Boosting small businesses

An apprentice ceramist at the Light from Africa Foundation hones his skills. (Denise Archer)

An apprentice ceramist at the Light from Africa Foundation hones his skills. (Denise Archer)

South Africa's new growth path calls for the creation of five million new jobs by 2020, a feat that would have a major impact on the economy and its participants's wellbeing.

Achieving this requires job growth of 40% over the next decade, which is eight times higher than the average rate over the past 10 years. Can small businesses save the day and, if so, how can big businesses support them through their corporate social investment programmes? Will accelerating the development of small, medium and micro enterprises be the silver bullet?

Inspiring entrepreneurs
South Africans embody precisely the resilient and creative spirit that should be ripe for entrepreneurship. However, studies such as the Global Entrepreneurship Monitor show that most South African entrepreneurs have started micro enterprises out of necessity, running what are essentially subsistence ventures.

Practitioners in the enterprise development space should be interrogating what kinds of initiatives and programmes could bridge this gap between "forced" survivalist business ownership and the inspired entrepreneurship that might actually create jobs.

CSI, ED and job creation
Corporate support for enterprise development, as defined in the department of trade and industry's broad-based black economic empowerment codes of good practice, tends to reside largely in the procurement domain, frequently with direct links to the company's value chain.

It can include direct funding or mentoring, or support as simple as favourable contract terms.
By comparison, CSI departments enter the enterprise development field from a more developmental perspective, often providing interventions with a poverty alleviation or skills development focus.

According to research conducted for Trialogue's latest CSI Handbook, investment in basic skills development for entrepreneurs represented over 40% of CSI-related enterprise development spend. It is unfortunate that the two functions often operate somewhat in isolation.

Recent changes to the codes will merge the enterprise development and preferential procurement scorecard categories, potentially driving corporate socioeconomic development initiatives further from "pure" enterprise development.

Companies must be clear about their goals for enterprise development. Interventions targeted at alleviating poverty look quite different to those aimed at business development.

Confusing the two could seriously hamper the efficacy of initiatives. CSI and enterprise development departments should work together closely to develop complementary enterprise development strategies.

In some cases the CSI initiatives could create a pipeline for enterprise development projects. Other CSI departments may choose to focus exclusively on micro-enterprises outside of the company's supply chain to reach their developmental objectives.

Incubating success
Despite the best intentions and loftiest goals, most small start-ups do not make it to their five-year anniversary.

A rising trend in the enterprise development arena is business incubation programmes that help budding entrepreneurs navigate the challenges of opening and growing their businesses. Their services are varied, but most of these programmes provide the mentorship, networking opportunities and practical support that increase the odds of success.

CSI practitioners are attracted to incubators as avenues to invest in enterprise development. Incubators give companies the opportunity to scale the impact of their initiatives but leave the specialised mentorship to those who are best positioned to provide it.

Incubators can provide a great deal of assistance to small enterprises but they can't work magic. Not all entrepreneurs and their ideas are destined for greatness and therefore incubation programmes are selective about the enterprises they take on.

But what about the businesses that do not make the cut, or that are not the sexy high-tech models that many incubators support? Although there is no easy answer, it is clear that CSI can play a role.

NPOs doing business
In an environment with limited funding, NPOs find themselves under pressure to identify alternative sources of income.

Some non-profit organisations are becoming social enterprises — income-generating organisations that exist to address a social purpose. Others are evolving into a hybrid model, incorporating a for-profit arm. To the degree that their income-generating activities are aligned to their mandate and available resources, this transition presents many opportunities for development organisations.

By reducing their dependence on grants, these organisations can potentially reduce the volatility of their funding and direct more focus on fulfilling their mission.

Not every organisation should pursue business interests as an income-generating strategy, and corporate funders should not demand to see it as part of a sustainability plan. On the other hand, social investment funding should not necessarily be withheld because an NPO has a for-profit income stream.

Social enterprise is an exciting and dynamic new space. Corporate funders should consider how they interact with new hybrid models that potentially offer significant development impact while aiming for financial sustainability.

Delegates attending Trialogue's Making CSI Matter 2013 conference will have the chance to explore platforms that can be used to connect with young people, and ways to improve work prospects for young adults on May 28 and 29. For more information visit csimatters.co.za

Although this article has been made possible by the Mail & Guardian's advertisers, content and photographs were sourced independently by the M&G supplements editorial team. It forms part of a larger supplement.

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