Development finance and SMME support

Prompt payment is vital for small businesses.

Portia Mngomezulu, the founder and managing director of Portia M, told the host of a radio business show in 2018 that one of the most important factors in allowing her to scale up her skin products business was the willingness of Pick n Pay to pay her within seven days.

The entrepreneur was named in 2018 as Pick n Pay’s Small Supplier of the Year and her sales topped R10-million. From an initial investment of R200, she now employs 27 full-time staff and her range of products is available in four African countries outside South Africa.

One of biggest problems faced by small, medium and microenterprises (SMMEs) is cash flow. Most government departments have rules about procurement which are biased in favour of purchasing from SMMEs or co-operatives. However, for many South African entrepreneurs, the inability or unwillingness of government to pay within 30 days presents a major risk to sustainability. The Enterprise and Supplier Development (ESD) Programme of Pick n Pay addresses and goes a step further with the seven-day rule.

Public procurement from township enterprises from provincial and municipal governments in Gauteng, the province where more than half of the country’s SMMEs are located, increased in 2017 to R17-billion, up from just R600-million in 2014. This expenditure has allowed many township businesses to enter the formal economy and for them to become more sustainable. The City of Johannesburg runs seven SMME hubs where office space, Wifi and advice and training are available for small business operators.

All South African retailers have ESD programmes which typically create or support small businesses along their supply chain. A small community in rural Mpumalanga is remote and difficult to get to, but 13 farmers at Elukwatini Farm sell tomatoes to Woolworths. According to a Business Day report, Woolworths works through Technoserve (an NPO) and Qutom (a large supplier) for produce to be collected.

De Beers Venetia Mine in northern Limpopo has chosen the transport of its workers as an area for business creation. Two small bus businesses servicing its labour-sending areas have been created with a wide range of ownership and with potential to expand.

SECTOR INSIGHT

SAB aims to create 10 000 jobs by 2022.

South African Breweries, a subsidiary of AB InBev, wants to use its four entrepreurship programmes to create 10 000 jobs by 2022. In 2018, Coca-Cola Beverages South Africa launched the Mintirho Foundation, a R400-million fund to pay for training of farmers and support business in the agricultural value chain.

Toyota South Africa Motors is funding the newly created Toyota Empowerment Trust (TET) to the tune of R42-million. Beginning in 2018, the trust will at first train specialised automation technicians with the long-term intention of helping qualified technicians to start their own maintenance firms.

The National Department of Small Business Development (DSBD) has several programmes to assist small, medium and micro enterprises (SMMEs) and co-operatives. These include: • The Black Business Supplier Development Programme, a costsharing grant to promote competitiveness • The Co-operative Incentive Scheme, a 100% grant.

The Small Enterprise Development Agency (Seda) is a subsidiary of the DSBD. Seda has 42 incubation centres in South Africa under its Seda Technology Programme (STP).

In a 2018 publication, Seda reported that the number of SMMEs in South Africa increased by only 3%, from 2.18-million to 2.25-million, between 2008 and 2015.

The National Department of Trade and Industry (dti) is trying to stimulate township and rural economies. Various programmes within the dti and its agencies contribute to the creation of SMMEs or to the rescue of ailing SMMEs in tough times.

The Enterprise Investment Programme (EIP) has achieved considerable success. Having received a grant in 2014, Thorax LP Equipment, a 100% black-women-owned company based in Gauteng, has subsequently turned over more than R8-million and employed many young people. A grant to Kalagadi Manganese in the Northern Cape helped to create 8 857 jobs.

The National Gazelles is a national SMME accelerator jointly funded by Seda and the DSBD. The aim is to identify and support businesses with growth potential across priority sectors. Businesses can receive up to R1-million for training, productivity advice, business skills development and the purchase of equipment.

The Industrial Development Corporation (IDC) supports SMMEs either by disbursing loans or by taking minority shares in enterprises and giving advice. An agricultural project in the Northern Cape is an example of the kind of work it does. Through the IDC’s Transformation and Entrepreneurial Scheme, a black economic empowerment project is underway at Kakamas. The emerging farmers of Vaal Community Citrus are planting citrus.

The president of Business Leadership South Africa, Jabu Mabuza, expressed concerns about at a small business summit in July 2018 about the number of different agencies working on diverse programmes to promote SMMEs. He also called for big businesses to pay SMMEs promptly.

