FLYING THE NEST - JSE MAGAZINE

FLYING THE NEST

Incubation hubs are proving crucial during the start-up stage to help fledgling SMMEs in townships find their wings

FLYING THE NEST

Lufefe Nomjana bakes spinach bread and muffins that are healthy and affordable, selling his green loaves through a growing number of outlets in the Cape Town area.

Zandile Dhlamini shows tourists a different side of Soweto, taking them, for instance, on a culinary tour that starts with a ‘smiley’ (sheep’s head) from a street vendor, then leads to a meal in a private house and culminates in an upmarket restaurant.

Sizwe Nzima collects and delivers chronic medication from public hospitals and couriers them by bicycle directly to the patients’ homes in Khayelitsha, saving them time and the hassle of queuing at the clinic.

These three township entrepreneurs all began their small businesses – Espinaca Innovations, Aahaah Shuttles and Tours, and Iyeza Express respectively – with little more than a brilliant idea and fierce determination. Today they run flourishing enterprises and provide employment for others.

Their success is rooted in strong governmental and corporate support structures that provided the training, tools and finance for their business ventures. Incubation hubs countrywide – such as Hubspace in Khayelitsha, Woodstock and Philippi in the Western Cape, and the newly established Riversands Incubation Hub in Gauteng – are helping SMMEs, especially during the start-up stages.

More than business centres, incubation hubs are places where under-resourced entrepreneurs come together in a shared work environment, providing access to advisory services, finance and a network of professionals and mentors. Hubspace plans to roll out franchises across townships ‘to lift people out of poverty and bring prosperity to enterprising individuals who deserve a legitimate shot at success’.

Nomjana and Nzima are both part of Khayelitsha Hubspace and previously got their big break at the Raymond Ackerman Academy of Entrepreneurial Development. Here Nomjana spent five months learning the basics of entrepreneurship and came up with the business plan for Espinaca Innovations – his bread bakery that uses spinach as a key ingredient. The concept has generated media interest, including an appearance on CNN.

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‘We investigate what kind of skills, marketing effort and financial requirements are needed’

SALIFOU SIDDO, CEO, TOURISM ENTERPRISE PARTNERSHIP

While Espinaca was partly financed through online crowdfunding, Nzima’s bicycle courier business Iyeza Express was kick-started with R10 000 in prize money that he won for being the best entrepreneurial student at the Ackerman Academy. This was followed by a R100 000 grant from the SAB Social Innovation Awards. The government also has a number of channels to develop budding entrepreneurs, such as the National Youth Development Agency, the Small Enterprise Development Agency, the Incubation Support Programme at the Department of Trade and Industry and the Gauteng Enterprise Propeller.

Then there is the Awethu Project, which has incubated more than 500 entrepreneurs, and raised funding from government agencies as well as companies such as Discovery, Accenture and General Electric.

Meanwhile, the SA Black Entrepreneurs Forum (SABEF) has taken its Kasi2Kasi SME Development roadshow to townships across the country to motivate and provide technical training sessions to potential and current black entrepreneurs and small-business owners.

SABEF’s research gives insight into township trading, where entrepreneurship is often a means of survival. For instance, the majority of entrepreneurs (56%) run their business from home, and 76% are renting the property. As the report states: ‘The entrepreneurs tend to focus on industries that are either easily conducted from their or someone else’s home (e.g. food, beverage, clothing and textile), or do not rely on a set location (e.g. agriculture and forestry, construction).’

Many would-be township entrepreneurs don’t make it. SA has the highest business failure rate among the BRICS countries, according to the 2014 Global Entrepreneurship Monitor report. And it reveals more bad news: the percentage of South Africans involved in entrepreneurial activity has dropped by 34% since 2013, and early-stage entrepreneurs (those involved in a business that is less than 3.5 years old) fell from 10.6% in 2013 to 6.97% in 2014.

However, there is good news too. Townships are an important market segment due to their sheer volume. Government has recognised that a thriving, well-organised entrepreneurial township sector will create jobs, reduce poverty and stimulate economic activity in the country.

