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What’s the best way to create entrepreneurs?

August 13, 2013

Despite the widespread need to create jobs – compounded by the potential for thousands of mining job losses – there is a growing realisation that indiscriminate programmes that aim to turn thousands into start-up businesspeople are doomed to fail. Instead, targeted enterprise development programmes – incorporating only small numbers of carefully selected candidates – are likely to have higher success rates and provide job opportunities, according to companies and analysts.

SAB, the local subsidiary of SABMiller, was one of these firms. SAB says its programme “initially focused on poverty alleviation, but the thrust and focus of SAB KickStart is now firmly centred on the creation of sustainable enterprises. This means the programme focuses less on numbers and more on success”.

The brewer selects 60 entrepreneurs from a national competition who undergo ‘robust’ training for two weeks that sees them emerge with a respected Gordon Institute of Business Science business plan. Eighteen finalists are then chosen, granted seed capital and mentored individually on a tailored growth strategy over six months.

Juandre Jeptha, one of 60 KickStart graduates who quit a comfortable job as a business consultant for Accenture to start a garden management service for public parks and facilities, agrees that training should be selective.

“Recruitment should take place from those with proven concepts. You can start a business and make money from nothing. If you make just R100 but can show that funding for a new piece of equipment will help you make more, then you should be considered,” Jeptha says.

As most start-ups fail, trainers should focus on businesses that already work, he says. Start-up businesspeople have many ideas “but when you put them into practice you find they are quite flawed”, Jeptha adds.

Nonhlanhla Luyanda Ngwenya, an optometrist and owner of mobile optometry ICU Eyecare, says: “I think in terms of selection the best people to train are those who have the motivation to start a business.”

People who quit a job to start a business might be more successful than someone who did not make the decision on their own accord,” Ngwenya says, in reference to most African businesspeople who are simply survivalist entrepreneurs.

About 80% of KickStart grant recipients are still in business after three years and 60% have hired more staff. Average monthly turnover increased from R24 000 in 1995 to around R91 000 currently.

It might be argued that SAB-sponsored entrepreneurs are unlikely to disagree with the organisation that has funded, trained and mentored them. Mike Herrington, an author of the Global Entrepreneurship Monitor 2012 Report has said prudent selection, post-training mentorship and linking financing to skills development are non-negotiable.

He described most entrepreneurship programmes as “a waste of time and money” and bemoaned the culture of entitlement in SA.

SA’s ‘culture of entitlement’, following centuries of racial oppression, is frequently talked about privately but rarely in public circles and has become the unspoken ‘elephant in the room’. That this topic is not confronted head on is not surprising, but it serves nobody. That oppressed people expected a better life from a liberation movement that promised a better life is hardly unusual or scandalous.

With the potential for massive retrenchments in the mining sector on the back of labour unrest, rising costs and weak demand for commodities, massive job losses are on the cards. Already 4 000 jobs were shed in January due to strikes in 2012, according to Adcorp labour market analyst Loane Sharp, reported Business Day. Sharp expected job losses to continue for up to four years with 200 000 to be cut this year.

The jobs losses throw into sharp relief the dilemma of encouraging entrepreneurship in a society where millions as opposed to hundreds of thousands are unemployed.

With political pressure on mining companies (given the exploitative history in the sector) the biggest extractive companies are under pressure to retain jobs or, at the very least, provide material and sustainable socio-economic livelihoods for thousands of people. Anglo American has pledged to create 14 000 new jobs to make up for 14 000 who potentially face dismissal at associate Anglo Platinum. While it remains unclear to what extent the threat is a negotiating tactic, the ultimate number could still be high. Attention will be focused on Anglo to see how meaningful and viable this job creation will be.

“We have designed a comprehensive social plan to ensure we make a positive difference in the Rustenburg and labour sending areas, creating at least the same number of new jobs as may be affected as part of the restructuring,” Anglo says. Already the multinational has two significant programmes.

At entry level the Zimele enterprise development and investment initiative fund creates and develops commercially viable and sustainable small and medium enterprises (SMEs). This includes those in mining communities, some of the most dysfunctional in the country, as revealed after last year’s Marikana tragedy. This sort of programme may be best suited to the workforce of which the majority has few skills apart from those needed for mining.

One element of Anglo’s plans – to facilitate new businesses in its supply chain – may be the most sustainable. The reason is that it offers a ready market for these firms, a strong motivation on the multinational’s part for the supply of quality products and services and on-the-job guidance.

Assisting former miners in their mostly rural ‘home’ areas, which range from the former Transkei to Mozambique, will be the greater challenge.

At the other end of the scale the company’s Entrepreneur Internship Programme (EIP) aims to provide ‘accelerated learning experience for high potential entrepreneurs’. In short, the internships aim to provide a boost to those already part of the formal economy that show the potential to rapidly expand their businesses and create jobs.

It combines experiential learning with industry exposure, mentoring and networking. “By the end of the EIP experience you will be able to develop a detailed go-to-market business plan that can be implemented and provides the foundation to run a successful business innovation with strong growth opportunities,” the global miner argues.

Selection criteria are strict. Apart from a tertiary education qualification and three years work experience, candidates are tested for entrepreneurial aptitude, innovation as well as leadership qualities.

While there is no quick fix to meaningfully eating into employment over the short-term through start-ups – at the very least it makes a dent – the debate continues whether small businesses or bigger corporate firms have the most potential in terms of creating jobs.

According to the Economist the evidence suggests small businesses have limited scope to create employment. However, free marketers argue otherwise. Even the Department of Trade and Industry in SA has said small, medium and micro enterprises (SMMEs) contribute up to 34% of the country’s GDP.

Of course the answer may lie with big and small businesses. After all, most big businesses were once small businesses. For corporate SA the challenge is to grow organically, offer contracts to new businesses and keep investing in sustainable entrepreneurship programmes.

Another beneficiary of SAB KickStart, Lerato Motsepe, now has the confidence to consider rolling out her corporate and retail confectionary business Tiers of Delight nationally.

“At the beginning I saw myself as a start-up baking cakes. I now see myself as a businessperson who could get into any kind of business,” Motsepe says.

At first glance mobile phone service provider MTN follows a traditional entrepreneurship approach as part of corporate social investment. The cash value of these programmes (R117 million) is bigger than most, but in line with what one would expect from a major mobile communications company in an emerging market.

“Our aim is to provide support up to the point where they are profitable and sustainable,” MTN says. “This is achieved through the provision of mentorship, support, advice and procurement from emerging entrepreneurs.”

Possibly more significant for MTN as a corporate entrepreneurship model, even if it is less significant in terms of funds spent, is a dovetailing of its SME business strategy and entrepreneurship. The convergence of earnings and education address takes place in the firm’s entry level, or SME, business package.

This occurs through the distribution of the MTN terprise customer magazine to those on SME packages. Recent articles include Seven Steps to Starting a Business, Selecting the Best Smartphone for your Business, and Managing Customer Service.

Upcoming small business courses are also regularly publicised. For many big corporates the business of expanding products and services into the emerging start-up market might be the most effective kind of entrepreneurship training.



From → Transformation, Youth

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