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CEFE Network Project for Micro Enterprises in South Africa – A critical look at Networking, Moving Towards Sustainability and Survival - Deepak Adhikary1 Abstract This paper summarises the experience of CEFE Network Project within the SMME scenario of South Africa. It includes some results of an impact evaluation and critically examines the learning in the context of broader networking and sustainability. Insights of the Project demonstrate that networking is feasible only when certain pre-conditions are in place and business development services can achieve a certain degree of sustainability. Furthermore, the package should be holistic and based on “street – smart” principles rather than conceptual ideologies. What is CEFE? CEFE is a comprehensive set of training instruments designed to stimulate positive interventions in the small enterprise development process. The concept was originally developed and tested in Nepal with German technical assistance in the early 80s. CEFE uses experiential and action learning methods to develop and enhance the competencies of two essential groups of actors:

a) existing and potential entrepreneurs, so that they can improve their business performance; and

b) the key personnel of enterprise support institutions, so that they can

foster an environment favourable to enterprise development. The delivery of CEFE interventions which have been adopted to various cultures and target groups in more than 45 countries around the world for the last sixteen years, has shown a high success rate in creating personal competencies of the entrepreneurs. The competencies are in the areas of project identification, start up businesses, growth businesses and business problem solving for small enterprises. This has been achieved through a more professional awareness of one's own resources, entrepreneurial qualities and appropriate strategies to adapt to the business environment in any given condition. Success rate of the programme around the world, as measured by an independent evaluation team, is estimated at more than 65% new business start-ups and a 95% positive impact on growth oriented businesses. The global evaluation has also revealed that more than 90% of the trained entrepreneurs found the course useful in terms of enhanced entrepreneurial competencies. The South African Context Macro Environment Among South Africa’s grave socio-economic problems, unemployment is one of the most serious and intractable ones. It has replaced “race” as the major factor in inequality, and it contributes to a wide range of other socio-economic ills. An official

1 Deepak Adhikary is a GTZ Senior Advisor to the CEFE Network Project for Micro Enterprises in South Africa. The views represented here are entirely those of the author and do not necessarily represent those of GTZ.

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estimate for 1996/97 shows a gross unemployment rate of 35% among economically active adults. However, unemployment figures among the previously disadvantaged population vary between 50 to 70% depending on the region. Unemployment among women is also at an alarming rate of more than 65% The macro-economic strategy of the government known as GEAR (Growth, Employment and Redistribution Strategy) expects to attain a growth rate of 6% per annum and creation of 400000 jobs by the year 2000. The strategy places a very high importance on the promotion and development of SMMEs in terms of job creation and absorbing the labour force. In 1995, Department of Trade and Industry set up a Centre for Small Business Promotion to co-ordinate and implement the framework of the government’s strategy to support SMMEs as outlined in the White Paper. Under the Centre, there are three key players: Ntsika Enterprise Promotion Agency: Ntsika is charged with promoting growth and development of SMMEs by strengthening local small business support organisations who provide direct assistance to SMMEs Khula Enterprise Finance: as a wholesale institution Khula provides funds (business loans, seed loans, credit guarantee funds etc) to banks, NGOs and provincial development corporations who in turn lend to the SMME sector. National Small Business Council: is set up to build coalitions and to lobby at all levels of government and business with the aim of creating an enabling environment for small business. The NSBC comprises of representations form various chamber of commerce and other associations. The current state of small business in South Africa, which is based on a booklet published by Ntsika, shows the following profile (based on 1995 figures): SIZE NUMBER PERCENTAGE Survivalist 194 950 23.3% Micro Enterprises( no employees) 259 250 31.0% Micro Enterprises(1-4 employees) 137 200 16.4% Very Small 164 600 19.7% Small 63 600 7.6% Medium 11 560 1.4% Large 5690 0.7% TOTAL 836 850 100% Problems As of now, there seems to be many problems associated with the sector: • Co-ordination of various initiatives from the private sector, donors and other

international key players in implementing SMME strategies seem to be disjointed. All the key players seem to be pushing their own agenda

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• There has been increasing criticism of the government by the SMME entrepreneurs for not being able to deliver “on the ground”. In particular, the government has been accused of spending too much time on meetings and planning rather than on improving the delivery mechanism and institutional framework conducive to providing appropriate support and intervention. The private sector is also criticised for not being sensitive to the needs of the small businesses

• In terms of performance, Ntsika has generated a mixed reaction. Although certain

activities have been implemented, there still seem to be lack of focus and unclear objectives. Target group analysis for the BDS still seem to lag behind. Khula has been trying to lend to retail institutions, however the outreach has not been significant. NSBC, of late, has been embroiled in financial mismanagement and the future of the set up is not clear as yet.

• Implementation of business development services also appear to be hampered by

lack of capacity and necessary skills on the part of many NGOs and service providers. Most of the agencies provide book-keeping and marketing training courses disguised as entrepreneurship development courses that do not really address the needs of the entrepreneurs.

• A report from the Reserve Bank shows that the economy shed 130,000 jobs in the

last couple of years. The mining sector was hit very badly to the tune of 60,000 job losses. Besides mining, construction, electricity generation and motor trade were other subsectors which suffered as well. With the recent crash of Johannesburg Stock Exchange, economists are already predicting recession and the scenario does not look too conducive for the GEAR aspirations to be realised.

• The private sector is not likely to make a significant break through in achieving labour

market deregulation due to high degree of politicisation of labour in South Africa. Big businesses are increasingly improving their productivity and competitiveness through labour rationalisation, downsizing and technical innovations.