According to a 2014 World Bank study titled Economics of South African Townships, roughly half of the country’s urban population lives in townships and informal settlements. These residents account for 38% of SA’s working age citizens as well as 60% of the unemployed.

The study focuses on Diepsloot, situated between Johannesburg and Pretoria and home to nearly 200 000 people, most of whom live in shacks. Despite the intrinsic poverty, Diepsloot’s economy is valued at R2 billion – which translates into huge opportunities for local manufacturers, retailers, entrepreneurs and small businesses.

The government has announced ambitious plans to improve the situation for those wanting to start or grow their township enterprises.

Gauteng premier David Makhura said in his 2015 State of the Province address that the provincial government had committed more than R160 million to the township economy. In the 2015/16 financial year, in excess of R300 million was set aside to support township enterprises and co-operatives.

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‘With little more than a brilliant idea and fierce determination, Today they run flourishing enterprises’

The previous year, he vowed to revitalise and mainstream the township economy by supporting the development of SMMEs, township enterprises, and co-operatives.

In his 2014 State of the Province speech, he noted that, as township entrepreneurs are capable of providing furniture, food and clothing, ‘this will bring millions of township residents into the mainstream of the economy’.

Back to Zandile Dhlamini, who was born and raised in Soweto (about an hour’s drive from Diepsloot) and is part of the mainstream economy. She started Aahaah Shuttles and Tours with the support of the Tourism Enterprise Partnership (TEP), which was launched 15 years ago to create jobs and market access for black-owned SMMEs in the tourism industry.

The NPO, which is funded by the Department of Tourism and the private sector, aims to create an ‘alternative face’ to the mainstream tourism experience. This means that tourists can book into in a township guesthouse, use historically disadvantaged tour operators and venture on more unusual adventures, such as quad biking, go-karting and paintballing in Soweto.

TEP’s Hidden Treasures is an initiative that features anything from grass-roots performing arts, wire art, authentic cuisine and African songs and instruments across SA’s nine provinces.

‘We normally support businesses that are about two years old but also help start-ups, such as Aahaah Shuttles and Tours, if they are promising,’ says TEP chief executive, Salifou Siddo. ‘It takes a certain person to become an entrepreneur. The core elements are determination to overcome the challenges; passion for what you are doing; as well as innovation and creativity, as you need to understand and meet client expectations.’

He adds that to date TEP has created 80 000 jobs; its database of clients encompasses 4 000 SMMEs; 28 000 owners and their employees have benefited from training programmes; and 450 small tourism business owners have been mentored.

The supported companies account for a combined turnover of R7 billion, while the return on investment is R9 461 for each job supported, and R9 for every rand invested.

‘Our clients have to report their turnover and the number of jobs they have created back to us,’ says Siddo. ‘If someone is not serious about their business and doesn’t allow us to monitor their progress, we will drop them.

‘Two years ago, we instituted an annual admin fee of R600 for our clients, to separate those who are truly committed to their business from those who are not. We found that people don’t value things if they are free.’

The support is staggered. When a client registers with TEP, the organisation first checks that all the paperwork and legal registrations are in order. This is followed by a development-needs analysis.

‘We investigate what kind of skills, marketing effort and financial requirements are needed to grow that particular business,’ says Siddo. ‘Once we know the profile, we decide on either a one-, two- or three-year programme.’

Clients are taught the business basics – technical, managerial, financial and administration skills – as well as one-on-one mentorship and direct market access. They can also apply for financial support. In 2014, TEP teamed up with the Small Enterprise Finance Agency to introduce the Ikwezi Tourism Facility, which assists tourism SMMEs with loans ranging from R10 000 to R5 million.

If Premier Makhura’s promises are turned into reality, a great number of start-ups and small businesses could replicate the success of Aahaah Shuttles and Tours, Espinaca Innovations and Iyeza Express.

Not only that, SA would also eventually be a good place for township entrepreneurs with determination and brilliant ideas.

By Silke Colquhoun
Image: Mr.Xerty © www.nomastaprod.com