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Global Practice in Incubation
Policy Development and Implementation
South Africa Incubation
Country Case Study
Global Good Practice in
Incubation Policy Development
and Implementation
South Africa Incubation
Country Case Study
October 2010
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This document was produced as part of the World Bank infoDev project on developing a policy frame-
work and implementation strategy for business incubators.
TABLE OF CONTENTS
1. INTRODUCTION 5
2. OBJECTIVES AND BROADER STRATEGIC
PUBLIC POLICY FRAMEWORK OF INCUBATION ACTIVITIES 5
2.1 The South African Environment and Economy 5
2.2 Entrepreneurial Activity in South Africa 7
2.3 Main Obstacles to New Venture Creation 8
3. INSTITUTIONAL ENVIRONMENT 10
3.1 SMME Development & Policy Framework 10
3.2 History of Incubation and SMME Support Programmes 14
3.3 History of the SEDA Technology Programme (STP) 15
3.4 Incubation Associations 17
SABTIA 17
TESIP 17
AIN 17
4. INCUBATION MODEL 18
4.1 The SEDA Technology Programme 18
4.1.1 Overview 18
4.1.2. SEDA Technology Programme (STP) Centres 18
4.1.3 Governance Structure 20
4.1.4. Incubation lessons learnt by STP 20
4.1.5. Critical success factors 21
4.1.6. SEDA Technology Programme Incubation Division Results 21
4.1.7 Economic Impact 22
4.2 Examples of Incubation: 23
4.2.1. The Innovation Hub 23
4.2.2. Maxum Incubator Overview 23
4.2.3. Raizcorp 25
4.2.4. Bandwidth Barn 26
4.3 Outreach Incubators 27
5. MONITORING & EVALUATION 27
5.1 M&E in the STP Centres 27
5.2 M&E Tools in Maxum 28
6. CONCLUSION: STRENGThS AND WEAKNESSES 28
6.1 South African Challenges 28
6.2 South African Incubation Key Success Factors 29
ANNEX A 27
REFERENCES 33
5 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
1. INTRODUCTION
This case study has been produced as part of the World Bank infoDev project on developing a
policy framework and implementation strategy for business incubators. The purpose of the case
study is to analyse public policy in incubator development and identify some critical success
factors which should be considered in the development of incubators.
The South African study was conducted using desk research and in-country interviews with
some of the key players involved with incubator development, including government officials
and incubator managers.
2. OBJECTIVES AND BROADER STRATEGIC PUBLIC
POLICY FRAMEWORK OF INCUBATION ACTIVITIES
2.1 The South African Environment and Economy
South Africa is situated on the southernmost tip of Africa. The country has a very diverse
population consisting of the indigenous people of the area, people that migrated from further
north in Africa and from Europe and other areas.
The country held its first democratic elections in 1994 after a long period of ―apartheid‖ rule.
South Africa has 11 official languages, including English.
The South African economy is classified as an emerging market and seen as one of the most
advanced in Africa. The country boasts a sophisticated financial system with a stock exchange
that is the 17th largest in the world1. The physical, telecommunications, legal and transport
infrastructures are well developed2 with an efficient distribution network to major cities in the
country and beyond3.
South Africa has an abundance of natural resources with a strong mining sector. Gold, diamonds
and platinum are some of the resources mined.
The country followed a growth-oriented fiscal policy stance after implementing ―stringent‖ fiscal
policies, following its first democratic elections in 19944. Economic policy is therefore
described as fiscally conservative but pragmatic, employing an inflation targeting macro-
economic policy5.
1 CIA The World Factbook Summary available from https://www.cia.gov/library/publications/the-world-factbook/
geos/sf.html. Accessed: 4 June 2008
2 SADC Review. Summary available from http://www.sadcreview.com/country_profiles/southafrica/
rsa_economic.htm. Accessed: 4 June 2008
3 CIA The World Factbook. op cit.
4 SADC Review. op cit.
5 CIA The World Factbook. op cit.
6 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
The economy is often described as one with a dual character consisting of a first world section
and a third world section, namely the second economy – which speaks of income inequality,
underscored by a GINI coefficient of 57.86 where 0 indicates absolute equality and 100 absolute
inequality.
GNI per capita (atlas method currently $53807 measurements place South Africa in the middle-
income category, but it’s very high level of income inequality means a large percentage of the
47.9 million population lives in poverty. According to Statistics SA, the rate of unemployment
in the country is 23%8, but using the broad definition of unemployment the figures could be as
high as 40%9 .
The income disparities between the population groupings are mainly seen as a legacy of the
apartheid policies, which were scrapped during the 1990’s. High levels of poverty, lack of
economic empowerment among groups previously excluded from equal economic participation,
a high AIDS population, poor service delivery - especially in terms of housing and a shortage of
adequate short-distance transportation - are some of the problems which the country still
struggles with.
Since September 1999, the South African economy has continuously expanded. Growth slowed
slightly in 2001 and 2002 and then rose to its highest growth rate in 25 years during 2006 – a rate
of 5%10, mainly fuelled by domestic demand. Since 2000, the GDP per person increased by
more than 20 percent11. From 2003 to 2008 1.5 million jobs were created, investment in fixed
capital expanded rapidly in 2007 and will remain a key support to GDP growth over the medium
term, driven by widespread public sector infrastructure development and its effect on private
investment and capacity.
Growth is slowing down, caused by decreasing consumer demand, electricity shortages and
rising interest rates. Despite the slowing down in growth, the country is experiencing strong
investment in infrastructure ahead of the World Cup in 2010, which is creating tremendous
entrepreneurial opportunity.
6 United Nations Human Development Reports. World Bank. 2007b. World Development Indicators 2007.
Washington, D.C. Summary available from http://hdrstats.undp.org/indicators/147.html accessed 23 June 2008. 7 The World Bank – Key Development Data & Statistics Summary. Available from http://web.worldbank.org/
WBSITE/EXTERNAL/
ATASTATISTICS/0,,contentMDK:20535285~menuPK:1390200~pagePK:64133150~piPK:64133175~theSitePK:2
39419,00.html. Accessed: 23 June 2008. 8 Statistics SA in September 2007. Key Indicators: Summary. Available from http://www.statssa.gov.za/
keyindicators/keyindicators.asp Accessed: 23 June 2008. 9 Global Poverty Research Group. Unemployment, race and poverty in South Africa – Summary. Available from
http://www.gprg.org/themes/t2-inc-ineq-poor/unem/unem-pov.htm Accessed: 23 June 2008. 10 South African Government Information. About SA: Economy. Summary available from: http://www.info.gov.za/
aboutsa/economy.htm Accessed: 4 June 2008. 11 Manuel, T.A. op cit.
7 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
2.2 Entrepreneurial Activity in South Africa
According to the Mail & Guardian Online12, the small business community in South Africa has
rapidly expanded over the past seven years. The small business community is ―...alive and
kicking, with lots of painful growth, extraordinary successes, shattered dreams and ruined credit
records.‖
The Mail & Guardian Online postulates that, ―...if one weighs up the forces working for and
against small business development, the former are stronger. A key positive influence has been
the political emancipation of the majority in 1994 and the human potential it unlocked.‖
Government, parastatal and corporate outsourcing is opening up unprecedented opportunities for
potential entrepreneurs. High government spending, coupled with preferential small business
procurement, is creating a catalyst for small business growth. A further impetus for the
development of the small business community is the perception among white employees that
career paths are becoming more limited and that they should start their own businesses to ensure
a sustainable income for themselves. However, the perception that many small businesses fail,
together with the lack of business management skills in South Africa are among the forces
impeding small business development. A further drawback for small black-owned businesses is
the enormous need in corporations and the government for black management. The
Mail & Guardian Online postulates that the country's most talented potential black entrepreneurs
work for corporations and the state.
Despite the opportunities presented to South African entrepreneurs, a number of authors have
suggested that entrepreneurship levels in South Africa are generally considered to be very low13.