The Future However, the SMMEs in South Africa seem to be moving ahead irrespective of the current bleak macro economic indicators. A lot of new dynamics is taking place in the SMME arena. The negative economic outlook seems to have propelled more entrepreneurial drive especially among the SMMEs as they have to be more innovative, competitive and be on a look out for opportunities to survive. Many new enterprises are starting and quite a few are getting out of business as well. There is a lot of vibration in the economy particularly in the SMME sector. The market is very receptive towards interventions promoting entrepreneurial competencies and related business development services. CEFE in South Africa The underlying approaches of the CEFE method in South Africa are the following: • Theoretical lectures alone cannot produce professional entrepreneurial action. CEFE

relies heavily on the various tested simulations, experiential and action learning

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methods to deliver the message so that entrepreneurs internalise the learning rather than discard the concept as a mere lecture.

• Since training is an expensive intervention, utmost care should be exercised as to

who should be trained. For better results, potential/existing entrepreneurs should be properly selected for any kind of assistance, otherwise a `spoon-feeding" syndrome is created. CEFE Network training creates "natural hurdles" in such a way that participants crossing all the hurdles have better prospects of making it at the end as successful entrepreneurs.

• If entrepreneurs want to grow in their businesses, the market has to sustain the

growth. This is possible only if “growth” is complemented by cost and production/service efficiency. CEFE Network trains existing entrepreneurs to look at different strategies for growth vis-à-vis their own business competencies. The CEFE focus is in the enhancement of those competencies where the entrepreneurs have competitive advantages.

• For sustainable and successful business development services to be offered by the

NGOs, the approach/method has to be understood and appreciated by the whole organisation. All the key members of the NGOs, whether from accounts/administration or technical departments, should be trained in entrepreneurial competencies. The NGOs also need to have successful business development services as a means to their own survival. Staff of the NGOs promoting entrepreneurship should act and behave like entrepreneurs. Only then will the target groups start to them.

• All training should be cost effective, simple and replicable so that the NGOs can run it

in a sustainable manner even after the donors have terminated assistance. CEFE Training Philosophy - Tools for Sustainable Business Development Services • Existing scenario: Many training programmes have the objective of

transferring needed skills and know-how, with the result that knowledge is acquired but there is very little subsequent action. Even if the environment is hospitable and is “enabling”, the motivation to act and the competencies to attempt something new is lacking in many developing countries. To make matter worse, the entry barrier in terms of business formalities – registration, loan application etc can be quite intimidating for entrepreneurs. Even if the courage to challenge formalities is there, the competence to engage in the new situation is not available and as a result they are less likely to succeed. The CEFE Approach tries to stimulate desired action, irrespective of the target groups, by following a six stage philosophy: (Figure 1)

• Ownership of training: The guiding principle in this kind of training is the

ownership of the process which is achieved through the time and energy that participants must invest. However, no amount of simulation, positive reinforcement and feedback in the classroom will fully prepare someone for the hardships and “real” pain that a business is bound to cause. Neither will they provide the thrill of achievement after a difficult struggle. Training can only offer support in building up an environment in which a person can begin to explore the questions of whether or not running an enterprise is the way they want to go and, if so, what types of competencies are they likely to need in the pursuit of success. Once training is

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tailored around entrepreneurs taking the ownership and ways/means of achieving competencies, there is a big chance of the training being ”sustainable”.

Figure - 1

• Start up vs existing entrepreneurs: Most entrepreneurship training programmes

have been concentrating on the activities related to how an individual gets into business. Although it is indeed an important stage in the development of an enterprise culture, it is by no means the end of the story. In terms of the Business Development Services, promoting start-ups alone causes imbalanced SMME growth. It has been learnt in the last few years that existing enterprises should not be ignored in the quest for new business development. Unfortunately, most of the current training available to existing entrepreneurs is very generic in nature and does not deal with specific issues.

• Business growth and expansion: Entrepreneurs who are generally doing fine

and would like to expand their businesses have very specific needs. Courses offered to them have to:

• Be time flexible as existing entrepreneurs cannot attend full-day and long training

courses, • Demonstrate practical strategies. Entrepreneurs in growth businesses are not

interested in the generic aspect of the business offered by many courses (like planning, function of management, marketing etc). The programme has to focus on “what strategies can they follow to expand the business? What are the financial implications for growth? How to cope with growth? How to take advantage of opportunities? etc. Only when a training course can offer answer to some of these issues, will existing entrepreneurs be interested in participating.

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• Reduction of failures through business re-structuring: Once the business is running for a while, the initial euphoria slows down. At this point, quite a few businesses start failing. Up to 70% failure rate during the first 3 years is quite common. Additionally, in emerging markets like South Africa, businesses are failing almost at an exponential rate.. Most of the enterprises on the verge of failing dabble with the symptoms of the problems and not necessarily with the cause. Any training or intervention directed towards such businesses should focus on equipping the entrepreneurs to identify the cause/effect relationship and work out a strategy to re-engineer the business. This is the only way to alter the failure rates. Unfortunately, there are not many interventions that target this niche.

• Changing profiles of business start up: Traditionally, the development gurus

thought they performed economic miracles by taking people from the state of unemployment to business start up. However, slowly the paradigm is shifting. With increasing emphasis on selection, there is a tendency to pick people who are already geared towards enterprise. In this process, many potential entrepreneurs who are gradually easing themselves into business by having a backyard business or working in the evenings or weekends are picked up. For an entrepreneur whose family has been in business, it is sometimes very difficult to say when the person made a move from not being in business to being a start up. Unless the NGOs are tempted by statistical acrobatics to prove that x number of businesses have started after the intervention, what is really important is how many participants received useful and sustainable training that can be used in their business situations.

