices and the rand exchange rate.

The negative indicators for the month were in manufacturing, imports, retail sales, inflation, private sector borrowing and real finance costs. The impact of share prices remained unchanged.
Sacci economist Richard Downing said: “Domestic and foreign demand for South African goods and services is strained and this has negative consequences for the supply side factors of production, namely labour, capital and operating overheads.”
Economists said the index was tracking the state of the economy fairly accurately.

Tony Twine, Econometrix director, said: “It certainly confirms the general business activity during the second quarter of the year. Vehicle sales, which were atrocious in March, recovered in May and slightly more in June.”
Standard Bank economist Johan Botha said, though the climate was still depressed, the economy was beginning to turn around.

“The rand has strengthened well over the year, which might have a negative effect on imports, but it also indicates that we are approaching the bottom of the cycle,” he said.
More details on this from the Times News Paper here

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SEDA small business support

SEDA, the governments small business support arm is as committed as ever to supporting small business in South Africa. Not only have SEDA supported numerous entrepreneurs from disadvantaged backgrounds over the last few years they have also put their money where their mouths are when it comes to Business Planning support and funding for new ventures.

In a recent interview, Hlonela Lupuwana, acting CEO of the department of trade and industry’s Small Enterprise Development Agency, spoke to ANNE HUTCHISON about Seda’s commitment to the Business LaunchPad

SEDA is a key partner in the Business LaunchPad competition, as its national network of branches and enterprise information centres help to ensure that entrepreneurs get to know about the competition.

“Business planning, which is what the competition is about, is the core of Seda’s business,” says Hlonela Lupuwana, Seda’s acting CEO, commenting on the importance of its involvement in the FNB Enablis Business Plan Competition.

“At a more strategic level, Enablis brings public and private sector partners in the business of SMME development together to collaborate on this project, which is a good example of the kind of synergy we support,” she adds.

Seda began working with FNB in 2007 — to assist South African entrepreneurs gain the necessary skills to run a sustainable and competitive business — about the same time as the bank became involved with the Enablis LaunchPad. Since becoming an active partner, Seda’s role has extended beyond simply being a co-sponsor to being closely involved in distributing entry forms, assisting with the adjudication of entries and identifying how entrants can be assisted through other Seda programmes.

As a key driver of SMME development to reduce high levels of unemployment and poverty, Seda is mandated by the department of trade and industry to boost the sector through its Integrated Strategy on the Promotion of Entrepreneurship and Small Enterprises (ISPESE), aimed at identifying factors that contribute to the success of the small business sector.

Recognising the need for focused SMME support, the ISPESE provides a wide range of non-financial business development support services to entrepreneurs in the pre-start-up, start-up and growth phases, as well as to businesses in distress. Through its 43 branches countrywide, Seda’s services include business registrations and planning, co-operatives’ support, training and mentoring, and access to markets, finance and technology.

Lupuwana believes that the Business LaunchPad gives fresh impetus to the SMME cause.

“It identifies existing and aspiring entrepreneurs and encourages them to sharpen their business acumen, improve their business plan thinking and develop writing skills,” she states. “Showcasing the winning entrants as role models also encourages entrepreneurs.”

Lupuwana says she felt “incredibly inspired” when she attended the adjudication panels for the finalists. “These were people from all four corners of the country, whose business ideas and passion had been recognised, and you could sense that whether they won or not, they could continue with the added confidence of knowing their idea had been selected out of the thousands of entries.”

She says Seda aims to move informal enterprises or businesses in the seed stage to viable concerns that are registered and can grow by taking advantage of the available support services. “The ultimate goal is to transform ‘necessity’ entrepreneurs into ‘opportunity’ entrepreneurs, where entrepreneurial thinking is not just based on subsistence but on properly identifying and harnessing available business gaps.”

Seda offers a number of structured programmes. The Technology Programme, for example, uses the “incubator model” to fast-track the development of small businesses in a range of industries from platinum beneficiation to the manufacture of essential oils.

Businesses are provided with premises, manufacturing machinery, advice on marketing and general business management for an initial period, after which time they are expected to have acquired the necessary skills and market reach to go it alone.

“The aim is to give entrepreneurs time to get up and running in a protected environment by providing the necessary access to resources, intensive mentoring and support that will make their business viable in the shortest time possible,” says Lupuwana.

Seda’s Export Development Programme exposes SMMEs to the international business arena and global best practice through TradePoint, a global system which assists small enterprises to trade internationally and access information by using electronic commerce technologies.

Other key areas of assistance are Seda’s Franchise Support Programme and Co-operatives Programme. It also focuses on growth industries: for example, its Tourism and Cultural Industries Programme supports both direct and indirect tourism initiatives through networking and training.

Partnerships such as that with FNB and Enablis are crucial to achieving Seda’s goal of establishing a formal and sustainable small business network on a large scale, says Lupuwana.

Other local partners include business development support agencies and a range of development finance institutions, as well as dti-appointed finance entities such as Khula Enterprise Finance, the National Empowerment Fund (NEF), the South African Micro-finance Apex Finance Fund (SAMAF) and sector-specific finance bodies.

“We also benefit from the experience of global partners who provide technical and, to a limited extent, financial support.”

A major partnership is with Finland, following the signing of an agreement to support Seda with core funding of around R45-million and technical assistance of about R7-million over four years. Another is the Tri-Nations partnership between representative groups of Seda, the Brazilian Micro and Small Business Support Service (SEBRAE) and India’s National Small Industries Corporation Limited (NSIC).

An annual Tri-Nations Summit on Small Business is part of the initiative between India, Brazil and South Africa to promote co-operation and exchange.

“Small business success is the cornerstone of economic growth in South Africa, and Seda initiatives and partnerships are pivotal,” says Lupuwana, emphasising that collaboration is a key component of the ISPESE strategy.

We acknowledge The Times newspater for their contribution to the article