Although the South African Total Early Stage Entrepreneurship Activity (TEA) indexes, utilised
in GEM13, remained relatively constant over time, South Africa’s position in the GEM rankings
had deteriorated over time, despite improved macro-economic conditions in the country14. The
2006 GEM report placed South Africa at position 30 out of 42 countries, down from position 20
in 2004. In an effort to isolate the factors that contribute to South Africa’s deteriorating GEM
ranking, the GEM 2006 report involved key informants to set the scene by surveying the
positives and negatives in terms of entrepreneurship promotion in South Africa. One of the most
important findings was that potential entrepreneurs lack the skills and mindset to become true
entrepreneurs. The GEM study found that, although a positive entrepreneurial culture is starting
to form on a macro level, entrepreneurship on a micro level is not showing any signs of growth.
International markets were not penetrated, employment creation was not encouraged and
innovation was under pressure15.
12 Mail & Guardian Online. 2002. Small business growing. [Online] Available from http://www.mg.co.za/
articledirect.aspx?articleid=232748&area=%2farchives%2farchives__online_edition%2f .
Accessed: 23 October 2007 13 Von Broemsen et al. op cit 14 Bosma, N. & Harding, R. 2007. Global Entrepreneurship Monitor. GEM 2006 Results. [Online] Available from
http://www.gemconsortium.org/download/1194956833906/GEM_2006_Global_Results_Summary_V2.pdf.
Downloaded: 11 March 2007 15 Bosma et al. op cit
8 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
2.3 Main Obstacles to New Venture Creation
According to the NUS Entrepreneurship Centre16, a number of antecedent factors that may positively
influence the propensity of an individual to become an entrepreneur, had been identified by a study
conducted in this regard. These factors are: self-efficacy, prior knowledge of other entrepreneurs and
the perception of opportunities. Conversely, fear of failure serves as a significant deterrent for would
-be entrepreneurs.
According to The Heritage Foundation’s Index of Economic Freedom 2008, the South African
economy is the 57th17 most free economy in the world and the 4th out of 40 countries in the sub-
Saharan Africa region. The following table depicts some of the parameters utilised in the calculation
of the freedom of doing business in South Africa:
TABLE 1— PARAMETERS OF THE FREEDOM OF DOING BUSINESS IN SOUTH AFRICA
The GEM model postulates that general business conditions and entrepreneurial framework
conditions influence individuals’ decisions to respond to opportunities to start businesses. These
entrepreneurial framework conditions are: access to finance; government policies; government
programmes; education and training; transfer of research and development; the commercial, legal
and financial infrastructure; the openness of the domestic market; access to physical
infrastructure; and the extent to which cultural and social norms support the choice of starting a
business as a career option.
Freedom % Description
Business Freedom 71.2% The freedom to start and close a business:
relatively well protected
average number of days to start a business: 31 days
(world average: 43 days)
Trade Freedom 74.2% Inefficient bureaucracy, excessive regulation, weak enforcement of
intellectual property rights and corruption add to the cost of trade.
Financial Freedom 60.0% Regulations generally adhere to international standards. It could be
improved by a new set of capital guidelines which aim to pull more of the
previously disadvantaged groups into the banking sphere.
Labour Freedom 57.5% Employment regulations are fairly inflexible hindering productivity growth
and employment opportunities.
16 Chua, B., Chen, J., Lee., L & Wong, P. 2005. Antecedents for entrepreneurial propensity: Findings from
Singapore, Hong Kong and Taiwan. NUS Entrepreneurship Centre. [Online] Available from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=856205#PaperDownload. Downloaded: 10 September 2007
17 Product of The Heritage Foundation and The Wall Street. 2008 Journal Index of Economic Freedom 2008. Sum-
mary available from http://www.heritage.org/Research/features/index/country.cfm?ID=SouthAfrica.
Accessed 4 June 2008
9 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
TABLE 2 — FACTORS THAT LIMIT, CONTRIBUTE TO, OR INCREASE ENTREPRENEURIAL ACTIVITY
Factors that limit entrepreneurial
activity in South Africa
Factors that contribute to
entrepreneurial activity in SA
Factors that may increase
entrepreneurial activity in SA
The education system does not encourage
entrepreneurship as a career – it is seen as
something you do when you cannot find a
job or do not have a profession.
Entrepreneurship is becoming a key focus of
the government.
Provide clear definitions for key
concepts such as political and
economic development, poverty
alleviation and economic
development.
There is a lack of resources available to
start one’s own business - banks want too
much security.
Economic conditions are stable and
favourable for the development of
entrepreneurship.
Entrepreneurship should be
developed from an early age
through the education system. The
right skills for modern
entrepreneur-ship should be
developed.
Regulations create huge administrative
burdens and high costs when starting a
business.
Government tries to encourage the
development of entrepreneurship through
regulations such as lower taxation rates.
Access to cheaper and different
funding models must be developed
i.e. quasi-funding, grants.
South Africa is not highly entrepreneurial
due to factors such as sanctions in the past
and the education system that does not
encourage entrepreneurship.
The implementation of a central integrated
organisation such as the
Small Enterprise Development Agency
(SEDA) is a step in the right direction.
A one-stop shop and integrated
approach for the development of
entrepreneurship is necessary e.g.
the development of SEDA and the
Business Place.
The environment in which children grow up
influences them to believe that it is better to
find a job and be safe.
Policies are starting to fall into place although
the execution still lacks focus.
Corruption and nepotism must be
ruled out by the politically
powerful.
Starting a business is a risky process that
often involves cycles of failure. South
Africa has a harsh attitude towards failure,
which inhibits many potential
entrepreneurs.
Schools are starting to encourage
entrepreneurship education.
Integrated support services such as
training, research and consulting
must be developed and
implemented.
Infrastructure and the necessary skills
required for the development of
entrepreneurship are lacking.
An entrepreneurial awareness is starting to be
developed among younger generations.
Access to venture capital must be
improved.
A paradigm of entrepreneurship does not
exist. The expectation is that big business,
the government and others should create
jobs, rather than that one can create one’s
own employment.
Unemployment pushes people to become
more entrepreneurial.
Service delivery on various
government levels must improve
drastically.
Competencies such as management and
entrepreneurial skills are lacking amongst
entrepreneurs.
More role models in entrepreneurship – also
women and people from various cultural
groups – are observable in South Africa.
Policy conflicts should be
highlighted and solved between
government departments.
People who are retrenched are forced to
become entrepreneurs because jobs are
scarce.
Different support measurements
should exist for the development
of different entrepreneurial groups
e.g. necessity and opportunity
entrepreneurial groups.
10 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
Thus, the obstacles to new venture creation in South Africa may be summarised as falling into
the following categories:
1. Developing country, with associated lack of resources and infrastructure
2. Lack of entrepreneurial intention and fear of failure
3. Low education levels and inadequate entrepreneurship education
4. Restrictive regulations
The positive aspects to new venture creation in South Africa include:
1. Developing focus on entrepreneurship
2. Stable economy promotes entrepreneurship
3. Numerous opportunities to exploit
4. Unemployment, which encourages entrepreneurship
3. INSTITUTIONAL ENVIRONMENT
3.1 SMME Development & Policy Framework
The South African Government’s key instruments for supporting Innovation and
Entrepreneurship are the following18:
1. Innovation
a. Special Policy Programmes of the Department of Science and Technology (DST) and
the Department of Trade and Industry (DTI)
b. Various ―Incentive Schemes‖, for example the Innovation Fund (IF), Sector
Partnership for Industrial Innovation (SPII), and others
c. Bi-lateral Agreements with other countries, for example with Finland (COFISA).
2. Entrepreneurship
a. Special Programmes of various government departments, especially the Department
of Education
b. SEDA (Small Enterprise Development Agency)
18 Wyeth, C. 2007. Government’s Role in supporting Innovation and Entrepreneurship in SA. AIN Conference,
Maputo, 9 July 2007.
11 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
In addition to the above national government programmes, numerous provincial and local
government programmes, as well as private sector initiatives, also exist.