• Cost of Training: Another debated area is the cost of training. It is generally

accepted that if the cost of training as translated into a per job basis is cheap, then there is value for money. Normally such statistics are compared between countries to say which training has been more successful. Although quite valid from certain perspectives, it is like comparing chalk with cheese! A training course in Bangladesh where an MBA working with an NGO earns in the region of $ 70 to $ 80 a month cannot be compared with, for instance, South Africa where an MBA in a similar situation would get about $ 1000 to $ 2000. Obviously in countries like South Africa, Korea, Hong Kong, Tunisia, Jordan etc. where the cost of living is very high, the cost of training is also going to escalate. So, does it mean that only training courses conducted in countries like India, Nepal, Bangladesh, Kenya is cost effective and sustainable compared to some of the countries mentioned above? Surely not. At the end of the day, “cost-effectiveness” is more than the actual costs for business development services.

• Changing needs of the entrepreneurs: In many entrepreneurship development

models implemented world-wide, the emergence of a “minimalist” approach has created havoc. Nowadays it is “taboo” and “professional hara-kiri” to talk about training and credit in one breath. People have actually gone one step further in this respect. Now they talk of specialised services and believe that the training institutions should provide only training. Institutions providing consulting or counselling should exclusively provide the same and credit institutions should provide only credit. There are certain merits to it. For instance, it would be unwise to have training, counselling and credit under one roof like many “Jurassic Park” SMME institutions in Africa and Asia. However, the various service providers often “talk” and link up with one another. Unfortunately, donors propagating one or the other approaches are all trying to prove which is better than the other. It seems as if they are busy building territorial empires and feel impeached when others make a

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contribution or constructive criticism. About 75% of participants come to training courses with a faint hope that they might be able to secure a loan whether from a bank or any other source. There is nothing wrong with that. Entrepreneurs who obtain loans from the DFIs/banks also need follow-up services. Entrepreneurs who come for a second or third loan or entrepreneurs who want to get out of group loan schemes, definitely do need some sort of training. At the moment, there seems to be a big communication gap between the “Minimalists” and the “Non financial support” group.

• New Breed of Trainers/Counsellors: Since the SMME sector is presently in the

limelight, many individuals have entered the arena as SMME experts/specialists. The trainers/counsellors come primarily from either a) liberal arts or business management (including accounting) or b) vocational training/education background. Normally, trainers/counsellors coming from liberal arts or business management are good in marketing or general book keeping but they can seldom cope with technical problems in a business. On the other hand, trainers with vocational education are good on the technical side, but they fear cash flows and income statements. Overall, preparation of the business plan seems to be another difficult area for majority of the trainers/counsellors. Not many organisations invest enough time on staff development and skills upgrading. As a result, the courses become sub-standard and do not evoke positive response from the clients. That is why it is common to see many training courses running below capacity even if the unemployment rate is so high in the country.

• Quest for quick results: In many instances, entrepreneurship programmes

are seen as the “quick-fix” – something that can be done with a relatively high profile and at reasonable cost. The results of this type of intervention are hit and miss and are frequently unsatisfactory because of the ignorance of a whole set of other factors at work in determining success. Sponsors also encourage the “number games” and assisted NGOs happily follow suit. Once the training is offered and a certain number is achieved, nothing much is done. This goes on until project evaluation and there is a rush for a “cosmetic” patch-up on the impact of the training. Since everybody likes success and nobody wants to be part of failure, a lot of white wash is done and the realities are concealed.

• Is training really necessary?: Many organisations offer entrepreneurship

development programmes with exaggerated claims. However, most of the programmes are merely business management courses and deal with management issues rather than entrepreneurial competencies. Their primary aim seems to be transferring needed skills and know how with the result that conceptual knowledge is acquired but there is very little subsequent application. As a result, many different “models” emerge and vanish quickly. Due to such occurrences, there is a big question mark in the minds of many whether entrepreneurship training can be sustainable and is worthwhile.

CEFE Implementation in South Africa The CEFE approach is now currently being adopted and implemented in South Africa (since October 1994), through GTZ technical assistance by a network of six Non -Governmental Organisations (NGOs) already involved in the promotion of micro and

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small enterprises. All these agencies are specialised either in small enterprise training/mentoring, skills development, credit delivery or both. The rationale behind assisting the network is two-pronged: a) a large group of entrepreneurs could be reached through the existing network, and b) institutional capacity building could be undertaken at a broader level so that the partner institutions can carry out the task of entrepreneurship development in a cost effective manner even after the technical assistance is terminated. In October 1992, GTZ had conducted a four-day Appreciation Workshop at the request of many NGOs to discuss the possibility of starting a small enterprise development programme in South Africa with a special focus on small and micro entrepreneurs. Out of the many organisations that participated in the workshop, some NGOs showed a very keen interest in the CEFE methodology to improve their package of services through technical co-operation from the Federal Republic of Germany. The current project is the outcome of such endeavour and negotiation. The Project Purpose The purpose of this project is to strengthen the network of NGOs in implementing CEFE programmes so that growth oriented small and micro enterprise initiative can be promoted by offering a range of services appropriate to the needs of the target groups. In the long term, several hundred micro and small entrepreneurs will be identified, given further training and supported in setting up or subsequently expanding their businesses on a sustainable basis. Target Groups of the Project The Project has the following target groups:

• unemployed and other township dwellers who are interested to be self employed and are prepared to put some of their equity/resources into the project

• micro and small business entrepreneurs who are already in the business but would need further support in growth and expansion

• entrepreneurs who have potential to survive and grow but currently are having major business problems

