Office of the Pro Vice Chancellor Empowering SMMEs for a Sustainable Future 20 September 2014 PVC - Prof Narend Baijnath
SA Development Context Poverty in SA remains pervasive despite gains. Youth unemployment is at perilous levels. Total unemployed in SA - 8.157 million according to a recent report by Stats SA Sluggish Economic Growth Decline in key sectors
SMME value to South Africa SMME is a major source of employment According to the National Development Plan: 90% of the jobs needed to meet NDP targets by 2030 would be created by small business enterprise There are an estimated 5.6 million SMMEs in the country The sector employs over 9 million people It is the driver of the economy Contributes 40 % of the national GDP Amplifies entrepreneurship Enhances competition Encourages innovation Results in poverty alleviation
SMME Business Confidence Index (BCI) According to the South African SMME Business Confidence Index Report: 2nd Quarter 2014 - Overall business confidence level of the SMMEs has decreased negligibly during the second quarter of 2014.
Business Limiting Factors Red-tape and cumbersome legal and regulatory processes and procedures Difficulty accessing finance and access to bank credit Tax regime Competition from imports The exchange rate Difficulty accessing markets or meeting industry requirements or standards Insufficient demand Skills shortages: technical skills and business management skills Fragmented and uncoordinated support from entities tasked with providing assistance. Employee costs Capital costs Crime and corruption
Barriers to entry and challenges to operations and growth experienced by SMMEs Lack of business planning during start-up. Lack of experience among owners and managers. Difficulty accessing land or securing operating premises. Lack of sector-specific expertise. Inconsistencies in cash flow. Lack of capacity to undertake market research, resulting in a lack of understanding of market needs and characteristics. Lack of entrepreneurial skills and mindset as well as business acumen. Lack of innovation and creativity.
Entrepreneurial Attitudes and Perceptions Sub-Saharan countries Perceived opportunity Perceived capability Fear Of failure Entrepreneurial intentions Entrepreneurship as good career choice High status to successful entrepreneurs Media attention to successful Angola 56.7 56.3 63.7 38.3 66.8 72.6 62.1 Botswana 65.9 67.4 18.6 59.2 80.7 83.7 85.6 Ghana 69.3 85.8 24.6 45.6 81.6 94.1 82.4 Nigeria 84.7 87.0 16.3 46.8 81.2 61.9 76.5 South Africa 37.9 42.7 27.3 12.8 74.0 74.7 78.4 Uganda 81.1 83.8 15.0 60.7 88.3 95.3 87.5 Zambia 76.8 79.6 15.4 44.5 66.5 71.2 69.0
HOW CAN WE TAKE AN INNOVATIVE APPROACH TO SMME DEVELOPMENT?
Idea Generation Idea Generation is the foundation of the process of discovering new sustainable business opportunities. Looking at things from a different angle is the first step to innovate and invent new solutions. Idea Generation is a process of deliberately brainstorming.
Optimizing Business and Idea Network Five important relationships to build for the purpose of generating sound ideas and business longevity. 1. Competitors 2. Employees 3. Advisors, mentors and industry influencers 4. Local businesses and community 5. Vendors and suppliers
The Global Context Innovation is:- important for driving economic development and competitiveness has a direct influence on efficiency and sustainability of businesses at the centre of many countries SMME growth strategies.
The Case of the EU Innovation at the Centre in EU Growth Strategy EU major financial crisis millions unemployed, lost competitive edge. Innovation was placed at the heart of the European recovery strategy. EU looked at a strategic approach to innovation to support economic development. Despite austerity measures there was increased investment in innovation to enable growth, productivity and job creation.
The Innovation Union Improved access to finance Innovation-friendly rules and regulations Accelerated standard-setting Cheaper patenting Innovation supported by the public sector Innovation Partnerships to give businesses a competitive edge Facilitated access to research and innovation programmes
An innovative approach to business. This means to bring new thinking and different actions to how you plan, execute and manage your business. Grow a culture of innovation - do not just outsource innovation or rely totally on someone else to solve your business problems.
Learn how to create the climate for innovative thinking to solve problems, develop new products and services. Remember: Innovation is increasingly a shared activity. It relies on networks built on trust, proximity, repeat engagement and social capital.
Become a Business Innovator Understand stakeholders/customers/clients Develop sound customer information and insight Design new solutions Work in a creative team Establish business priorities, operations and strategic goals Analyze processes and turnaround times Determine unmet needs Explore areas needing new thinking or futures thinking Continually improve processes through incremental innovation. You can use innovation to work in collaboration and drive results.
Business Innovation Requirements Overcoming the anxiety to try new things. Innovators are optimists. Should show in approach to business Innovation is about change. Foster a culture where change is expected and not the end of the world. Don t succumb to the whinge mentality and give up too easily. Innovation is about constantly looking for new opportunities and threats to create new solutions. Don t rest on traditional business techniques. Every business is different.
Note to Business Innovators: Self knowledge is an intangible but valuable quality for innovative thinkers. Seek out professional training and advice. Continually seek ways to develop your skills look out for formal and informal learning opportunities. Embrace the Internet and digital media to grow your business.
The Changing World of Business Technology must be embraced in order to remain competitive in the global marketplace. Job functions are constantly being reconfigured. The workforce has to become increasingly flexible. Increasing prevalence of ICTs and social media to aid business communication and collaboration and ensure efficient and effective systems.
WEF: The Global Information Technology Report 2013 Growth and Jobs in a Hyperconnected World WEF economists state Economies of countries utilising digital technology grew faster, created more jobs and are more competitive. SA placed 70th place in the WEF rankings of 144 countries, according to their ability to benefit from the digital era. SA ranked 33rd - companies' ability to use ICT to improve their productivity. SA ranked 102nd - how importantly a government regarded ICT policy, state efforts to plan for this sector and the availability of online government services.
Competitiveness The World Economic Forum s Global Competitiveness Report ranks South Africa 53rd out of 148 countries - down one position from last year. South Africa has fallen behind Mauritius as the most competitive country in sub-saharan Africa. We must understand the value of innovation and ideation in the SMME context in order to bolster our competitiveness ranking and regain our competitive advantage on the continent.
How Universities can support SMMEs Universities can:- conduct research for policy change host public lectures and discussion groups to stimulate discourse facilitate innovation labs with multi-stakeholder groups and prospective business owners to incubate new, innovative business ideas collect and disseminate information on best practices and lessons learnt nationally and internationally create uniquely African business intelligence share knowledge on entrepreneurship and social entrepreneurship encourage ethical business practice explore the impact of Globalisation on society Global Elite, Global Poor.
To Conclude: Why we must collaborate No one government ministry, industry, sector or scientific discipline will be able to offer complete solutions to the challenges of SMMEs. Collaboration brings benefits of scale. Sharing the burden of research activity and breaking down complex challenges into manageable pieces, can be invaluable. Create a bridge between universities, SMMEs, government and civil society.