WPI US-AFRICA Business Conference
Capacity Building for African Small & Medium Enterprises:
EXPERIENCES,CHALLENGES AND OPPORTUNITIES
March 9,2008
WPI US-AFRICA Business Conference
Capacity Building for African Small & Medium Enterprises:
EXPERIENCES,CHALLENGES AND OPPORTUNITIES
March 9,2008
SOUTH AFRICAN INTERNATIONAL BUSINESS LINKAGES
United States Agency for International Development
Corporate Council on Africa (CCA)
ECI Africa (Pty) Ltd
SOUTH AFRICAN INTERNATIONAL BUSINESS LINKAGES
United States Agency for International Development
Corporate Council on Africa (CCA)
ECI Africa (Pty) Ltd
SAIBL OPERATIONS
Facilitates and leverages:
• business linkages between South African black-owned/partnered SMEs and large corporations
• access to US & SADC export markets
• access to business development services
• access to finance for SMEs
SAIBL OPERATIONS
Facilitates and leverages:
• business linkages between South African black-owned/partnered SMEs and large corporations
• access to US & SADC export markets
• access to business development services
• access to finance for SMEs
SAIBL 1998 – 2008• Assisted over 500 black-owned/partnered SMEs
• Total reported turnover of $1.44 billion)
• Total reported exports of $130 million
• Total reported net new jobs of 17,323
SAIBL 1998 – 2008• Assisted over 500 black-owned/partnered SMEs
• Total reported turnover of $1.44 billion)
• Total reported exports of $130 million
• Total reported net new jobs of 17,323
AFRICAN ECONOMIC LANDSCAPE
• Dominant public sector
• Dominant role by large corporations in private sector & commanding heights
• Globalization a reality
• Increasing recognition & role of emerging indigenous small & medium enterprises
CHALLENGES & OPPORTUNITIES
Creating and growing business partnerships between private and public corporations and local small and medium enterprises
Business Linkages
BUSINESS LINKAGES ENVIRONMENT
Policy and Regulatory Frameworks
A growing number of competitive BEE SME companies
Effective entrepreneur and SME development support programs
Support & incentives for SME procurement (BBBEE codes)
Significant procurement available to BEE SME companies from private and public corporations
Small and Medium Enteprise Development
KEY FACTORS IN SME PERFORMANCE
Enabling business environment and conditions (policies, legal, skills, infrastructure, etc)
Access to and affordability of business development support services
Access to market information, and opportunities (local and export)
Access to and cost of finance (risk finance, loans & working capital)
Small and Medium Enteprise Development
Changes in knowledgeattitudes and behaviour
Transparency, confidence,energy, vision
Improved strategies,processes, investment
capacity & performance
Increase in sales, profits and employment
Linkage Framework
Large CompanyDemand for Goods and
Services
SME Supply
Of Goods &Services
SME expectations•Information•Skills•Finance [s/up & w/capital]
Corporate expectations•Quality;•Cost;•Delivery [time; spec]
LinkageProgram
FIGURE1: SAIBL BUSINESS LINKAGES MODEL
DEMAND SIDE
SUPPLY SIDE
Linkage team meets senior management to secure commitment for SME outsourcing
Linkage team meets procurement managers to quantify non-core & core business available to SMEse.g services, components, etc
Team works with procurement managers/engineers on pre-qualification, qualification & tendering requirements
Requirements established and agreed and made available to SMEs
INCREASED BUSINESS LINKAGES
Existing SME Suppliers
Company diagnostic/ audit of SMEs
Prepare compliance/ deficiency report
Draw up a program with SMEs to build capacity and competencies to take advantage of procurement business
-Business strategy-Sourcing finance -Working capital -MIS,-Quality assurance,-Certification (ISO)-Production improvements,- Tender document preparation-Mentorship, coaching, training
Assisted by local Business Dev. Service Providers
No Progress Drop from list
Periodic Reviews To
Monitor Progress
Local SMEs competent to bid and deliver on standards required by large corporations
New SME Supplier Companies
Needs Additional Assistance
SAIBL DIAGNOSTIC & CAPACITYBUILDING AREAS
Tender preparation
Business ManagementSkills
Mentorship and Training
Business Planning andSourcing Finance
Marketing and Sales
Financial & Working Capital Management
Management Information Systems & Accounting
Production and CapacityImprovements
Certification (ISO)
Quality Management & Assurance
Business Linkages Matchmaking
SME DEVELOPMENT PATH
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Entrepreneurs who don't know what they don´t know about managing a modern
business
Entrepreneurs withbasic demands and needs
Entrepreneurs with specific
demands and needs
Enterprises with
verifiable economic
improvement (impact)
Competitive Enterprises
EntrepreneurLevel IV
Enterprise Level II
Basic demands
and needs
Personalized style with little
delegation
Poor administration
Confuse symptoms
with problems
EnterpriseLevel III
Specific demands
and needs
Difficulty managing
change and concerned
about added value
Have delegation
problems, lack of order and
administrative organization
Are familiar with their
problems but require
methodologies and
organization to be able to
confront them
Enterprise Level I
don´t know what they don´t
knowabout
running a modern
company
Focused on the product
Involved in all aspects
Don't understand
the magnitude of
their problems
Don't easily accept they
have problems
Promotional Actions
Radio program
Consult via phone and internet
Business roundtable
Group and self diagnostics
Workshops
Access to credit