The lead department tasked with SMME development, the Department of Trade and Industry,
published their strategy for SMME development in a white paper entitled: A National Strategy
for the Development of Small Business in South Africa (May 1995)19. The paper detailed the
design of a policy framework targeting survivalist (informal) enterprises, micro-enterprises and
formal small and medium-sized enterprises, in other words the entire spectrum of the SMME
sector20. The strategy had at its heart addressing basic inequalities in the economy by the creation
of an enabling environment for SMME growth. In 1996 Parliament passed the National Small
Business Act providing the institutions with a legal basis to implement the strategy21.
These documents described the objectives of SMME development as:
1. Alleviating poverty, by making it possible for poor people to generate income to meet
basic needs
2. Reducing poverty through employment creation
3. Redistribution of wealth, income and opportunities
4. Contributing to economic growth, by improving innovation and thus competitiveness
5. Strengthening cohesion amongst small enterprises
6. Levelling the playing field between big and small business.
The National System of Innovation (NSI) was described in the 1996 Science and Technology
White Paper22 as being a core vision of establishing a “national system of innovation which
seeks to harness the diverse aspects of Science and Technology through the various institutions
where they are developed, practised or utilised‖. The NSI described in the White Paper trades on
the supposition that technological change is the primary source of economic growth23 and that it
will only be deemed successful if it can be converted into the development of wealth and
improved quality of life for all members of society24.
SMME policy and Science, Technology and Innovation policy have changed since 1999.
Important areas are25:
19 Department of Trade and Industry. Medium term strategic plan 2002-2004. Summary available from: http://
www.etu.org.za/toolbox/docs/government/sbd.html Accessed 4 June 2008. Business Referral and Information Net-
work – www.brain.org.za
20 SEDA Information supplied by Ravjee, J. June 2008.
21 Department of Trade and Industry. op cit.
22 Department of Science and Technology. Science Technology White Paper. Available from www.dst.gov.za/
legislation_policies/white_papers/Science_Technology_White_Paper.pdf Accessed 14 June 2008.
23 SEDA Information. op cit
24 SEDA Information. op cit
12 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
1. A Broad Based Black Economic Empowerment (BBBEE) strategy26 was developed
specifically for the DTI so as to enable equal access and opportunities to exploit
economic potential by increasing the number of black people participating in ownership
and control of companies.
2. The DTI adopted an Integrated Manufacturing Strategy (IMS)27 in 2002, with the aim of
managing key drivers which are important to the transformation of the industrial sector.
3. Three pillars support the National R&D Strategy28 which was adopted in 2002. These are:
innovation, science, engineering and technology (SET), human resources and
transformation and creating an effective government Science and Technology system.
The SEDA Incubation Programme (previously the Godisa Programme and described later
in this document), specifically deals with the execution of this strategy and aims to
contribute to two main groups of objectives, namely technical progress and business
performance. Most of the incubators in South Africa are managed under the SEDA
Programme.
4. The National Biotechnology Strategy29 provides mechanisms for the development of
Biotechnology Regional Innovation Centres. These Centres support the enablement of
new businesses in the relevant sphere and aim to stimulate the creation of new intellectual
property, while seeking co-operation with other stakeholders through SEDA incubators.
The BBBEE policy is an empowerment policy that aims at integrating the Formerly
Disadvantaged Individuals into the mainstream of South African economy. It sets the
requirements under which private companies have to operate, with higher levels of compliance
for those that deal with the government or parastatals as stated in the Preferential Procurement
Act. The BBBEE criteria are defined by using seven pillars, one of them being ―Enterprise
Development‖, which measures the effort of companies to support the development of SMMEs
(small, medium and micro enterprises) by way of engaging in long term business partnerships
with organisations that complement their market offerings and contributing to these partnerships
primarily through the transfer of contracts and knowledge.
The ―Enterprise Development‖ criterion accounts for 15% of total bark in the BBBEE scorecard.
The other 85% is made of other six criteria, partly interconnected, which are: Equity Ownership
(20%); Management (10%); Employment Equit (15%); Skills Development (15%); Preferential
Procurement (20%), and Socio-economic Development (5%).
25 SEDA Information. op cit 26 Department of Trade and Industry. Available from www.dti.gov.za/bee/bee.htm. Accessed 14 June 2008 27 Department of Trade and Industry. Available from www.dti.gov.za/downloads/ims.pdf. Accessed 14 June 2008 28 Department of Science and Technology. Available from www.dst.gov.za/legislation_policies/strategic_reps/
sa_nat_rd_strat/pdf. Accessed 14 June 2008 29 Department of Science and Technology. Available from www.dst.gov.za/programmes/biodiversity/
biotechnologystrategy.pdf. Accessed 14 June 2008
13 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
Having included the Enterprise Development dimension in the BBBEE policy speaks volume
about the key role that the SMME sector is expected to play not only for economic development
but also for social inclusion of the formerly disadvantaged.
The South African Government utilised technology transfer and innovation as a tool for
developing existing businesses and the formation of new ones30. In 2003, through The Integrated
Small Business Development Strategy, Government pledged their continued support for
technology transfer support centres and the promotion of the integration of these services into
other business support centres. Government therefore expanded the successes achieved by the
evolving national grid of Manufacturing Advice Centres (MACs) that worked in close co-
operation with the CSIR, the DTI and local non-government organisations, as well as training
institutions. The establishment of ―local industrial parks‖, ―small business hives‖ or ―incubators‖
were aiding the technology transfer. The Godisa Trust (see later in document) was formed to
consolidate technology incubators from different sectors such as furniture, stainless steel and
biotechnology.
A new National Industrial Policy came into existence from January 2008 to enable higher
sustainable growth needed by the South African economy. The framework of the strategy lists
priority sectors which should be targeted by policy and implementation31. The Government aims
to achieve 6% GDP growth from 2010 onwards and decrease unemployment dramatically
through the Accelerated and Shared Growth Initiative of South Africa (ASGI-SA). The higher
growth will only be possible through fundamental restructuring of industrial policy, with the
specific aims of the National Industrial Policy Framework32 being:
1. To facilitate diversification beyond our current reliance on traditional commodities and
non-tradable services.
2. The long-term intensification of South Africa’s industrialisation process and movement
towards a knowledge economy.
3. The promotion of a more labour-absorbing industrialisation path with a particular
emphasis on tradable labour-absorbing goods and services and economic linkages that
catalyse employment creation.
4. The promotion of a broader-based industrialisation path characterised by greater levels of
participation of historically disadvantaged people and marginalised regions in the
mainstream of the industrial economy.
30 Department of Trade and Industry. October 2003 Unlocking potential in an enterprising nation - The Integrated
Small Business Development
Strategy in South Africa 2004 – 2014 Technology transfer and incubation 31 Department of Trade and Industry. Republic of South Africa. Integrated Strategy on the Promotion of Entrepre-
neurship and Small Enterprises – Unlocking the Potential of South African Entrepreneurs. 32 Department of Trade and Industry. Op cit.
14 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
5. Contributing to industrial development on the African continent with a strong emphasis
on building its productive capabilities.
One of the strategic programmes entails small enterprise support and will focus on supply-side
factors, such as finance and technical support, as well as aiming to strengthen market
opportunities for small enterprises. A recent change in the area of small enterprise development
has been the consolidation of institutions like the Ntsika Enterprise Promotion Agency, the
National Manufacturing Advisory Centre (NAMAC), the Community Public Private Partnership
Programme (CPPP) and the Small Enterprise Human Development Programme and into the
Small Enterprise Development Agency (SEDA)33.
The four priority sectors identified were: capital goods, such as transport equipment and metal
fabrication; the automotive and associated component industries; chemicals, plastics and
pharmaceuticals; and forestry, pulp and paper. Work on bio fuels, tourism, and business-process
outsourcing will also continue34.
In 2000 a new bill on intellectual property has been enacted. It regulates the IP rights deriving
from Publicly Financed Research and Development, and was intended also as a stimulant of new
innovative SME creation. IP arising from publicly financed research shall be owned by the
recipient of the grant, but if the recipient prefers not to retain ownership of its IP and not to
obtain statutory protection for the IP, it must make the results of research available to others that
intend to exploit them commercially.
The bill has provided for the set up of an Intellectual Property Management Office to support
inventors and innovators to manage their IP, as well as for the establishment of an intellectual
property fund that will help private companies to become exclusive licensees of IP emanating
from publicly financed research if they prove to have the capacity to manage and commercialise
the intellectual property in a manner that benefits the public.