• capacity building in terms of training, counselling and other delivery skills of the participating NGOs

• specialised target groups like rural entrepreneurs • at least 35% of the target group are expected to be women

The following table shows how the network is placed and different activities carried out by the NGOs. In the last few years, all the partner institutions have built up their niche markets and areas of expertise: (Table –2)

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Table - 2

The CEFE Products CEFE offers the following products to existing and potential entrepreneurs through the network: Product #1 Business Start-Up Courses ( 2 to 4 weeks) Target Group: Potential entrepreneurs who would like to start and operate a viable business

Course content * Entrepreneurial Competency Acquisition 2 weeks * Project Identification and Selection Field Work for Business Plan Preparation 2 weeks * Business Plan Preparation 2 weeks * Presentation and Discussion with the Potential Financiers

CE F E NE T W OR K P R OJ E CT SCE F E NE T W OR K P R OJ E CT S

Advis ing Nts ikaE n ter pr is e

P r omotion Agency

Advis ing Nts ikaE n ter pr is e

P r omotion Agen cy

As s is t ing otherS MME actor s

As s is t ing otherS MME actor s

Advis ing D ept. ofT rade & Indus try in

var ious matter s

Advis ing D ept. ofT rade & Indus try in

var ious matter s

T R IP L E T R U S TOR GANIS AT IONT R IP L E T R U S T

OR GANIS AT IONGE T AH E AD

D E VE L OP ME NTGE T AH E AD

D E VE L OP ME NTIND E P E ND E NT

B U S INE S SE NR ICH ME NT

CE NT R E

IND E P E ND E NTB U S INE S S

E NR ICH ME NTCE NT R E

F OU ND AT IONF OR E CONOMIC

& B U S INE S SD E VE L OP ME NT

F OU ND AT IONF OR E CONOMIC

& B U S INE S SD E VE L OP ME NT

S T U T T E R H E IMB U S INE S S

AD VICECE NT R E

S T U T T E R H E IMB U S INE S S

AD VICECE NT R E

B E E H IVEE NT R E P R E NE U R IAL

D E VE L OP ME NTCE NT R E

B E E H IVEE NT R E P R E NE U R IAL

DE VE L OP ME NTCE NT R E

S etting up L ocalB us ines s S er vice

Cent res

E ngaging L ocalGover nments

S elling CE F E tomult iple donors

after r e-packaging

U s ing in S kil lsT rain ing

D is abled &other s pecif ictar get gr oups

L inking withMicr o Cr edit

GenderR es earch

S ell ing CE F Eto pr ivate

s ector

Indus tr ialE xtens ionCapacityB uilding

L inkingwith Micro

Cr edit

D epar tment ofE ducation

D epar tment ofL abour

T echnikonsadapting CE F E

for teacher ’str ain ing

S ell ing CE F Eto m ultiple

donors afterr epackaging

Vil lage/R ural

E n terpr is eD ev.

S m all com-mer cialfar ming

AgroIndus tr ies

CapacityB u ilding

for L B S C’s

R ural E conomicD evelopment

E m er gingContractor D ev.

T our is mD evelopment

Ar ts & CraftsD evelopment

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Evaluation Criteria: at least 75% of the trained entrepreneurs operate a sustainable business within one and a half to two years Product #2: Business Growth and Expansion Courses( Modular 2-4 weeks) Target Group: Existing small and micro entrepreneurs who are surviving and doing

relatively well (they have normally taken out a loan, have already paid it back and would like to take second loan)

Course content

* Portfolio Analysis and Selection of Entrepreneurs for the Course 1 week * Inputs on Business Growth and Expansion 1 week - Can the market sustain growth? - Can existing capacity be better utilised? - How to maintain cash-flow? - How to reduce costs? - If I am ready, then what strategy do I follow? Field Work for Business Plan Preparation 1 week

* Final Inputs on Business Plan Finalisation 1 week * Presentation to the Potential Financiers Evaluation Criteria: Observable growth in sales, more than 25% increase in value added within two years of the training Product #3 Business Re-Structuring Courses( Modular 2-4 weeks) Target group: Existing small and micro entrepreneurs who are seen to be good clients by the banks and supporting agencies but are having business problems

Course content * Portfolio to Establish Whether the Businesses Have any Potential to be Revived 1 Week * Inputs on Business Re-structuring 1 Week - Establishing Cause-Effect relationship and identification of core problems - Transforming problems into opportunities - Formulation of appropriate marketing and production/ service strategies for re-structuring the business Field Work on Business Problem Solving 1 Week

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* Inputs on the Business Problem Solving Plan 1 Week * Presentation to the Re-financiers if any Monitoring & Evaluation Criteria: Decreased loan arrears, improvement in cash flow situation, increased customer confidence. The Project is moving rapidly towards addressing the needs of the existing entrepreneurs as there is a real value added at this level. If the NGOs have to move towards self-sustainability, then they have to focus on the upper end of small enterprises and the lower end of medium sized enterprises. The higher the level in the pyramid, the better are the opportunities for the NGOs to charge market related fees. The following table (Table- 3) explains the scenario:

Table - 3

The CEFE Process Pre-conditions: When potential/existing entrepreneurs attend the courses, the project does not provide them with financial support. We insist that they provide themselves with their own basic resources (transport, food, lodging etc.). We also charge them a small registration fee as part of the self-selection process and as an illustration of the seriousness accorded to the training course. CEFE projects around the world have conclusively experienced that anything given free to entrepreneurs is never valued much by them whatever target group they may be. Selection: Selection is an important factor. Traditionally, various psychological tools have been used in selecting potential entrepreneurs. Although glamorous and interesting, such tools have not been able to make any breakthroughs or performed any

