Transcript Siseko se-Afrika Enterprise Business Model

INTEGRATED SUPPLY SIDE MEASURES
FOR
VIABLE AND COMPETETIVE SMALL BUSINESSES
INTEGRATED SUPPLY SIDE MEASURES
FOR
VIABLE AND COMPETETIVE SMALL BUSINESSES
VUYO MAHLATI
AFRICA SMME CONFERENCE, JOHANNESBURG, 25 OCT 2007
COMPETETIVENESS
LINK WITH
‘ECONOMIC PERFORMANCE’
Economic Performance Measures
– Sustained ROIC
– Sustained Revenue Growth
Foundations of Economic Performance
• The fundamental unit of strategic analysis is the industry
− Defining the relevant industry a company competes in is essential to strategy
• Company economic performance results from two distinct causes, and
strategy must encompass both:
Good or Bad Business
Good or Bad Position
Industry
Structure
Relative Position
Within the
Industry
- Overall Rules of Competition
- Sources of Competitive Advantage
Source: Prof M. Porter, 2007
Foundations of Competitive Advantage:
Defining the Industry Value Chain
There can be different ways of configuring the value chain in the same industry
Firm Infrastructure
(e.g. Financing, Planning, Investor Relations)
Human Resource Management
Support
Activities
(e.g. Recruiting, Training, Compensation System)
Technology Development
(e.g. Product Design, Testing, Process Design, Materials Research, Market Research)
M
(e.g. Materials, Subcontracted Labor, Advertising, Services)
Land Acquisition
& Development
(Identify attractive
markets, Secure
land, Procure
entitlements and
permits, Prepare
site)
Construction
Marketing
& Sales
(Design,
(Lead generation,
Engineering,
Model home
Schedule and
display, Sales
manage
force, Customer
construction
selection of
process)
personalized
options)
Primary Activities
Source: Prof M. Porter, 2007
Value
a
Procurement
Closing
(e.g. Customer
Financing,
Contract, Title,
Closing)
r
g
After-Sales
Service
(e.g. Warranties,
Customer
Complaints)
i
n
What
buyers are
willing to
pay
Industry Structure in Context
Role of Government
Threat of Substitute
Products or Services
Bargaining Power
of Suppliers
Rivalry Among
Existing
Competitors
Threat of New
Entrants
Source: Prof M. Porter, 2007
Government
Policy
Bargaining Power
of Buyers
ASGI-SA: Isolating key constraints
Binding constraints that inhibit movement to a higher range of
investment, job-creation and thus economic growth
Relative volatility
of the currency
and interplay
among main
indicators
Cost and
efficiency of
national logistics
system and some
infrastructure
Barriers to entry
and competition in
sectors of the
economy
Regulatory
environment and
burden on small
and medium
enterprises
Shortage of suitably
skilled labour and
disjointed spatial
settlement patterns
Deficiencies in
state organisation,
capacity and
strategic
leadership
Size of domestic market and distance from major global markets.
Value Proposition: A case for:• Integrated Supply Side Measures that are:
– Demand-driven
– Enhancing value-chain based mainstreaming
– Prioritizing economic performance
– Building on existing potential
– Adaptive to context, and
– Optimize/Maximize – Collaborative Strategies
Value Proposition: A case for:• Integrated Supply Side Measures that
CAN:
– Bridge the small and big; informal and formal;
rural-urban, 1st and 2nd economy divide
– Move from isolated micro projects to scalable
interventions
– Maximize the Procurement potential in both
public and private organizations
SMME CHALLENGES
• Current growth context has relied on
imports of consumer goods
• Poorly developed alternative markets
available at low income households
• Weak capability of new producers &
distributors to penetrate existing
markets
HSRC
SMME CHALLENGES
• GDP growth of 5% has not translated to massive reduction in
unemployment & poverty.
• Level of SA productivity is amongst the lowest in the world – ranked
47 out of 50 countries. SA Productivity Institute Study, 2004
• Level of entrepreneurship amongst the lowest in the world – at 12%
compared to 56% in developing countries. Global Entrepreneurship
Monitor Study 2005.
• Most small businesses are not making profit – just surviving.
• CIPRO is recording the highest number of company/cc registration
in the last 2 years, yet most of these companies are dormant.
• BEE deals are not redistributive in nature …very small amount of
these deals trickle into the 2nd economy.
• Various Small Enterprise Development initiatives are not well
coordinated resulting in waste of resources.
• Too much reliance on what the government does to develop small
enterprises
Source: Dreamplus
BUSINESS PYRAMID
At the bottom of the pyramid businesses focus on survival as they struggle to make a decent profit
Private Limited Co’s
Public companies
Private Limited Co’s
Few CC’s, Partnerships
00000
00000
00000000
0 0 00 0 0 0 0 0 0 0 0 0
0 00 00 00 00 00 00 0 0 00
CC’s, Sole propriety,
Unregistered businesses
000000000000000000
00000000000000000000000000
000000000000000000000000000000000
000000000000000000000000000000000000000
Source: Dreamplus
Big
small/
medium
Micro/
small
Small
Micro
<100 Empl.
Medium
100%
Turnover R150000 <10 Employees
Corporate
Sector
TWO ECONOMIES OF SOUTH AFRICA TODAY
UPPER CLASS
Standard Bank
92% <R8000p.m.
Mainly White Males
First National Bank
ABSA
MIDDLE CLASS
78% <R3500p.m.
Nedbank
All Races
74% <R2500p.m.
Etc.
IDC
DBSA
Landbank
Khula
Etc.