Although it is far too early to measure the impact of the new IP regulations, it is expected that the
clients of South African incubators might be among the net beneficiaries of the new situation.
3.2 History of Incubation and SMME Support Programmes
South Africa first addressed business incubation through the Small Business Development
Corporation, when they established what was then called ―hives of industry‖ in 199535. These
Hives were areas in townships and made access to developed infrastructure - such as
telecommunications, electricity and storage - and the formation of subcontracting relationships
between small and bigger businesses, possible36. Companies forming part of the hives were not
required to graduate from the system.
33 Department of Trade and Industry. Op cit. 34 DTI. 7. August 2007. News from Parliament. National Industrial Policy Framework Gives Clearer Picture.
Summary available from: http://www.sabinet.co.za/sabinetlaw/news_par478.html Accessed 17 June 2008.
15 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
Incubators evolved from Hives and other enterprise centres37. Most of the 28 Business Incubators
or Technology Business Centres (TBC) in South Africa are publicly supported, with 18 of these
receiving funding through the SEDA Technology Programme (STP). Only one fully privately
owned incubator remains in South Africa, whilst in-company incubation is taking place at
selected organisations. There are a number of Small Business Development Corporations and
Business Partners Hives that still exist. Maxum at The Innovation Hub, Sedichem and
Bandwidth Barn are probably the most successful non-SEDA Technology Programme funded,
public sector supported incubation centres in the country.
As part of government’s national strategy of consolidating small enterprise support interventions
the DTI commenced a process of streamlining its small enterprise support interventions. As part
of this process, the DTI merged the activities of the National Technology Transfer Centre
(NTTC), the Technology Advisory Centre (TAC), the Technology for Women in Business
Programme (TWIB), the SME support activities of the South African Quality Institute (SAQI)
and the GODISA Trust, to create a single national Programme that will be responsible for a
broad array of Business Incubation, Technology Transfer and Quality & Standards services and
support, namely SEDA Technology. The mission38 of SEDA Technology is to develop and
support innovative, technology–based platforms that result in the creation and development of
sustainable, globally competitive SMMEs that contribute towards the accelerated growth of the
South African economy.
Previously, incubation projects focused on female-run enterprises39 and disadvantaged rural
communities40. A Demonstration and Training Business Incubator (DTBI)41 has also been used
to ―enhance entrepreneurial capacity in a disadvantaged rural community‖42.
3.3 History of the SEDA Technology Programme (STP)
The Godisa Trust – now incorporated in the STP - first came into being during 2000, as a joint
initiative between the Department of Science and Technology (DST) of the South African
Government, in partnership with the Department of Trade and Industry (DTI) and the European
Union43. Role players included all levels of government, the private sector, donors and
partnerships between them44.
35 European Commission Enterprise Directorate. General Centre for Strategy and Evaluation Services February 2002
Final Report – Benchmarking of Business Incubators 36 Wagner J.J. (1997). The Incubation of Technology Intensive New Businesses, Institute for Technological
Innovation, University of Pretoria, Pretoria: 170–184. 37 Wyeth, C. op cit. 38 SEDA. 2007. SEDA Brochure 2007 39 Kellogg Fellows Leadership Alliance, 2003 40 Jordaan et al. op cit. 41 Atherton, A and Hannon, P.D. 2006. Localised strategies for supporting incubation. Strategies arising from a case
of rural enterprise development. University of Lincoln, Lincoln, UK and National Council for Graduate
Entrepreneurship, Birmingham, UK. Journal of Small Business and Enterprise Development Vol. 13
No. 1, 2006: 48-61. 42 Jordaan et al. op cit.
16 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
Godisa was established to develop a national incubation framework, experimenting with various
models in order to identify the most suitable model/s for the South African environment. The
Godisa Trust aimed to bring about the enhancement of technological innovation through the
creation of technology-intensive SMMEs with the objectives of increased economic growth,
employment creation and sustainable development45. Godisa was brought about with the
intention of enhancing the capacity of SMMEs in South Africa.
The main approach was to establish technology centres to target high growth SMMEs and
provide technology support services, through the establishment of three pilot centres:
1. A technology demonstration centre (TDC)
2. A technology incubator (TI)
3. Innovation support centre (ISC).
The European Commission agreed to an initial contribution of 5.4 million to the pilot phase of
the GODISA programme over a three-year period in January 199946.
The specific purpose of the EU financial intervention was to demonstrate the feasibility,
sustainability and possibility of replication of the three models. The programme was expected to
achieve this purpose through four specific result areas:
1. The effective management of the programme and capacity building assured.
2. Access to innovation support in the pilot areas assured (i.e. innovation support centre).
3. Access to demonstration of new technology in chosen pilot areas assured (i.e. technology
demonstration centre).
4. The efficiency and impact of the pilot incubator.
In parallel to the Godisa initiative, the DTI established several incubators and training centres
with various partners. As previously indicated, 2005 saw the DTI restructure its SME support
activities into a new organisation, the Small Enterprise Development Agency (SEDA), the main
objective being to increase the contribution of SMMEs to the national economy47. Subsequently,
it was decided that the national incubation activities should report to SEDA and hence the SEDA
Technology Programme (STP), incorporating the incubation activities of the DTI and DST under
one governing body - STP - during 2006.
Initially, the funding to create an incubation sector in South Africa was structured as follows48:
43 SEDA info. op cit
44 Buys, A.J. and Mbewana, P. N. September/October 2007. The Godisa Case Study - Key success factors for
business incubation in South Africa. Graduate School of Technology Management, University of Pretoria, South
African Journal of Science 103: 356-358
45 SEDA info. op cit
46 SEDA info. op cit
17 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
TABLE 3 — INITIAL INCUBATION SECTOR FUNDING
3.4 Incubation Associations
SABTIA
The Southern African Business and Technology Incubation Association (SABTIA) is a not-for-
profit organisation based in Gauteng49. Established in 2004 to coordinate and promote business
incubation in South Africa, SABTIA aims to coordinate and promote incubation in South Africa.
Amongst other goals, SABTIA provides a platform for networking and information sharing, and
the promotion of best practice in incubator management. The Association is composed of
incubator developers and managers, SMME and entrepreneurial development organisations,
technology commercialisation specialists and business assistance professionals.
TESIP
The Tertiary Education Satellite Incubation Programme (TESIP) focuses on a logical virtual
incubation model in the tertiary education sector, with the specific objective of extending
incubation from specialised incubators to the tertiary education sector, by creating university-
based satellite incubators with critical linkages to government and industry.
AIN
The goal of the African Incubation Network (AIN) is to develop a collaborative network of
African incubators and other business development service providers, and to facilitate the
provision of appropriate knowledge to support the development of innovative SMMEs.
Softstart BTI, a STP Incubator, played a founding role in AIN’s origination and continues to
drive the development of the association, with a number of South African Incubators being
members of AIN.
