Transcript David Morobe - Africagrowth Institute

PRESENTATION : SA SMME
CONFERENCE
THURSDAY, 26 OCTOBER 2006
BIRCHWOOD HOTEL
BENONI
National & Provincial Priorities
National Goal:
• Halving poverty and unemployment by 2014
Provincial Priorities:
• Enabling faster economic growth and job creation
• Fighting poverty & building strong, sustainable
communities
• Developing healthy, skilled and productive people
Fundamental Assumptions
• Entrepreneurs create and build the future
• They can be found in every walk of life
• A few entrepreneurs can make a difference; but when
there are many, a region or community simply takes off
• Most have become entrepreneurs in spite of the system
and not because of it
Defining the Entrepreneur
• Joseph Schumpeter (1934) describes entrepreneurs as
“responsible for the change of the economy using
new technologies or upgrading an old one”.
• Peter Drucker (1979), enlarge the definition and focus it
on opportunity. Endeavor is not just about creating a
enterprise, but doing it allied to a real opportunity.
• Louis Jacques Filion (1986), define entrepreneurs as
being the kind of people that conceive, develop and
realize visions.
Market Challenge
1. Why do people not start businesses?
What are the barriers?
• Fear of taking risk
• Educational limitations
• Apartheid legacy
• Cultural elements
Market Challenge
2.
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Why do businesses fail?
Access to capital
Under capitalisation
Poor management
Poor record keeping
Access to markets
Over estimation of market
Quality of people
Market Challenge
3. How do we foster improvement?
(grease the wheels of enterprise)
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Info and advice
Mentorship
Training
Facilitation
Incentives
Finance
Affirmative procurement
ASGI-SA Key Constraints
• Barriers to entry & competition in sectors of the economy
• Regulatory environment and burden on SMMEs
Addressed through:
• Encouraging establishment, growth & sustainability of
SMMEs
• Procurement quotas for SMMEs
• Making finance & other opportunities accessible to
SMMEs
ENTREPRENEURS
ENTREPRENEURS
WHO HAVE
TO BE PUSHED
ENTREPRENEURS
WHO RESPOND TO
SUPPORT AND HELP
ENTREPRENEURS
WHO JUST
“GET ON WITH IT
THE ENTREPRENEUR AXIS
--------------------------------------------------------------------------------------------------------------ENTREPRENEURIAL
STRONG ON
TALENT LIES BURIED
ENTREPRENEUR
TEMPERAMENT
CHARACTER THEMES
THE SUPPORT INFRASTRUCTURE
PEOPLE
SECTOR
FACILITY
IDEAS
Research and
Education and Training Development
School;
College;
Unversity;
Training facility;
Entrepreneur School
Industry;
university;
and garage
EXISTING ENTERPRISES
Business
Community
Support
Development
Property
Finance
Business
Seed and
Subincubator;
venture contractors
Housing;
innovation centre capital labour pool
Schools;
science,
Hospitals;
technology
Recreation;
and business
Transport;
parks
ACTIVITY
Courses and
Programmes
Technology
transfer
Premises and
Support
Telecoms
Equity
Training;
advise and
networking
Amenity
provision
Reasons for Business Failure
Lack of
Management
Competence
16%
Poor
Management
of Financial
Activities 34%
Inflation &
Economic
Labour
Conditions
Problems 6%
12%
Poor
Bookkeeping
& Records
12%
Sales &
Marketing
Problems 11%
Staffing
Problems 9%
Non-Financial Support Interventions
• Financial Management Support
– Accounting/bookkeeping
– Setting up a debtors/creditors system
– Setting up a stock control system
• Technical Support
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Assistance with IT hardware and software
Product testing & development
Feasibility Stidies
ISO Accreditation
Factory Layout
• HRD Support
– Assistance with setting up HR policy & systems
– Setting up a payroll system
Non-Financial Support Interventions
• Operational Support
– Business administration
– Mentorship & coaching
– Assistance improving turnover
• Planning Support
– Business Plan
– Productivity Improvement Plan
– Business Turnaround Plan
• Legal Support
– Joint venture agreements
– Purchase agreements
Financial Support
 To provide financial support to SMMEs efficiently and
timeously including but not limited to the following:-
-
Guarantees
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Bridging Finance
-
Debtors Factoring
-
Re-Financing
-
To facilitate access to capital from financial institutions
and other institutions such as Khula, NEF, Umsobomvu
etc.
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Incentive
General Finance Programme
 Pilot (R50 000 – R2 000 000)
To provide both long and short term debt finance for the
following:
- Start-ups
- Expansions
- Acquisition of assets
- Working capital
Leverage Programmes
TO FORM STRATEGIC PARTNERSHIPS
-
Joint Funds with major banks
-
Guarantee Schemes
INVESTMENT CRITERIA
GEP GENERAL FUND
GEP GUARANTEE/
JOINT FUND
Ownership
SA Citizen
SA Citizen
Business location
Gauteng
Gauteng
Finance Required
- Minimum
- Maximum
R 50, 000
R 2, 000, 000
R 20 000
R 1, 000, 000
Industry Focus
All sectors (preference will be
given to industry targeted
through GDS Strategy
Tenders/ Contracts
Minimum Requirements
-Business Plan
-Projected Financial Statements
-Economic viability
-Entrepreneurial involvement
-Black Owned/Managed
-Demonstrate commitment
Criteria to be determined by
concerned parties
Funding Questions
Question
Answer
What is the money needed for?
The answer yields the loan
amount needed.
Is it a short term or long-term
need?
The answer determines the length
of the loan.
What will you give up for the
capital?
The answer determines what sort
of requirements the owner must
adhere to in order to get the
money.
What rate of return can be
expected from the success of the
business?
The answer indicates how much
interest on a loan or return on
investment a business can afford
to pay.
Business Development Life Cycle
FUNDS
Maturity
Debt
Collateral
Expansion
Growth
Breakeven
Variable Expenses
Equity
Startup
Fixed Expenses
Gestation
Inception
Roll-out
Founders
Prototype
Angel Investors
Venture Capital
Government Agencies
Skills Development
Business Services
Business Plan which addresses:
1. Technical Risk
2. Market Risk
3. Growth Risk
4. Financial Risk
5. Management Risk
TIME
Vision, Mission & Values
Vision
• Africa’s leading enterprise development and business support
agency.
Mission
• To enable entrepreneurs.
Values
• Professional
• Accountable
• Focused
• Accessible
Our Goal
To facilitate increased SMME participation
in mainstream economy and their
contribution to economic growth,
development and employment in Gauteng
Our Strategic Priorities
 Provide efficient and timely financial support to develop SMME’s
 Provide efficient and timely business development support to
SMME’s to increase professionalism of SMME’s
 Contribute to the creation of an enabling environment for SMME
growth and sustainability
 Identify business opportunities, enhance business facilitation and
business partnerships
 Facilitate increased SMME participation, including women, youth
and people with disabilities in the province’s growth sectors, and
GPG’s priority socio-economic development projects
 Ensure efficient and effective management of GEP
Thank you