LOWER MIDDLE CLASS
Mainly Black
Mainly Urban
No Employees
•Institutions/agencies:
serve primarily the welloff and employed
•Skills and HRD training
Clear career tracks from
secondary school to
management
•Business culture:
promoted by private
sector
48% <R800p.m.
POOR LOWER CLASS
Mainly African
Deregulated
Commercial
Lending
Industry
Mainly Rural
0%
•Legal instruments: well
developed and are fully
accessed by the
institutions
•Resource base: massive
available resources with
substantial backing from
the state
35% <R400p.m.
Survivalists
•Regulatory Environment:
well developed and
state supported
NGO
Financial
Initiatives
14% No income
POOREST OF THE POOR
Mainly African Female
Business Communities
Social
Responsibility
Social
Grants
Financial Services
•Regulatory
Environment: Hardly
exists
•Legal instruments:
Poorly developed and
inhibits development of
CBOs and NGOs
•Institutions/agencies:
Almost non-existent
•Skills and HRD training
No career opportunities
•Resource base: Very
poor and almost no
state backing
•Business culture: Nonexistent and ignored by
private sector
Source: WDB
DFI mandates - focus areas
Tourism
TYPE OF USE
Housing
Infrastructure
Business Finance
Other
BUSINESS SIZE
Micro/Small
Medium
Large
RHLF
Retail
NDA
IDT
Manufacturing
NHFC
Mining
NTSIKA
NTSIKA/
SEDA
Housing
DBSA
DBSA
Agriculture
Land
bank
bank
SECTORS
KHULA
KHULA
Focus
IDC
Institution
A MODEL FOR ENTREPRENEURSHIP
SUPPORT
Entrepreneurial orientation
Culture
Role models
Education
Work
experience Personal orientation
Enterprise culture
Supportive Environment
Infrastructure Finance
Laws
Training
Policy framework
Co-operative Environment
Institutions which are actively
involved and assist with new
org development
Entry of entrepreneurs
+
Acquired abilities
Inherent abilities
Products / Services
Results of entrepreneurship
 Economic growth occurs
 Incomes increase
 Tax base is enlarged by a greater
number of new firms
 Living standards improve
 Technological development occurs
 Investment opportunities arise
 Job opportunities arise
Prof Nieman
INTEGRATED AND COLLABORATIVE METHODS FOR LOCAL
ECONOMIC DEVELOPMENT
Farmers and small
food processors
Wood value
chain
Textile + garments
value chain
An integrated
furniture cluster
A garment
cluster
A large metalworking company
Regional service providers:
• Health care
• University
• Wholesale trade
Local producer services:
IT, transport, construction, ...
Local consumer services:
Retail, beauty, ...
Global buyers
Training
institutions
Business
promotion
Finance
institutions
Government
PROCUREMENT
• Anglo American’s divisions and operations
recorded R2,4 billion in procurement
transactions with BEE SMEs and related
business development initiatives during
the 2002 financial year, up from 807
million in 1999.
SAE Case Study
Facts (2003 – 2004 Fyr)
Details
Sample of tenders issued by Municipality
Figures
215
Tenders withdrawn
13%
Tenders awarded to Big Construction Co
58%
Tenders awarded to white SME
22%
Awarded to HDE’s
7%
HDE that sell tenders (no equipment/ collateral)
92%
HDE Failure rate (those that did not sell)
60%
HDE outright success rate
Estimated BEE portion of R90bln budget
Estimated years to have 50% of HDE participation
0.224%
0.23%
223
Challenges
•
•
•
•
•
Lack of Access to working capital
Lack of access to equipment
Lack of Capital To buy Equipment
Poor business &/or technical skills
Poor Project Management skills
Value Proposition
• Develop a dedicated Emerging Contractor
Support Programme
• Provide Technical Assistance to SME in
the Construction Industry
• Facilitate a partnership between
Government and Financial Institutions
Key Players in the VP
•Issue & award tender
•Facilitate repeat
business
CLIENT
•Provide Technical Assistance
 Manage loan repayment
Project Management
Financial Management
•Facilitate material procurement
•Make Loan Available to
SME
•Contribute to TA cost
SMME
EDA
FINANCE
INST
•Secure business
•Meet specific requirements
•Performs as per contract
•Commit to support scheme
MACRO/MICRO FRAMEWORK CHALLENGES
• Rural economy revitalization thru local value
creation (rural poor as labour, consumers &
social service beneficiaries)
• Tradeoffs between the rate of reduction of
inflation and the rate of real growth and
employment creation in (particularly) the rural
economy.
• Relationship between sustained economic
growth and rural economic drivers
• Urban – Rural Linkages
• Economic Institutions (see below)
ECONOMICS OF INSTITUTIONS
L1
L2
L3
L4
EMBEDDEDNESS
INFORMAL
INSTITUTIONS,
TRADITIONS, NORMS,
RELIGION
Social Theory
INSTITUTIONAL
ENVIRONMENT: FORMAL
RULES OF THE GAME – ESP,
PROPERTY (POLITY,
JUDICIARY, BUREAUCRACY)
Economics of Property Rights
(Institutional Environment)
GOVERNANCE:
PLAY OF THE GAME – ESP.
CONTRACT (ALIGNING
GOVERNANCE STRUCTURES
WITH TRANSACTIONS)
Transaction Cost Economics
(Governance Structures)
RESOURCE ALLOCATION AND
EMPLOYMENT (PRICES AND
QUANTITIES; INCENTIVE
ALIGNMENT)
Neoclassical Economics/Agency Theory
(Marginal Conditions)
Source: Williamson, 1999.
Thank You!
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