Funding organisation Year 1 Year 2 Year 3 Year 4
EU R15 million R10 million R10 million
DST R5 million R12 million R24 million R24 million
DTI R9 million R24 million
Total R20 million R22 million R43 million R48 million
47 Wyeth, C. Interview conducted by Sawers, J. June 2008. 48 Sawers, J. 27 May 2008. History of the Seda Technology Programme. 49 SABTIA website. Available from http://www.sabtia.org.za/index.php?
option=com_content&task=view&id=9&Itemid=11. Accessed 17 June 2008-08-06
18 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
4. INCUBATION MODEL
4.1 The SEDA Technology Programme
4.1.1. Overview
The STP supports National Government objectives of supporting economic growth, employment
creation and achieving greater equity in the South African economy. This is achieved by the
establishment, development and strengthening of selected mechanisms, instruments and
interventions that seek to promote economic empowerment of small enterprises, specifically
those owned by priority groups, namely blacks, women, youth and the disabled. In particular,
STP’s mission is:
1. Increase accessibility to, and utility of, technologies and technical support for small
enterprises
2. Facilitate the acquisition, development and transfer of technology to small enterprises,
particularly those operating in the second economy
3. Facilitate the establishment of women-owned small enterprises
4. Promote the use of Quality Systems and Standards by small enterprises
5. Improve small enterprise performance and productivity
6. Enhance small enterprise profitability and growth
7. Improve small enterprise competitiveness
8. Reduce small enterprise failure rates
4.1.2. SEDA Technology Programme (STP) Centres
The following Incubators, Technology Centres and Training Centres fall under the STP
umbrella50:
50 Seda Technology Programme. STP 2007 Brochure
TABLE 4 — STP CENTRES
Current Centres Location Sector
1 Acorn Technologies – Cape Town Cape Town Life Sciences
2 Softstart Business and Technology Incubator Johannesburg ICT
3 EgoliBio Johannesburg Biotechnology
4 Zenzele Johannesburg Resources: Small Scale Mining
5 SEDA Ethekweni Contractors Incubator Durban Construction
6 Biodiesel Marble Hall Bio-Fuels
7 Eastern Cape Information Technology Initiative East London ICT
8 Eastern Cape Information Technology Initiative Port Elizabeth ICT
9 Chemin Port Elizabeth Chemicals
10 Timbali Nelspruit Floriculture
11 SEDA Automotive Technology Centre Rosslyn Automotive
12 SEDA Ekhurhuleni Base Metals Springs Resources: Mining Benefication
13 SEDA Platinum Incubator Rustenburg Resources: Mining Benefication
14 SEDA Essential Oils Business Incubator Pretoria Agriculture: Essential Oils
15 Downstream Aluminium Centre of Technology Richards Bay Manufacturing: Aluminium
16 Mpumalanga Stainless Initiative Middelburg Manufacturing: Stainless Steel
17 Furntech: Cape Town Cape Town HQ Manufacturing: Furniture
18 Furntech: George George Manufacturing: Furniture
19 Furntech: White River White River Manufacturing: Furniture
20 Furntech: Umzimkhulu Umzimkhulu Manufacturing: Furniture
21 Furntech: Durban Durban Manufacturing: Furniture
22 Furntech: Gauteng Gauteng Manufacturing: Furniture
23 Sugar Cane Incubator Malelane Agriculture: Sugar Cane
24 Mpumalanga Agri-Skills Development & Training Nelspruit Agriculture: General
Future Centres to be established Location Sector
1 Furntech: Umtata Umtata Manufacturing: Furniture
2 Mixed Manufacturing Technology Demonstration
Centre
Manufacturing: General
20 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
4.1.3. Governance Structure
SEDA reports to the DTI and is a line item on the DTI budget. All the STP incubators are
registered as independent entities, being either Section 21 or Not-for-profit companies or trusts.
The non-executive directors responsible for each incubator are appointed by the members of the
Company or Trust, and the Executive Director manages the incubator51.
4.1.4. Incubation lessons learnt by STP
When reflecting back on lessons learnt over the years, STP concludes that the following lessons
are important52:
1. The number of government officials and institutional representatives as Board members
should be reduced, whilst the number of private sector Board members must be increased
in order to gain industry representation.
2. An advisory board should form part of the governance structure, so as to gain from an
additional facilitating unit.
3. There should be a clear and common understanding by the relevant departments
regarding the objectives of the incubation programme, especially if the programme is to
fall under more than one government department.
4. It is not advisable to establish an incubation programme within a large quasi-state
organisation. However, should this be the only available option, then such an
organisation should be required to invest in the incubator so as to ensure appropriate buy-
in, as opposed to treating the programme as a consultancy project.
5. It is recommended to start the programme with different incubator models to determine
which is more appropriate. The approach followed by the original Godisa programme
was to test out a variety of different incubation models and target industries to create
diversity in the initial population. Based on the results from the diversity of initial
models, lessons were learnt and applied to further incubators that were supported in later
phases. This approach seems sensible in an environment where the incubation concept is
new. As example, Godisa initiated the following models:
a. Technology Demonstration Centres, which offered access to state-of-the-art
equipment to SMEs
b. Incubators
c. Innovation Support Centres
d. Hybrid models
6. Flexibility is critical, so that incubators may adapt to the changing requirements of the
market and their incubatees.
51 Wyeth, C. op cit
21 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
4.1.5. Critical success factors
STP considers the following to be critical success factors to successful incubation in
South Africa53:
1. The incubator CEO and the incubator management team must be passionate about
entrepreneurship and incubation
2. Relevant systems, policies and procedures should be put in place, for example:
a. Guiding documents
b. Code of conduct
3. Incubator Boards should comprise the right people, with the relevant experience and who
can add value to the Incubator
4. Funders’ expectations should be managed, so that they have realistic expectations of
outputs that may be achieved by the Incubator.
4.1.6. SEDA Technology Programme Incubation Division Results
The key outcomes of the Seda Technology Programme Incubation Division for the 2006 / 2007
year are as follows54:
53 Wyeth, C. op cit
54 Seda Technology Programme. STP Annual Report 2006/2007
22 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
TABLE 5 — STP INCUBATION DIVISION RESULTS (2008/2009 FINANCIAL YEAR)
Note: The above reflects data published by STP’s Incubation Division on the 2008/2009 Annual Report.
4.1.7. Economic Impact
According to the STP, incubation in South Africa had thus far contributed to the following55:
TABLE 6 — STP ECONOMIC IMPACT
Parameter Value56
Enterprises created 900
Sustainable jobs created 6,000
Enterprises supported 1,500
Enhancement of SMME survival rate 83.9% of SMMEs in the programme survived the
2004/5 Financial Year
80.1% of SMMEs in the programme survived the
55 Wyeth, C. op cit 56
Our calculation based on aggregated STP data published until 2006 and subsequent annual reports
Parameter Value
Number of SMME’s established 224
% Black Owned SMMEs supported 87%
% of women-owned businesses assisted with
Technology Transfer interventions
47.8%
Number of Direct Jobs Created 1,318
Number of Direct plus Indirect Jobs Created 10,628
Growth in SMME turnover +23% - increased from 105 to 129 million rand
New incubators funded by SWEEEP were established Two: Seda Limpopo Jewellery Incubator in Polokwane and the Seda
Agricultural, Mining and Tooling Incubator in Bloemfontein
Sectional composition of total turnover of SMMEs § Metal Beneficiation
§ Construction – Building & Civil
§ Agriculture and Agri-Processing
§ ICT & E
§ Furniture
§ Chemicals
§ Bio-Tech and Life Sciences
23 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
4.2 Examples of Incubation:
4.2.1. The Innovation Hub
The very essence of a Science Park is not just to sell real estate, but primarily to manage the flow
of knowledge between universities, research and development institutions, industry and
government. While this concept is new to South Africa, the Gauteng Provincial Government,
through Blue IQ, took a bold step in 2000 when it announced the development of TIH as one of
its major projects to stimulate economic growth in the province. The local development is built
on extensive international learning and benchmarking and as a result, has been awarded full
membership of the International Association of Science Parks (IASP), the first in Africa.
TIH was started by the Gauteng Provincial Government (GPG) in February 2000 in response to
the 1997 Provincial Strategy to grow the knowledge economy and develop a ―smart province‖ .
The guiding strategy for TIH is the Gauteng Development Strategy (GDS), being an action-
oriented strategy for all sectors of society in Gauteng.
The establishment of TIH has taken cognisance of the key success factors of Science Parks,
including the choice of sites near universities or research institutions, the need to become part of
the larger community of contributing role players, and providing both value-adding services and
infrastructure. TIH has ensured that its objectives are well aligned with those of the GDS, and its
objectives include:
1. To develop a physical cluster on The Innovation Hub following a market related
Development Plan that will stimulate economic development of knowledge-based
businesses Gauteng.
2. To offer business services that support the creation of innovation business clusters by
developing customer centric deliverables within a structure of measurable Value-Added
Services.
3. To develop programs to stimulate the development of entrepreneurs in the Province and
provide Incubation Services, linking to further developments of Blue Catalyst and
associated venture funding.
