Paving the way for SMME incubators
Small, medium and micro enterprises (SMMEs) are seen as key drivers of economic growth, innovation and job creation. SmartXchange, an SMME incubator, is producing significant results and garnering national and global attention.
Based in Durban, KwaZulu-Natal, SmartXchange focuses on the media information communication technology and electronics (MICTe) sector. It is a not-for-profit company, registered as Durban Technology Hub and trading as SmartXchange.
“We were originally an ICT incubator. However, when media and electronics converged into the ICT space, we responded to these shifts,” says Jonathan Naidoo, chief executive of SmartXchange.
In 2009, the World Bank released its global study of ICT incubators and SmartXchange was one of five incubators identified as a replication model for incubation in sub-Saharan Africa.
Focus on MICTe
Established in 2004, the organisation promotes and supports the region’s vision to be the technology hub of Africa. Its mandate is to identify and assist in developing quality MICTe SMMEs and to build a pool of skilled MICTe workers.
SmartXchange also focuses on developing localised solutions, as well as promoting empowerment, so that the new generation of MICTe businesses reflect the region’s demographic makeup.
“We are an innovation node and a business incubation centre. Our premises include some of our strategic partners, test lab facilities, SMME financing facilities, graduated small businesses and SMMEs that are currently within the programme. It’s about creating an environment that stimulates innovation, attracts new ICT projects into the region and supports local SMMEs,” explains Naidoo.
The organisation runs programmes for incubation and innovation, skills development and creating relationships with the MICTe industry.
Training for development
SmartXchange organises training to develop incubator SMMEs. “We cover every aspect of business training,” says Naidoo. “There are various tools and accredited training programmes, with training outsourced to certified providers.” There are only eight SmartXchange employees, as well as interns.
A training needs analysis is conducted for each business and SmartXchange invests where necessary. Training is also based on the industry needs, identified by the private sector and the SMMEs. Naidoo has access to provincial MICTe requirements as the chairperson of the Vocational Education, Technical Training, Knowledge Economy and Innovation Technical Task Team in the KwaZulu-Natal Premier’s Human Resource Development Council.
SmartXchange runs a three-year programme, with a new intake of four companies every quarter. There is a vigorous interview process with thorough screening. Naidoo says that this is part of the business model, which has a 99% success rate of graduated SMMEs.
“While the mandate is to focus on youth, women and BEE candidates, the incubator doesn’t turn genuine business cases away. However, when it comes to recruitment drives, the focus is on the three priority areas,” explains Naidoo.
The organisation also has a pre-incubation process for individuals with the right qualities but who need to develop their business case.
SMMEs pay an office space fee to belong to SmartXchange. This includes benefits such as free internet and training. Naidoo says the payment shows the SMME’s commitment and also regulates the space allocated to a business.
Stimulating innovation is part of the incubator’s focus. SmartXchange has a Technology Innovation Agency seed fund of R500 000 per year. It’s for innovative SMME MICTe projects that address day-to-day community challenges. The funding focuses on prototype development and there are currently eight innovation projects being funded.
The incubator is now launching a challenges portal. Industry will log its challenges and MICTe companies will respond with a proposed solution. If the businesses like an idea, they progress forward with the SMME.
SmartXchange was the brainchild of a multiparty consortium led by the eThekwini Municipality. The founding partners included Siemens Business Services, Durban University of Technology and the department of trade and industry.
SmartXchange continues to partner with corporates from the MICTe industry, tertiary institutions and the government sector. “It is through partnerships that we can contribute to sustainable jobs, economic growth and the competitiveness of the province,” says Naidoo.
Universities are seen as the pipeline for future clients and SmartXchange engages with final-year ICT students annually. Naidoo says that, in reality, 60% of the graduated students will be unemployed, so they are encouraged to turn their ideas into businesses.
In 2015, the 55 SMMEs in the SmartXchange programme created 322 jobs and had a collective turnover of R163 774 326. Since 2004, the incubated SMMEs have created 3 054 jobs while in the programme. The incubator graduates, on average, six successful SMMEs yearly.
The organisation has won numerous awards. These include the FNB KZN Top Business Award – Finance and Business Services (2013), the Alec Rogoff B-BBEE Enterprise Development Award (2013), the DTI/SEDA Best Performing Incubator of the Year (2013), and the Elan Property Group KZN Top Business Award – Community and Social Services (2015).
The vision is to expand SmartXchange’s reach throughout KwaZulu-Natal. Naidoo then hopes to take the model nationally to develop the MICTe industry across South Africa and to focus on entrepreneurs from our many disadvantaged communities.