At about the same time as Mabuza’s speech, some of the early findings of a baseline study of the SMME sector were released. The study is being conducted by the Small Business Institute (SBI) and SBP, a business environment specialist. The study suggests that definitions of enterprise size vary too much, that there is not sufficient coordination in support of the sector and that entrepreneurs face an enormous amount of red tape.

ONLINE RESOURCES

Gazelles: www.nationalgazelles.org.za National Small Business Chamber: www.nsbc.org.za Small Business Institute: www.smallbusinessinstitute.co.za Small Enterprise Development Agency: www.seda.org.za Small Enterprise Finance Agency: www.sefa.org.za SMME Opportunity Roadshow: www.smmesa.co.za

VeriFi

VeriFi is the leader in the business of verification and certification for BBBEE recognition.

South Africa requires an economy that can meet the needs of all its economic citizens, its people and their enterprises in a sustainable manner. Government’s objective is to achieve this vision of an adaptive economy characterised by growth, employment and equity. Achieving authentic BEE has required a reassessment of traditional business models and corporate cultures. The Bill, code and strategy document rely upon core policy instruments that have been designed to bring about BEE. These instruments are essentially measurement tools that will permit the public and private sectors to evaluate the BEE status of a particular enterprise. Failure to adapt to the new paradigm will have significant consequences. A real commitment to BEE is now a business imperative.

Description of services

• assess and certify BBBEE rating; • provide insight into BBBEE challenges facing various organisations; • provide insight and guidance on the actions required to elevate BBBEE status; and verification of supplier BBBEE status.

With BBBEE recognised as an imperative by companies committed to building an equitable South Africa, verification is an essential requirement that confirms a company’s participation and contribution. Verification is performed in a manner similar to that of a financial audit: it provides an independent assessment of investment, performance and initiatives in a control system. Criteria against which companies are measured are provided by government and like an audit, verification must be performed annually.

Target markets

Small, medium and large enterprises achieving an annual turnover of below R10-million and over R50-million respectively (including all charter sectors).

Pricing

Pricing for BEE consultancy services is based on the client’s requirements and can be structured on an hourly or monthly basis.

For BEE verification and issue of a BEE Compliance Certificate, please contact the office for the current rates.

BBBEE explained

Government BBBEE legislation consists of: • The Strategy for Broad-Based Black Economic

Empowerment • The Broad-Based Black Economic

Empowerment Act, No 53 of 2003 • The Codes of Good Practice for Black Economic

Empowerment • Various sectoral BEE Charters or Codes

In terms of these Codes of Good Practice, businesses are divided into three categories: • Where turnover is less than R10-million a year, or when in the first year of incorporation, a business is categorised as an Exempt Micro

Enterprise (EME). However, it is necessary to confirm this status by providing proof of annual income. • Businesses with a turnover of between

R10-million and R50-million a year are categorised as Qualifying Small Enterprises (QSEs).

The criteria for each of these elements are less onerous for QSEs than for companies with turnovers exceeding R50-million per annum.

The value of verification

With BBBEE recognised as an imperative by companies committed to building an equitable South Africa, verification is an essential requirement that confirms a company’s participation and contribution. Verification is performed in a manner similar to that of a financial audit: it provides an independent assessment of investment, performance and initiatives as a control system. Criteria against which companies are measured are provided by government, and like an audit, verification must be performed annually.

Advantages of BEE certificate from VeriFi

• proposals for new business with government; • the licensing of regulated activities which include mining, liquor sales and the granting of credit; leasing of premises from government or private businesses; and • the creation or continuance of business relations with clients seeking assurance of a company’s BEE compliance.

Once a verification and certified rating through VeriFi is accomplished, a company can perform business in confidence, as its commitment to equality, nationbuilding and unique South African business processes will be recognised.

Key facts and figures

Year established: 2005 No of staff: 15 Major clients: BP, Public Investment Corporation Limited, IBM South Africa, Saab Grintek Defence, Independent Newspapers, Premier Fishing & Brands Limited, African Equity Empowerment Investment Limited, South African Express Airways SOC Ltd.

CONTACT INFO

Tel: +27 86 175 3233 Email: info@verifibee.co.za Website: www.verifibee.co.za