4.2.2. Maxum Incubator Overview
In response to stimulating the development of entrepreneurs (1), The Innovation Hub started a
pilot incubator in 2000 that evolved into a fully branded incubator – Maxum, in 2005. Maxum
has graduated 14 companies over four years, linked business and the University of Pretoria
through the CoachLab leadership programme for postgraduate students, and created the INNOV8
network, which has grown to beyond 3,000 members. The pilot activities also brought about a
local understanding of the needs of high-tech businesses and contributed to the design of The
Innovation Hub’s main environment.
24 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
Maxum provides an enabling environment where start-ups from the knowledge-intensive sectors,
including information and communication technology, biosciences, advanced manufacturing and
materials, and energy and the sustainable environment, are fast tracked. Entrepreneurs are
provided with a dynamic, synergistic and enabling environment where they benefit from
mentorship, access to resources, shared peer learning, working partnerships and doing business
together. Outputs from Maxum are benchmarked on a continual basis against international good
practice and Maxum is a full member of the National Business Incubation Association in the US.
Maxum is a programme of TIH and hence it benefits from the many networking events that are
arranged by TIH. It received a ring-fenced budget from GPG for its first 6 years of existence. As
Maxum is a non-profit incubator that focuses on economic development, the sustainability model
is that rentals received from TIH tenants will eventually cross subsidise Maxum in addition to its
rental income and charges for related incubation services, Maxum is seen as ―growing timber‖
for TIH, as most of the graduates from Maxum eventually take up residence in one of the TIH
buildings.
Having Maxum as part of a science park has been very beneficial for the tenants of Maxum.
Apart from the normal services offered by an incubator, Maxum incubatees have benefited in the
following ways:
1. peer-to-peer networks with a large technology community comprised of incubatees and
established companies
2. business opportunities arising from walk-ins by corporations visiting TIH
3. access to TIH’s strategic partners including the local academic institutions
4. many and varied networking events designed for TIH tenants
5. remaining part of a community after graduation
Being embedded in TIH has been beneficial, both for the incubatees and for Maxum. Maxum
has enjoyed co-branding opportunities with TIH and has benefited from being part of a ―larger
entity‖.
Maxum Critical success factors
Maxum considers the following to be critical success factors to successful incubation in
South Africa57:
1. A passionate and energetic champion to develop the programme and appoint a champion
management team
2. The Incubator Manager must have entrepreneurial experience and a “heart” for SMMEs
3. Flexibility – being able to adapt to changing market and incubatee needs
25 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
4. A reputable brand and a “good physical address” – i.e. up-market facilities
5. Good stakeholder relationships
6. A sustainable source of funding
7. A stream of entrepreneurial talent
8. Business opportunities for start-ups
9. Funding opportunities for start-ups
Maxum Results and Economic Impact
Maxum’s 2006 results58 show that it has supported 30 companies since inception in the year
2000 and supported the creation of 183 jobs. Two of these companies have female ownership
and six companies have at least 30% BEE ownership (Black Economic Empowerment). The
success rate of growing the companies from start-up to self-sustainability has been 80%.
4.2.3. Raizcorp
Raizcorp, founded in 2002, is a privately owned and managed incubator situated in Woodmead,
Johannesburg. It is a well-established, yet innovative Incubator or self-named Business
Prosperator that offers infrastructure and administrative services, business management expertise
and ongoing generation of sales leads59. Raizcorp is mainly a Marketing Services Incubator – one
of a kind in South Africa and Africa - that provides centralised infrastructure, mentoring and
financial services and assists entrepreneurs in getting off the ground.
An important aspect of Raizcorp’s model is the concept of cross-pollination of client bases for
the benefit of the group. Raizcorp has been able to increase the turnover and profitability of over
95% of the companies that partner them and claim to reduce overheads for start-ups by 40% to
50% and have an 87% success rate60.
It should be noted that Raizcorp does not follow the classical incubation funding model.
Raizcorp takes a substantial equity stake as part of the incubation fee. In addition, Raizcorp
takes substantial fees, some of it on a revenue sharing basis, from incubatees for monthly
services rendered. Finally, since contributions by successful incubatees are a critical part of the
Raizcorp business model, Raizcorp does not include graduation from their organisation in their
incubation process.
57 Sawers, J. op cit 58 VentureSmart. Incubation Slashes Failure Rate. Business Day, 15 May 2006
26 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
4.2.4. Bandwidth Barn
A subsidiary of the Cape IT Initiative (CITI), the Bandwidth Barn61 is a Business Accelerator for
information and communications technology start-ups in the Western Cape. The Bandwidth
Barn started as an ICT incubator in 2000 and has morphed into a fully-fledged Business
Accelerator.
Bandwidth Barn is registered as a private company, reporting to a Board and measured against a
Balanced Scorecard. Bandwidth Barn supports companies by practically reducing the cost of
overhead services through its shared office environment, whilst providing networking
opportunities for entrepreneurs. In addition, it provides business development programmes to
equip tenants with all the skills required to move from start-ups to profit-generating, stable
companies.
The Cape Information Technology Initiative (CITI) is a non-profit organisation. Its three key
objectives are to grow, transform and promote ICT in the Western Cape. It aims to develop:
1. ICT businesses through the Bandwidth Barn business accelerator and other support for
entrepreneurs
2. ICT skills through close co-operation with all industry bodies
3. The ICT cluster, by hosting events and encouraging networking
4. ICT policy by participating in national processes and commissioning relevant research
5. CITI brings businesses, governments and individuals together to unleash the power of
entrepreneurship, community and capital.
According to Odette Potter62, the current Incubator Manager, Bandwidth Barn was born out of
the need to develop the IT industry in the Western Cape, since a great drain on IT skills were
experienced from the Western Cape to Gauteng. Although it initially felt the same financial
restrictions as those experienced by start-ups, since it initially only received R1million in funding
from DTI, Bandwidth Barn successfully created clustering of companies and has already
supported 65 companies. Bandwidth Barn now receives some funding from Government and
UUNet Verizon, but does not consider itself a significant creator of jobs, since it believes that the
businesses it assists are generally too small to be impactful as job creators and typically consist
of only one to two individuals per start-up.
59 Raizcorp. Raizcorp website. Available from http://www.raizcorp.co.za/index.html. Accessed 17 June 2008 60Bizcommunity. 20 Oct 2004. New MD for Gauteng business incubator Raizcorp. Available from http://
www.bizcommunity.com/Person/414/11/1540.html. Accessed 14 June 2008
61 Bandwidth Barn. Bandwith Barn Website. Available from http://www.bandwidthbarn.org/about.php Accessed
6 August 2008
27 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
4.3 Outreach Incubators
The Tertiary Education Satellite Incubation Programme (TESIP) was created with the objective
of extending incubation from specialised incubators to the tertiary education sector, by creating
university-based satellite incubators with critical linkages to government and industry. This
virtual incubation model was established by Softstart BTI, and enables entrepreneurs to receive
coaching and mentoring remotely via the internet, using remote management tools and
technologies like video conferencing which enables the mentoring, monitoring and guidance of
entrepreneurs wherever they are located. In addition, the entrepreneurs are connected to a wide
network of coaches and investors outside the Incubator, spreading the costs and exposing them to
a wide range of expertise and experience. Using funds donated by infoDev, a system was
developed which manages the entire virtual incubation process. At its core is Softstart BTI’s
Business Building Model, which leads start-up businesses through the six stages of development
- from concept through to maturity - and encompasses four pillars of a business: marketing,
technology, finance and operations.
The TESIP model originated from the need to reach and support large numbers of entrepreneurs
who are not able to physically be in an Incubator. When it was found that there was no model for
this kind of wide-ranging approach to incubation elsewhere in the world, the TESIP model was
created to meet the need of covering substantial geographic distances and to address the funding
and infrastructure inadequacies of the region.
The initial emphasis on tertiary institutions is reflected in the initiative's name, but it has since
become apparent that there is just as big a need for such services in the local authorities and
SoftStartBTI is working towards signing agreements with local municipalities to set up satellite
incubators within their local offices for the public to access and use. This expansion in the use of
the TESIP model brings the original goal of having an Incubator in every town closer to fruition.