South African SMME PyramidSouth African SMME PyramidAnd a move towards sustainabilityAnd a move towards sustainability

Generic divisionGeneric division

BLACKOWNEDBLACKOWNED

MOSTLYBLACKOWNED

MOSTLYBLACKOWNED

MORE THAN80% WHITEOWNED

MORE THAN80% WHITEOWNED

WHITE OWNEDWHITE OWNED

INFORMAL AND MICROENTERPRISES

SMALLENTERPRISES

MEDIUM-SIZEDENTERPRISES

BUSINESS START-UPCOURSES

BUSINESS START-UPCOURSES

BUSINESS GROWTH &EXPANSION COURSESBUSINESS GROWTH &EXPANSION COURSES

BUSINESS RE-STRUCTURINGCOURSES

BUSINESS RE-STRUCTURINGCOURSES

CEFE PRODUCTSCEFE PRODUCTSPARTICIPANTSCOVER HIGH %OF FEE

SUBSIDISED

LARGEENTERPRISES

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“miracles” by way of identifying entrepreneurs who would make it in the end. The network partners start with a one day appreciation workshop in various communities/city centres etc after an extensive publicity campaign. Local politicians, bank officials and other key players are invited to participate. Such events draw anywhere between 100 to 200 curious participants. The NGOs introduce themselves and explain what it takes to be an entrepreneur. A mini-workbook that contains a summary business plan is sold on the spot. It is announced that those who buy and complete the mini-workbook can come back after two weeks on a specified date for interviews. Normally, 60 to 70% of on-lookers drop out and do not even venture to buy the workbook. The Network experience has been that about 30% would buy the workbook, complete it and come back with the serious intention of starting a business. The Network calls this process “Natural Hurdles” and generally, participants coming out of such “hurdles” always have performed better and have accorded the necessary seriousness to the training. In the case of existing entrepreneurs, the selection is done a bit differently. Referrals are solicited either from the banks or other business organisations. A Portfolio Analysis is carried out and the results are discussed with the entrepreneurs. It is then decided whether the entrepreneur should participate in a business growth or a re-structuring course. Field Work: The participants spend substantial time in the actual business location so that a major part of the course is devoted in pursuance of their personal business ideas. After investigating their own entrepreneurial competencies vis-à-vis the market dynamics, the participants ultimately come up with a viable business plan for start –up, growth and expansion, or business re-structuring that will be presented to potential financiers and other interested parties. Follow Up: Follow-up of the training is carried out through action learning methods using an innovative entrepreneurial pocket system. It is a peer support group established by the entrepreneurs themselves and they take turns to co-ordinate it. The trainers merely play the role of facilitators. The Network experience has shown that such groups are cost effective, easy to follow and more effective in building entrepreneurial confidence as they deal with entrepreneurs’ personal experiences. This method is a significant departure from one-to-one follow ups. Monitoring and Evaluation: NGOs perceive the Monitoring and Evaluation system as a forced requirement from the donor agencies. An analogy could be drawn here with SMME client’s hesitation to keep records. Unfortunately, the concern of the NGOs is not unfounded. Most of the donor agencies confuse monitoring, evaluation and the requirements of the Logical Framework. As a result, a huge volume of data is required. Since most of the NGOs do not have expertise in setting up the system, the data is collected somehow, and once the project is over, the system is also forgotten. The Network realised this and has embarked upon setting up a very simple monitoring system linked to the management information systems of the NGOs. With this system, the NGOs can actually see the cost implications of their business development services and make informed decisions. This encourages the NGOs to take responsibility to maintain the system as they can see the actual benefits. Once the system parameters are simple and do not demand undue resources, the system is maintained in a sustainable manner. The Network uses independent consulting companies to carry out a periodic impact evaluation without confusing it with the data of the monitoring system. Although there is a direct link, the monitoring does not impact the evaluation directly. Sadly, many agencies do not understand the consequences of confusing the two.

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Project Inputs The CEFE Project supports the network mainly through capacity building of the participating organisations. The following inputs are provided: • Setting up a Monitoring and Evaluation System • Providing Training of Trainers Courses on Business Start-Ups, Expansion and

Growth, Business Problem Solving, Small Business Mentorship, Action Learning Techniques, Technical Aspect of SMMEs, Advanced Facilitation Skills etc.

• Coaching trainers, consultants and loan officers on -the - job while they conduct the

courses for the entrepreneurs • Providing overseas staff development opportunities • Assisting the partner organisations in strategic planning and orientation related to

small enterprise development • Assisting them in the sharing of information and experiences • Making a grant to cover part of the direct cost spent in training entrepreneurs based

on partner organisations’ respective performances in conducting training and follow ups

• Preparation of various training manuals and other support materials to be used by the

partner organisations • Facilitating contemporary research • Soliciting funds from other key players in terms of consultancy assignments The project has a secretariat based in Johannesburg and reports to a council comprising of heads of the NGOs. The GTZ Contact Person plays a dual role of head of the Secretariat and also as a council member. The GTZ Contact Person provides inputs with the help of local and international short-term consultants. The first phase of the project, completed in December 1996 was funded to the amount of 4 million DM. The current phase, which ends in December 1999, is funded to the amount of 3.5 million DM. Results of an Impact Evaluation The Project has been trying to operate a sustainable model. But what was the result? How did the NGOs perform? The Community Agency for Social Enquiries (C A S E), a research NGO based in Johannesburg, was contracted to carry out an impact evaluation in all the project locations. Out of the trained 2000 entrepreneurs, C A S E surveyed 217 with the sample stratified by partner organisations. The questionnaire was largely uniform and designed to accommodate all respondents, regardless of the training course

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they underwent. All trainees had completed one or more of the CEFE Start up, Growth and Expansion or Restructuring courses. Some interesting findings emerged: • Two-thirds of trainees are women and almost a quarter of trainees are women aged

30-39. • More than half of trainees are breadwinners, and one-fifth are spouses of

breadwinners. Among trainees who are currently working, 80% are the main breadwinners in the household. This then places a high degree of financial responsibility on these individuals.