Interventions
TRAINING &MENTORSHIPCustomer Service
Customer Support
Sales Management
Marketing Plan
HR Management
Business Management
Leadership
Negotiating Techniques
CONSULTING
Diagnostic Services
Organization
Marketing
Production & Process
Financing
MIS
Interventions
CONSULTING & COACHING
CompanyDiagnostics
Organization
Management
Marketing & Sales
Finances
Production & Process
Quality Assurance
MIS
Technological Innovations
Internet Commerce
Work Safety, Health, HIV/AIDS
Environment & Clean Production
Linkages & Outsourcing
SME Clusters
CHAINS OF SERVICES
CONSTRAINTS FOR CORPORATES
• Corporate policy
• Local autonomy
• Risk aversion
• Scale
• Capability & competence of local SMEs
THE CASE FOR BUSINESS LINKAGES
• Deepening & broadening local economy
• Create jobs and income
• Improve capability of local companies
• Improve supplier base
• Attract inward investment
• Provides sustainable market solutions
RECOMMENDED PRACTICES
• “High level” corporate champion
• Include in procurement managers’ KPAs
• Pragmatism- one building block at a time
• Enlist and work with partners
• Input-output
• SMEs as business partners, not beneficiaries
Program Deliverables • Stakeholder buy-in and establishment of champions at
Board and management level.
• Streamlined and written policies & practices.
• Linking accountability, performance to incentives
• Increased number of SMEs doing business with corporations
• Increased Rand value of business with BEE sector SMEs
• Improved access to capacity building support for SMEs.
• Improved monitoring and reporting
The Three Step Process:
Market and Client Identification
Includes; a Rapid Assessment and our company Diagnostic Tool, sector selection and market research, and identifying the key players in the marketSynchronization between Client and Market Needs
Includes; preparing clients through our rigorous training program and developing a business and export plan, a market exposure workshop, and developing a critical path to market penetrationMarket Penetration and Development
Includes; a group trade mission to export market, an extensive to do list based on feedback, a return trade mission that is more focused on matchmaking and closing deals, and then another follow up visit to help
partner promote clients products
South African International Business Linkages
Case Study on Izala WinesImpact: Winery finds U.S. importer in second trip to the United States
Marthinus Saunderson of Izala and SAIBL staff displays Izala food and wine products at the Fancy Food Show in New York, NY. Marthinus found an U.S. importer by incorporating feedback from SAIBL seminars.
Challenge: Marthinus Saunderson of Izala Warehousing and Exports wanted to export his Lutouw wine and AfriDeli specialty food products to the United States. His own attempts to penetrate the U.S. market were not successful. Despite a 350-year tradition of wine making, South Africa is not well-known to American consumers for its wines. Small, Black-owned wineries face additional challenges trying to enter the U.S. market e.g. the average wine company trying to enter the U.S. market spend on average $750,000 a year to that end.
• His objectives included a greater understanding of U.S. marketing strategies such as restaurant vs. retail, packaging, price points, and the three tier system. Izala also prioritized the economic and social impact potential of successful market enter to the local community. By growing his exports, Mr. Saunderson hopes to increase the financial independence and job security of the surrounding community.
• Initiative: In 2006, Izala became a client of the SAIBL program which assists Black Empowered South African SMEs. SAIBL staff in the Western Cape worked with Mr. Saunderson to improve his company's business operations, and to develop a long-term business plan. After having worked with local staff, SAIBL contracted a U.S. wine consultant to improve Izala's market entry strategy, packaging, and labeling for the U.S. market.
• Late in 2006, Mr. Saunderson made his first market research trip to the United States where he and four other Black-owned wineries met with wine experts and conducted tasting seminars that evaluated their wines and packaging. After returning to South Africa, he incorporated the experts' suggestions and returned to the United States in 2007 to exhibit his new product ranges at a premier U.S. trade show.
South African International Business Linkages
Six months later, Mr. Saunderson returned to the United States where he participated in another SAIBL-sponsored wine trade mission, held in conjunction with Wines of South Africa in three of the largest wine consumptions markets in the United States. Along with three other BEE wineries, Izala exhibited new vintages and a new bottle design. Again, industry experts evaluated his wine and packaging.
Mr. Saunderson included in his visit promotional events and buyer meetings with retailers and restauranteurs organized by his importer.
South African International Business Linkages
Results: After returning to South Africa, he incorporated the experts' suggestions and returned to the United States in 2007 to exhibit his new product ranges at a premier U.S. trade show, the Fancy Food Show in New York, NY. At a prearranged meeting by SAIBL.
Mr. Saunderson met with a boutique wine and food importing company Vin Aspen who was impressed by the quality of the products and the empowerment objectives of the company.
South African International Business Linkages(SAIBL)
South African International Business Linkages(SAIBL)
THANK YOUTHANK YOU