The goal is to roll the TESIP programme out nationally, so that promising entrepreneurs may
link into incubators and tertiary institutions from anywhere in the country.
5. MONITORING & EVALUATION
5.1 M&E in the STP Centres
STP makes use of aggregated data from each of its respective incubators and reports on a
quarterly basis according to each sector on the following parameters63:
62 Potter, O. 2008. Interview conducted by Zaaiman, S. 13 June 2008
28 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
1. The number of new companies registered
2. Survival rates of new companies
3. Growth in turnover of new companies
4. No. of black and female companies created/registered
5. No. of clients graduating from the incubator per annum.
Annexure A provides a detailed indication of all the parameters utilised by STP in the
monitoring and evaluation of its centres. It should be noted that the current M&E system is
widely seen as overly complicated by incubator professionals in the country.
5.2 M&E Tools in Maxum
TIH reports on a quarterly basis to Blue IQ Investment Holdings on TIH’s corporate plan. The
deliverables for Maxum include64:
1. Number of pre-incubatees (a virtual incubation programme aimed at preparing incubation
candidates for founding and running their businesses)
2. Number of incubatees
3. Number of graduates
4. Aggregated numbers of incubate / graduate employees, and whether black, male or
female
5. Aggregated turnover of incubation graduates
6. Success rate of incubatees (Those companies currently being incubated, who have
graduated from the programme, and who are still in business)
7. Programmes and initiatives undertaken by Maxum to stimulate the entrepreneurial
pipeline
6. CONCLUSION: STRENGTHS AND WEAKNESSES
6.1 South African Challenges
In addition to the obstacles to new venture creation, which was explored earlier on, there are a
number of incubation challenges unique to South Africa.
According to Leon Lourens65 – current CEO of Softstart BTI - incubation theory designed for the
developed industrial countries does not have the same application in South Africa. He notes the
large geographical areas as one of the crucial differences and challenges to South Africa.
Individuals require access to support in remote and rural areas, but it is naturally not possible for
Incubators to be established in each of these areas.
63 Wyeth, C. op cit
29 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
In addition, a large proportion of the rural and peri-urban South African inhabitants have limited
access to education, live in poverty, and generally experience a low quality of life. Therefore,
these communities provide a logical starting point for higher education institutions to engage in
outreach activities through entrepreneurship education and development. It is important to
recognise that these disadvantaged rural and peri-urban communities have rather unique
circumstances and characteristics, which are quite different from the average urban resident.
However, as a result of the mindset of providing education programmes based on what’s on
offer, rather than what communities require, many academic institutions lack the capacity and
skills to meet the training and development needs of the communities they service. (Jordaan,
1998)
Funding shortages are another prominent feature of the incubation landscape. According to
Lourens, there is only one operational venture capitalist organisation in the country and none of
the incubators have in-house seed funds, despite the fact that most start-ups require R500 000
and not R5 million66.
SEDA considers the following to be the key challenges to business incubation in South Africa67:
1. The benefits of incubation accrue to a small number of clients or incubatees
2. Balancing the deep and narrow versus a shallow and deep approach
3. The need for technology versus business incubation
4. The lack of skills in the “incubation” domain
5. A lack of real support from the Tertiary Education Institutions
Thus, the question remains of how to increase the impact of incubation without decreasing the
quality?
6.2 South African Incubation Key Success Factors
A number of factors are considered to be keys to the success of incubation in South Africa:
1. The industry focus of incubators must be clear (Wyeth, 2008)
2. The potential of the actual underlying business idea68 is crucial, not only the skills and
qualifications of the individual submitting a business proposal
3. There must be no ambiguity between social entrepreneurship and business incubation - it
is imperative to focus on business fundamentals in incubation69. In this regard, it should
be noted that considerable debate exists in the South African milieu around the exact
meanings and definitions of various terms such as sustainability and true incubation.
65 Lourens, L. Johannesburg, 25 May 2007. Techforum, Innovative African Model For Business Incubation Attracts
Interest of International Community - Issued by SoftstartBTI. Available from http://www.itweb.co.za/office/
softstartbti/0705250808.htm Accessed: 3 June 2008 66 Lourens, L. op cit
30 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
4. An environment conducive to incubation is critical. A study done by the Graduate
School of Technology Management at the University of Pretoria, demonstrated that,
where conducive environments are present, incubators tend to fare better than where the
environments are not present70. An environment conducive to incubation, according to
the study, refers to the following key factors71:
a. Access to science and technology expertise and facilities.
b. Availability of low-interest funding, such as government grants, loans, angel and
venture capital.
c. Quality of entrepreneurs - entrepreneurs must have the desire to succeed, have
adequate knowledge and ability and be prepared to take calculated risks.
d. Stakeholder support - The involvement and support of stakeholders, consisting of
sponsors drawn from the local business community, government, the broader
community, venture capital providers, entrepreneurs and incubator management
are vital for success. It is important that there is clarity, consistency and
cooperation from its stakeholders that is consistent with the needs and capacities
of the locality it is aiming to serve. There should be consensus on a mission that
defines the incubator’s role in the community and quantifiable objectives to
achieve the mission. Incubators should develop stakeholder support, including a
resource network.
e. Supportive government policies - The success of services directed at
entrepreneurship promotion depends largely on a broad-based consensus on
economic and industrial policy.
f. Competent and motivated management - The success of business incubators
depends largely on the quality of the management teams appointed to operate
them. The Incubator manager should have a business background, entrepreneurial,
leadership and organisational skills and be well networked in the community.
g. Financial sustainability - The ultimate test of success of an incubator is whether it
can be self sustaining, and incubators should thus operate as viable businesses.
This will require the need for ongoing subsidies to be confirmed as a part of the
overall sustainability issues, whereas at the moment unclear signals are coming
from the government. In the evolving policy environment that governs business
incubation, the shifting official stance on what constitutes sustainability, the
67 Wyeth, C. op cit 68 Wyeth, C and Ravjee, J. Interview conducted by Zaaiman, S. SEDA Offices 26 June 2008. 69 Potter, O. op cit 70 Buys, A. J. and Mbewana, P. N. op cit 71 Buys, A. J. and Mbewana, P. N. op cit
31 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
varying emphasis on human capital development and empowerment goals and
rapid incubatee success, and the trade-off between supporting the further growth
of successful incubators to sustainable scale vs. the development of more
incubators, are all complications that incubation practitioners and policy makers
have to deal with on a regular basis.
h. Networking - Partner networks contribute to the success of incubators through the
sharing of wisdom, reaped from both achievement and failure, and assisting in
expanding market opportunities for entrepreneurs and graduates. This network
typically includes universities, industrial contacts, and professional service
providers such as lawyers, accountants, marketing specialists, venture capitalists,
angel investors, and volunteers.
Hence, government policies should be aimed at creating and sustaining environments that are
conducive to business incubation characterised by the above key success factors.