• Two-thirds of trainees have less than a matric equivalent education, • Almost all trainees (87%) are members of community organisations, particularly a

church, stokvel (group lending scheme) or political organisation. • Two-thirds of trainees are currently working and almost three-quarters of those

currently working have changed jobs from their previous businesses. • Just over half of the trainees currently working have run businesses for three years

or longer. This indicates that there is a high demand for courses amongst relatively established business people.

• Slightly more than half the trainees (53%) were satisfied with the cost of the course, but there was strong evidence to indicate that people in all the organisations were reluctant to pay more than they originally paid. This in part may be due to the fact that people are unwilling to make a prior commitment about payment without knowing what the course may entail in the future.

• There was a generally favourable response to the courses, with nearly all the trainees (80%) from all the organisations rating the courses as better than they expected.

• Most trainees (85%) from all three courses found the courses easy to understand. The majority of those who said they experienced difficulty comprehending the course said these problems were language related.

• On average, 34% of all respondents took out loans. The ability to repay on loans was very high (93%) across all organisations.

• Eighty three percent of trainees said their business sales had improved since training, while 78% from all groups had improved profits.

• At least 90% of them keep at least one form of business record. • More than two-thirds of trainees employ one or two people, either not related or

family members. Half of those who run family businesses employ family members. • Manufacturing is the largest sector, with 43% of those working being employed in

this sector. One out of four people are involved in a service-sector-related job, while the remaining 32% are involved in a retail/wholesale job.

• Trainees were asked to assess their assets before and after training. There was an increase in the number of assets the trainees now owned. Trainees were reluctant however to tell us what the Rand value for many assets were.

• One-third of men, and one-quarter of women saw business problems as being gender-specific.

• One in five women said they had better public relations skills than men, but a similar number also said they were more prone to being cheated by customers than men.

• A high percentage of those who felt gender-related problems did exist in business, (71% men, 89% women), said the course helped them with these problems.

• More than half of those who received follow-ups, said the follow-ups were better than expected. Those who received personalised visits from the organisation felt the greatest levels of satisfaction.

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• Ten percent of respondents said they had nothing to suggest, as they were satisfied with their training.

• Almost the same percentage, (7%-9% of trainees for each suggestion) made the following proposals: organisations must better facilitate loans from banks; make the course more accessible in terms of language and geography; conduct the training over a longer period of time. etc.

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Visualisation of Some Impact Evaluation Results

Degree of satisfaction amongst trainees (all organisations)

C A S E research for CEFE

38

80

85

95

Prepared to pay more for course

Course better than expected

Course easy to understand

Recommend course to someone else

0 20 40 60 80 100 120

%

Loans, sales, profits, records, employment (all organisations)

C A S E research for CEFE

34

93

89

15

83

78

78

46

Took out loan

Can make loan repayments

Course helped me repay loan

Business costs have decreased

Sales have improved

Profits have improved

Keep business records

Employ more people since course

0 20 40 60 80 100 120

%

10 1

4

1

9

4

7

5

1 6

2 1

3 1

0

5

1 0

1 5

2 0

2 5

3 0

3 5

%

O T H E R O T H E R R E L A T IV E S C H IL D P A R E N T S S P O U S E /P A R T N E R B R E A D W IN N E R

P R IM A R Y M O N E Y E A R N E R S IN T H E H O U S E H O L D B Y G E N D E R

M a le

F e m a le

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M O S T U S E F U L C O M P O N E N T S O F T R A I N I N G C O U R S E ( G R O W T H A N D E X P A N S I O N )

P r e p a r a t i o n o f P r o d u c t i o n

s t r a t e g y2 7 %

P r e s e n t p la n t o B a n k1 3 %

F i e l d w o r k f o r B u s i n e s s P l a n

1 3 %P r e p a r a t i o n o f

F i n a n c i a l s t r a t e g y3 4 %

P r e p a r a t io n o f M a r k e t S t r a t e g y

1 3 %

M O S T U S E F U L C O M P O N E N T S O F T R A I N I N G C O U R S E ( S T A R T - U P )

P r e s e n t P la n t o B a n k

8 %

A l l u s e f u l4 %

E n t r e p r e n e u r i a l C o m p e t e n c ie s

2 5 %

C r e a t i v i t y E x e r c i s e

1 3 %

In t r o d u c t i o n t o B u s in e s s P la n

3 7 %

F ie ld W o r k f o r B u s in e s s P la n

1 3 %

M O S T U S E F U L C O M P O N E N T S O F T R A IN IN G C O U R S E ( R E S T R U C T U R IN G G R O U P S )

D ia g n o s t ic s1 0 %

D is c u s B u s in e s s w it h E n t r e p r e n e u r

3 1 %

Id e n t if ic a t io n o f M a in B u s in e s s

P r o b le m1 8 %

S t r a t e g ie s t o C o r r e c t B u s in e s s

P r o b le m1 5 %

F ie ld W o r k & B u s in e s s P la n

P r e p a r a t io n2 6 %

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Lessons Learnt and Implications for Future Sustainability There are three distinct lessons that the Project has learnt over the last three and half years in a practical, hands-on way. Many mistakes were also made in a process that eventually has enriched the Project in strategizing the future:

- What it entails to successfully network and how to do it? - How to move towards sustainability and what strategies to follow? - Where is the Project’s competitive advantage vis-à-vis the niche market?

