Making the private public partnership work is the answer to improving SME’s
South Africa could be doing better; we don’t have enough entrepreneurs building businesses on scalable models. The sum result of is a slowing economy with little wiggle room. The fix is a simple one – Let’s invest in building the right environment for entrepreneurship.
The National Development Plan goals are to create 11 million jobs by 2030; this is only possible through 90% of new jobs being created by SME’s by 2030. To achieve these numbers, South Africa must create 8.2 million small and micro-enterprises.
80% of small businesses do not make it past their first five years of business and whilst we can say that a large part of the failure is a lack of leadership, this raises the alarm as 2030 is effectively 13 years away. We need to have a joint approach that is focused if we are to meet the NDP goals as a country.
Whilst economic uncertainty, the volatility of the rand and rising costs are seen as the biggest challenges facing SME’s in South Africa, a well-managed business with effective leadership can mitigate these factors and still run profitably, but the issues are much broader.
The following needs to be attended to both on a micro and macro perspective with both business and government playing a more entrenched role:
Access to funding – One of the most challenging barriers for any entrepreneur is accessing funding to start or grow the business. The private sector and government have a greater role to play by creating funds that are focused on unearthing the right entrepreneurs and funding at the right price with a focus on the types of businesses that will show quantifiable promise in terms of jobs created and ability to scale.
Lowering barriers to starting a business – New businesses especially complain about the administrative processes involved in starting a business in SA. There needs to be less red tape to encourage greater participation of SME’s.
Tax breaks and incentives for SME’s – The government has done some great good however, we must acknowledge that South Africa is in a tough environment economically, so naturally we tend to see less people venturing into business, what would assist is if we created greater tax breaks and incentive plans for businesses to launch and run with less financial strain.
Education – Secondary and tertiary education need to be prioritized, we need to make entrepreneurship an intricate part of our school curriculum. We need to start positioning entrepreneurship as a viable option especially for young South Africans finishing school and university.
Incubation and scalability models – A great deal of why businesses fail is aligned to the leadership and the business models that are driving the businesses. Entrepreneurs should be encouraged to access a network of mentors who have already walked the path and who will be able to guide the entrepreneur on his journey ahead by advising him on the best strategy and approach to his business path.
What is required is to create the ground work for entrepreneurs to stand a better chance at creating strong and scalable businesses which will in turn generate sustainable jobs for the South African economy.
To achieve this, we must take a measured and deliberate approach to the idea that is entrepreneurship. It needs to be made more practical through programs of action and a sustainable partnership between academia, government and business.
In the end, we must come to the consensus that entrepreneurship is the only answer to South Africa’s ailing economy.
Mags Ponnan is the Head of Business Incubator and Customer Value Propositions at FNB Business. He is passionate about SMEs and joined the FNB Business team in 2013 to create and deliver entrepreneur-focused solutions. Coming from Mauritius, he is a fan of Chinese food and French is his first language. Magendhren has an Economics background from the University of KwaZulu Natal and is a firm believer that entrepreneurial drive and initiative will be the driving factor for employment and economic growth in emerging markets. His latest offering to the market is a tailor made business solution that will enable new and established SMEs to grow and make their mark in the South African economy.