Township economy and SMMEs need a boost

Nedbank client executive Terence Sibiya and George Sebulela, Black Business Council secretary-general, discussed the difficulties that must be overcome in financing small businesses at the Critical Thinking Forum. (Photo: Elvis Ntombela)

Nedbank client executive Terence Sibiya and George Sebulela, Black Business Council secretary-general, discussed the difficulties that must be overcome in financing small businesses at the Critical Thinking Forum. (Photo: Elvis Ntombela)

There is no shortage of township entrepreneurs, but venture capital remains a contentious issue, as banks are reluctant to support growth in this sector.

This was one of the burning issues discussed at the Mail & Guardian’s Critical Thinking Forum at the Johannesburg Securities Exchange recently.

Panellist Dr Terence Sibiya, client executive at Nedbank, said the state has a huge role to play in helping banks to empower township entrepreneurs as financial institutions always have to consider risks when giving out loans, particularly to high-risk clients such as start-up businesses.

Gauteng Growth and Development Agency [GGDA] group chief executive Saki Zamxaka said that township economies need to be viable for banks to extend venture capital.

In September Business Unity South Africa (Busa) president Jabu Mabuza announced that 70% of the top 40 South African companies had contributed to the R1.5-billion SME Fund. The fund is aimed at helping small enterprises with growth potential and has also pledged to contribute to an initiative in which a million youth will be absorbed into internships. This will cost about R15-billion and will take place in the next year in partnership with government.

But George Sebulela, former chairman of the Black Business Council, criticised business for contributing paltry amounts to the SME Fund. Sebulela argued that growth and transformation must happen at the same time, citing the example of Shoprite paying its chief executive Whitey Basson a salary of R100-million and pledging only R5-million to the fund as an example.“Where is the logic there?” asked Sebulela.

But Zamxaka argued that companies could not be reckless with their money as they have a responsibility to shareholders.

Lulu Krugel, chief economist at auditing firm KPMG, cited a company survey which said that the country is facing a danger of shedding jobs if it doesn’t prepare for the “fourth industrial revolution”. “The majority of youth are not trained correctly,” said Krugel.

According to Statistics South Africa, the country’s unemployment rate decreased slightly to 26.6% in the June quarter. This was down from 26.7% in the three months prior to March.

Sebulela said Further Education and Training (FET) Colleges have a huge role to play in preparing youths for the demands of the economic sector. “It is absolute nonsense to think that you can still go to university and [have to] come back and look for a job. FET colleges need to produce entrepreneurs. They must come back [from college] and run their own businesses,” said Sebulela.

Professor Ronald Wall of the University of the Witwatersrand told the forum that it is important that education matches the demands of the labour market and the economy.

A township renaissance

Very few will argue that the lack of markets, unsuitable facilities, dubious business models and minimal government support all conspire to make township economies impotent.

Faced with such seemingly insurmountable odds, it is small wonder that most township businesses crumble within their first year of operations. Those that are more resilient hardly break even; it’s a bitter struggle to survive.

But its not all doom and gloom if the Gauteng Growth and Development Agency (GGDA) are successful in their quest to revitalise township economies. One of their key priorities is the refurbishment of township hubs, formerly known as industrial parks.

As Letumile Sebolai, an investment and economic development specialist within the GGDA explains: “Ours is a broad programme, which is informed by the Gauteng department of economic development to ensure that government starts intervening more proactively in township economies, while also creating an enabling environment for these to thrive [in].”

Sebolai believes that township hubs are the engine needed to kick-start the renaissance of township economies.

She is emphatic that developing suitable business models and pairing with the right partners like the Small Enterprise Finance Agency will unlock the potential of township businesses and help bring them into the mainstream economy. Sebolai adds that a fresh look at these hubs is necessary if they are to operate optimally and be a source of job creation as well.

“In some instances the facility is not suitable for the kind of business being conducted, and there are no complimentary businesses around it. We need to recreate these facilities so that they meet the demands of the times,” she says.

The task of creating an enabling environment for domestic business or investors to thrive in Gauteng province is obviously no mean task. Sebolai is of the view that with proper policy imperatives, the production of quality products, government support, logistics, know-how and with an established business model, township hubs should turn the corner.

Though bemoaning the decline of the manufacturing sector in the Gauteng province, which she blames on market forces, Sebolai says she is however encouraged by the abundant talent available in this sector. What she envisages is a time when there will be collaboration between government, the private sector, and academia “so we can continue to churn out talent as well as produce much needed skills”.

“It is crucial that we encourage the importance of research that can be done in collaboration with the province, the CSIR, Science Council etc,” she says.

With talk lately being about the green economy and with government rolling out WiFi and broadband in the townships, Sebolai says it is imperative for township business people to start thinking out of the box and to make use of the new technology.

She said there was a need to instil certain new habits so township business folk can be able to produce more in a cost efficient manner, using the latest technology and benefits that come with the green economy.

“We need to learn to do a lot, even with not enough,” she says.

What drives the GGDA agenda, she says, is Premier David Makhura’s plan, which seeks to ensure a rapid economic transformation in the province, the creation of sustainable jobs, modernisation of the economy and support for knowledge-based and high-tech economies.

While it is well and good for the GGDA to be tackling township economies, Sebolai says that there has to be foreign investor confidence in Gauteng province as well.

She says its crucial for the GGDA to realise it is operating in a global economy and has to consider a broad number of factors to ensure foreign direct investment. She adds that matters of cost, related industries, ease of setting up business, support that comes with the region, and a proper regulatory framework are all necessary to woo investors.

She said though the province prides itself as being a “gateway to Africa”, it was incumbent upon the GGDA to realise that competition for investors has become a bit stiff, with cities like Nairobi in Kenya and Lagos in Nigeria doing quite well in terms of satisfying especially foreign investors.

The province does have a financial sector that is among the best in the world, and boasts good infrastructure and a large work force, though this does not mean the GGDA should relax and rest on its laurels.

There was also a lot of inter-provincial sharing of best methods used and the provinces are learning a lot from each other. Sebolai said staff movements among the provinces were also helpful, especially for sharpening up certain sectors that had become dull.

Bheki Mathe, a spray-painter at the Orlando West hub in Soweto, said he was ecstatic about the latest GGDA agenda, and said it was about time these hubs were given a facelift.

“We looking forward to the implementation of the promised changes,” he said. — Ali Mphaka