Networking Of late, “Networking” has been a buzzword and is very fashionable in development circles. However, it is one of the most misunderstood and abused processes. Networking is also not easy. The Project tries to conceptualise the networking process in the following manner: Network Paradigm

Availability of Resources: Most of the people in the development business do not realise that networking requires substantial amounts of resources. There is a wrong perception that networking is voluntary. At the end of the day, whether they are the NGOs or the entrepreneurs or any other service providers, they will always ask ‘ Who or

CEFE NETWORKPROJECT

CEFE NETWORKPROJECT

AVAILABILTY OFSOME RESOURCES

NON -PARTICIPATION INORGANISATIONAL

POLITICS

INFORMALITY OFPROCESS &PERSONAL

RELATIONSHIP

SPIRIT OFCOLLABORATION& COMPETITION

RECOGNISINGKEY PLAYERS

BALANCINGOF POWER

BACK UP OFFICEPROVIDING

PROFESSIONALSUPPORT

LIMITED TOSELECTEDPARTNERS

TRANSPARENCY &OPENNESS

LONG TERMVISION

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what is going to pay for it?” For example, there is a meeting and some of the key players have to fly or drive to a certain destination. Now who pays for such costs? Participants on the network try not to incur unnecessary network expenses. Otherwise the initial euphoria dies sooner than anticipated. All meetings, visits, exchange of information etc have cost implications. The CEFE Network has a very well equipped secretariat headed by a seconded expert with many years of SMME experience. The secretariat organises various training courses, pays a certain subsidy to the partner NGOs, outsources various international experts, pays for network members to travel etc. The network also facilitates exchange of trainers/consultants etc. on a cost-sharing basis. Without resources, the network would have collapsed a long time ago. A back up office providing support: It is very difficult to maintain a network without providing back up support. Once the contacts have been made between the network partners, “everybody’s business” becomes “nobody’s business”. Most of the entrepreneurial networkers are busy people. They will contact and decide to “network”, but somebody has to do the job. The CEFE secretariat works as an anchor for the network where things can be organised relatively fast. Recognising key players: In the process of networking, people spend an awful lot of time dealing/networking with institutions/people who add very little value. Right at the outset, it is necessary to identify who are the key players in the SMME field and find a way to approach them. There will be times when a substantial amount of time, energy and resources have to be invested but at the end of the day, it is worth it. In a dynamic environment, the equations are always changing. The “know-who” in networking is a real crucial consideration. The CEFE Network Project is working very closely with the Department of Trade and Industry, Ntsika Enterprise Promotion Agency, Khula Finance etc, which are the key government players promoting SMMEs in the country. The project is also acting as a service provider to many donor agencies and other key actors who have an influence over and impact on the sector. This has also strengthened the network as the partners are “required” to work together most of the time. Over a period, the initial suspicion diminishes and they see the need to co-operate. Long Term Vision: Most of the networks of SMMEs become a flash in the pan, as they do not anticipate a long-term vision/scope. Since development projects these days work on logical frameworks with a short to medium term (between 2 to 5 years) time span, most of the activities are crammed and do not leave much scope for consolidation. As a result, once the funding agencies pull out, the initial enthusiasm also disappears. Within the CEFE Network Project, one of the big strategic themes has been the issue of how the network will continue as the GTZ funding gradually decreases? The Network has already started to look for new avenues to generate own revenues by selling its services on a consulting basis in the SADC region and within South Africa. Balancing of Power: Organisations promoting entrepreneurship and small business, whether a para-statal or an NGO, should act and behave like an entrepreneur.

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Conventional wisdom shows that agencies with strong entrepreneurial leadership and professional competencies have always survived and have become market leaders. NGOs in South Africa have been on many roller-coaster rides and the surviving ones are quite entrepreneurial. Within the CEFE Network, the heads of the network partner institutions are very entrepreneurial and are well known figures in their own rights. They lead very high profile lives. As the network secretariat, there are occasional temptations to succumb to one of more of the high-flying partners. There are also clashes of egos. One of the main tasks of the project has been to manage and maintain a “power balance” of the entrepreneurial partners. This can be achieved if the secretariat can keep them excited and motivated with new opportunities and challenges all the time. Transparency and Openness: In a network, especially if assisted by a donor agency, there is always a suspicion between the counterparts. The local counterparts have the perception that substantial money is available but the seconded experts do not like to disclose the amount. Due to such stereotyped observations, counterparts do not believe that there could be genuine problems. On the other hand, NGOs and community organisations are perceived to be bottomless pits. Normally the so-called experts come to a country and start criticising what is non-existent and that causes counterparts to be defensive. Secondly, most of the donor-assisted projects have huge overhead costs in terms of the salary of the seconded experts, cost of office operation and so on. Normally there is a tendency not to disclose such amount to local counterparts. On the contrary, it is a very common knowledge to guess the salary of the experts and costs of operations as the job adverts and the standard UN salary is known by many. Since the agencies try to hide it, the local counterparts always suspect there is something else behind it. In the CEFE Network Project, the budgeting is done jointly with the local counterparts and all the incomes/expenditures are open. Since the network is open to scrutiny by the counterparts, the Project also can demand the same from them. Such open transactions help to build confidence/mutual respect and alleviate fear of “hidden agendas”. Limited to selected partners: Successful networks are always “exclusive”. The first objective is always to identify entrepreneurial NGOs and partners who are widely respected by the target groups. If the network is open to many, it becomes too difficult to manage and the resources get fragmented. This encourages partner NGOs to be part of a “number game” i.e. providing limited services in terms of training and extension to many entrepreneurs. At the end of the day, a lot of entrepreneurs will be ‘reached’ but the impact would be minimal. In the CEFE Network Project, NGOs who were more competitive and entrepreneurial were handpicked. For instance, the CEFE concept was presented to at least 25 different organisations in 1992. The methodology, what would a typical project entail, how will the capacity building take place and how much assistance could be provided were all clearly explained. Out of the 25 different organisations represented, only about 7 organisations approached GTZ for future collaboration. The GTZ assessed the 7 and finally settled for 4 NGOs. Later on, two more were added after extensive consultation and evaluation. The Project made sure of the following: - GTZ is not the only agency assisting this particular NGO

