The provision of mentorship services to entrepreneurs is growing in South Africa, but concerns are being raised about the level of quality in the industry.
Assigning an experienced business person to mentor an emerging entrepreneur is a fashionable idea, says Kerrin Myres, director of the centre for entrepreneurship at the Wits Business School.
“But I’m a bit concerned that we’re creating another industry like we did with business-plan writers,” she says, referring to the wasteful splurge by the now-disbanded Umsobomvu Youth Fund, which paid consultants to write business plans on behalf of small businesses in the hope that it would increase the flow of bank finance to the sector.
At R7 000 a business plan, the scheme spawned an industry of fake consultants who cut-and-pasted business plans for business owners who weren’t interested in using them, but were told that they needed them to get bank loans.
Myres is leading a study into the implementation and success of mentorship programmes in South Africa. She expects the research to be completed by the end of the year. “What we really want to understand is how people come to see themselves as mentors and how SMMEs (small, medium and micro enterprises) view them.”
Myres, who expects to find a diverse range of people who describe themselves as mentors, will look at established programmes such as those of the Institute of Business Advisers (IBA) and the smallbusiness finance house, Business Partners. But she’ll also take a close look at a number of new projects being developed by some of the sectoral education and training authorities (Setas).
“A couple of tenders have come out asking for mentoring on a very large scale. There must be an awful lot of people out there who are mentoring SMMEs. I think they need to get a handle on exactly what is going on. I don’t think we’re thinking it through carefully enough. “It seems to me the assumption is that you just kind of set free these mentors and they somehow magically help the entrepreneur,” says Myres.
It may create false expectations and, worse, subject entrepreneurs to poor-quality advice if South Africa fails to develop a set of standards by which the work of mentors is judged. “The poor small-business owner, who may be getting a mentor for free because it is part of somebody’s enterprise development programme, is actually put at risk,” says Myres.Meanwhile, the IBA is lobbying the government for statutory standards for business advisers and mentors.
Martin Theron, chief executive of the IBA, says so far his institute’s proposals to the department of trade and industry have fallen on deaf ears. Theron says the IBA, which uses a strict grading system for its members, has seen a growth in its membership to 580, up from 180 in 2008 when the organisation was revived.
He says the growth of mentorship stems from a realisation among small business developers that lack of finance is not the main problem for emerging businesses. “There must be some form of non-financial support to go with the finance,” he says.
The IBA differentiates mentorship from consulting or business advice by stipulating that age, wisdom and experience must be present in a mentor. A grade four IBA mentor, the highest qualification recognised by the institute, must have at least five years of tertiary education, seven years’ experience as a business adviser and 10 as a manager of a business.
At last count almost half of the organisation’s mentors were recognised as grade four advisers, 35% as grade two and 17% as grade one. Theron ascribes the larger number of highly qualified members to the fact that experienced business advisers are more interested in joining professional bodies than inexperienced ones who would not gain full recognition.
Khula, the government’s small-business finance agency, assigns only IBA mentors to business owners who make use of its bank loan guarantees. Business Partners, the commercial small-business lender, uses an inhouse database of about 340 mentors.
Pierre Mey, executive general manager at Business Partners, says his company has always used a mentorship system to mitigate the risk of lending to small business owners. Sometimes a mentor is assigned as a condition of the loan when gaps are identified in a client’s business management skills or systems. These can vary from a lack of financial systems, marketing expertise or even technical expertise relating to specific industries.
Mey says Business Partners does not try to fit its mentors into a grading structure, but rather evaluates and negotiates fees with each mentor separately. Apart from technical expertise and depth of experience, the company looks for mentors who approach the work as social commitment rather than income generation.
Fees are capped at R500 an hour and the first consultation, usually lasting two-and-a-half hours, is provided free of charge. The result is that many of Business Partners’ mentors are retired experts who want to contribute to development. The system works well for Business Partners’ needs, says Mey. Its average loan size of about R2-million is large enough to justify the costs of a high-quality mentor.
Business Partners sometimes struggles to find a mentor in rural areas and in cases where rare expertise is needed. Mey says that although statutory regulation will set a common standard, the disadvantage is that it will “take many potential mentors out of the market”. A number of retired experts will be put off by compulsory registration and annual fees, he says.