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- GTZ financial subsidy contribution should not be more than 10 to 15% of their total budget portfolio

- The trainers/consultants are eager and willing to learn - The organisation is willing to have a monitoring system - Senior staff members demonstrate entrepreneurial behaviour - Senior staff are respected in the SMME circles - The NGO Has a long term strategy for survival and growth, and - Has at least two unique components Sustainability Issues Sustainability, the way CEFE Network Project looks at it, has four dimensions: a) Technical expertise – competent staff in the network who are capable of designing

and delivering requisite training programmes b) Capable managerial and administrative support within the NGOs providing for

continuity through ongoing organisational structures, systems, procedures and leadership to cope with changing demand in an entrepreneurial manner

c) A market for the services offered, and d) Financial viability based on reasonable expectations of revenue providing for

recovery of direct costs and a contribution to the overhead costs of managerial and administrative support. Also some provision for reinvestment in technical expertise.

The network (especially the NGOs) has to position itself where it has on-going competitive advantages. Secondly, if the NGOs do not have reputation as centres of excellence, it will be difficult to maintain market acceptance in the medium to long run. Training entrepreneurs alone would not suffice. The NGOs would have to move towards training other service providers on a cost recovery basis. However, such positioning would be justifiable if the products that form the basis of offerings to other institutions are tested and developed and can be offered at prices that recover the costs. However, the most important value added activity is dependent on constant monitoring, evaluating and re-designing the programme packages. It will be very important for the NGOs to demonstrate that that business development services it is offering is effective in achieving the desired outcomes of the clients in terms of business start up, growth or re-structuring. Sustainability of the programmes from direct cost recovery needs to be explored as well. Since most of the NGOs run highly subsided programmes, the training courses are offered to clients who are subsidised by other organisations and donor agencies. There is a “Catch –22” situation. If the NGOs target upper end of small and micro enterprises and the lower end of medium sized enterprises, the NGOs have to rely on revenues generated from the fees as not many donor institutions are willing to invest in that “missing middle”. In the South African context, most of the agencies want to be politically correct and they rather make massive investments in the informal and survivalist businesses to “alleviate poverty”. To deal with rather sophisticated clients of small enterprises, the NGOs have to recruit fairly qualified and experienced staff who come at

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a “cost”. Since the fees charged at that level is not exactly good enough to cover all the overheads and donors are normally not willing to invest in that sector for the reasons given above, the NGOs loose interest and tend to go back to the survivalist businesses where massive amounts of donor funding is available and where they have expertise. Such dichotomy has confused and de-motivated many NGOs who would have liked to move to such target group. Although the CEFE Network Project is moving towards that target group (not completely ignoring the survivalists) by offering growth and re-structuring courses, it is an uphill task. With the network Project, there are two further issues involved – a) individual sustainability (the network as an entity and the respective partners) b) collective sustainability in the medium to long run. This will be a function of the degree to which key stakeholder needs are met (including needs of the direct customers) and how well the NGOs fit within the overall national development framework. Vision for the future The major issue is that the partner institutions should see the benefit and have commitment to enhance it. Some of the joint issues are:

• development of new training programmes for new segments of the market to be jointly shared through joint market research and programme/product development

• joint promotional activities aimed at raising national and local awareness of

the potential for entrepreneurship

• joint conferences to create awareness among stakeholder groups and to create visibility for the work of the network

• Lobbying of external foreign donors, the private and the public sector

• Joint effort on staff development, staff exchange and impact evaluations

• Development of training programmes for trainers and educators as well as

programmes for stakeholders such as banks, and other development agencies/local authorities

• Brokering relationship between the wholesale SMME promotion agencies of

the government and the NGOs If these issues could be tackled, the next step is to explore the possibility of registering a company for “profit” as an offshoot of the network that will eventually replace the network structure. This will, in the medium to long term, facilitate a creation of sustainable organisation with SMME development focus. The organisation will address the vacuum in South Africa in terms of local institutions that could provide services to “service providers” and at the same time scale up the level of target groups from survivalists to medium sized enterprises.

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References • Adhikary, D (1994) Entrepreneurial personality and enterprise culture - new interventions, Kenya Institute of

Management Nairobi, • Community Agency for Social Enquiry(CASE) 1997, "Impact evaluation of CEFE Network Project • Gibb, A (1997) Strategic review of CEFE Network Project, Johannesburg (Restricted document) • Kolshorn R and Tomecko J, various documents on CEFE concepts and enterprise growth, Germany & Laos • Tomecko, J, (1996) Key note address - Conference on "Training for Success, Cape Town • Loucks K (1994), "Strategic Review of Kenya Institute of Management, Nairobi