32 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
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r th
e y
ear
endin
g _
_____________
Q
uart
erl
y T
ota
ls
Cum
ula
tive T
ota
ls
Goals
O
bje
ctiv
es
Act
ivitie
s O
utp
uts
Q
1
Q2
Q
3
Q4
Y
1
Y2
Enterprise Creation
Promotion of macro-economic goals (Cost-Benefit Analysis Positive)
Q
uantita
tive
Ta
rgets
07/0
8
FY
08/0
9
FY
Impro
ving
the
bus
iness
perf
orm
anc
e, pro
fita
bili
ty
and
sur
viva
l ra
te o
f ne
wly
est
ab
lishe
d t
ech
nolo
gy
ba
sed S
MM
Es
# n
ew
SM
MEs
est
ab
lishe
d
# n
ew
pro
ject
s in
itia
ted
# C
lient
s Sup
port
ed
# S
MM
Es s
upp
ort
ed
% S
MM
Es t
hat
surv
ived 1
st y
ear
% S
MM
Es t
hat
surv
ived 2
nd
year
No o
f G
rad
uations
Pro
motion
of
Bla
ck
Econo
mic
Em
pow
erm
ent
# b
lack
ow
ned S
MM
Es
est
ab
lishe
d
% b
lack
ow
ned S
MM
Es
est
ab
lishe
d
# b
lack
em
pow
ere
d S
MM
Es
est
ab
lishe
d
% b
lack
em
pow
ere
d S
MM
Es
est
ab
lishe
d
# b
lack
ow
ned p
roje
cts
initia
ted
% b
lack
ow
ned p
roje
cts
initia
ted
33 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
# b
lack
ow
ned p
roje
cts/
SM
ME'
s in
port
folio
% b
lack
ow
ned p
roje
cts/
SM
MEs
in
port
folio
# w
om
an
ow
ned
SM
MEs
est
ab
lishe
d
% w
om
an
ow
ned S
MM
Es
est
ab
lishe
d
# w
om
an
em
pow
ere
d S
MM
Es
est
ab
lishe
d
% w
om
en
em
pow
ere
d S
MM
Es
est
ab
lishe
d
# w
om
an
ow
ned p
roje
cts
initia
ted
% w
om
en
ow
ned p
roje
cts
initia
ted
# w
om
an
ow
ned
pro
ject
s/SM
MEs
in
port
folio
% w
om
an
ow
ned
pro
ject
s/SM
MEs
in
port
folio
Pro
motion
of
eco
nom
ic
gro
wth
and
em
plo
ym
ent
creation
# J
obs
(Direct
) cr
eate
d
Fund
s Rais
ed (
Rm
)
# J
obs
(Ind
irect
) cr
eate
d
# C
asu
al / S
easo
nal jo
bs
create
d
# n
ew
pro
spect
s ent
eri
ng
pip
elin
e
Tota
l SM
ME
T/O
at st
art
of
QTR
To
tal SM
ME
T/O
at end
of
QTR
34 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
%
gro
wth
in
SM
ME
inco
me
Pro
moting
Exp
ort
s Fo
rex e
arn
ed
by S
MM
E (R
and
va
lue)
# N
ew
fore
ign
clie
nts
with
who
m b
usin
ess
ha
s b
een
secu
red
Optimisation of centre deliverables
Pro
moting
Tech
nolo
gy
Tra
nsfe
r a
nd d
iffu
sion
withi
n th
e S
MM
E se
ctor
and
to p
ote
ntia
l ent
rep
rene
urs
# P
ate
nts
reg
iste
red
# n
ew
/up
gra
ded
tech
nolo
gy
tra
nsfe
r in
tera
ctio
ns c
om
ple
ted
Pro
moting
Tech
nolo
gic
al
Inno
vation
# t
ech
nolo
gy f
ocu
sed
cons
ort
ia
# C
lust
eri
ng a
ctiv
itie
s
Sustainability
Dep
end
enc
y o
f ce
ntre
on
gra
nt f
und
ing
%
dep
end
enc
y o
n STP
fun
din
g
Leve
l of
Inco
me g
ene
rate
d f
rom
oth
er
SA
sour
ces
(%)
Leve
l of
Inco
me g
ene
rate
d f
rom
in
tern
ationa
l so
urce
s (%
)
Leve
l of
Pri
vate
sect
or
inco
me
gene
rate
d (%
)
%
of
clie
nts
pa
yin
g f
or
serv
ices
35 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
Tota
l fe
es,
rent
als
, le
vies
&
royaltie
s as
% o
f To
tal In
com
e
Tota
l g
ov
gra
nts
rece
ived a
s a
% o
f to
tal co
sts
% f
undin
g t
hat
goes
to c
lient
s
INC
UBA
TO
R N
AM
E A
nnual Im
pact
Sum
mary
Com
pliance
Perf
orm
ance
Are
a M
easu
rable
s fo
r th
e y
ear
endin
g 3
1 M
arc
h 2
008
Quart
erl
y T
ota
ls
Goals
O
bje
ctiv
es
Act
ivitie
s O
utp
uts
Q
1
Q2
Q
3
Q4
Q
uantita
tive
Targ
ets
Enterprise Creation
Promotion of Macro- economic goals
Impro
ving
the
bus
iness
perf
orm
anc
e, pro
fita
bili
ty
and
sur
viva
l ra
te o
f ne
wly
est
ab
lishe
d t
ech
nolo
gy
ba
sed S
MM
Es
Ave
rag
e c
lient
satisf
act
ion
gra
de
Pro
moting
Tech
nolo
gy
Trans
fer
and
dif
fusi
on
No o
f su
ccess
sto
ries
Faci
litation
of
eff
ect
ive,
eff
icie
nt a
nd e
cono
mic
al
tech
nolo
gic
al a
nd b
usi
ness
sk
ill/ k
now
how
in
Cent
re
# int
era
ctio
ns w
ith
STP
(tr
ain
ing
work
shops,
conf
ere
nces
etc
)
Capa
city
deve
lopm
ent
(%
of
bud
get a
lloca
tion)
Cont
ribut
ing t
o
know
ledg
e c
reation
and
dis
sem
ination
# int
ern
s em
plo
yed
Kno
wle
dg
e /
mana
gem
ent
Syst
em
Promoting
Networks and
Linkages
Es
tab
lishm
ent
and
m
ain
tena
nce o
f lin
kag
es
with
sim
ilar
org
ani
sations
#
of
inte
ract
ions
with
sim
ilar
org
ani
sations
e.g
. co
nfere
nces,
work
shops
etc
.
36 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
# M
OU
/M
OA
s co
nclu
ded
with
key d
eve
lop
ment
sta
keho
lders
op
era
ting
withi
n th
e c
ent
re's
bus
iness
dom
ain
# J
V/ p
art
ners
hip
ag
reem
ent
s w
ith
key s
take
hold
ers
in
the
cent
re's b
usin
ess
dom
ain
Syst
em
to c
ap
ture
"ne
twork
in
form
ation"
Ensuring effective and efficient management of investment
Inve
stm
ent
is
well
ma
nag
ed
Sour
ce o
f in
com
e v
s. b
udg
ete
d
exp
end
itur
e
In K
ind
Serv
ices
pro
cure
d
Effe
ctiv
e a
nd e
ffic
ient
m
ana
gem
ent
of
cost
s C
ent
re o
verh
ea
ds
are
min
imis
ed
Exp
end
itur
e is
in lin
e w
ith
ap
pro
ved
bud
gets
Aud
itors
ass
ess
ment
is
posi
tive
Effe
ctiv
e a
nd e
ffic
ient
m
ana
gem
ent
of
ass
ets
C
om
plia
nce w
ith
Sta
tuto
ry
and
oth
er
God
isa
Req
uire
ment
s
C
om
plia
nce w
ith
Kin
g 1
1, EE
A,
LRA
and
oth
er
rele
vant
le
gis
lation
37 Global Practice in Incubation Policy Development and Implementation South Africa Case Study
Qua
rterl
y R
eport
s a
nd B
usin
ess
Pla
ns s
ubm
itte
d o
n tim
e, a
nd o
f hi
gh
qua
lity
Com
plia
nce w
ith
the c
ond
itio
ns
and
stip
ula
tions
of
the G
od
isa
Polic
y a
nd P
roce
dur
es
Ma
nua
l
Corporate culture
conducive to personal
and career
development, and in
line with the national
population profile Reg
ula
r co
mm
uni
cation
with
sta
ff u
ndert
ake
n
# m
ana
gem
ent
int
era
ctio
ns w
ith
sta
ff
Sta
ff a
ttitud
e/Perf
orm
anc
e
surv
eys
take
n
Sta
ff p
rofi
le -
gend
er
and
ra
ce
Marketing and
communications
Aw
are
ness
and
pro
file
of
the c
ent
re r
aised
am
ong
st
key s
take
hold
ers
# p
ublish
ed
art
icle
s
# m
ed
ia r
ep
ort
s
About infoDev
infoDev is global development financing program
among international development agencies,
coordinated and served by an expert Secretariat
housed at the World Bank Group, one of its key
donors and founders. It acts as a neutral convener of
dialogue, and as a coordinator of joint action among
bilateral and multilateral donors—supporting global
sharing of information on ICT for development
(ICT4D), and helping to reduce duplication of efforts
and investments. infoDev also forms partnerships
with public and private-sector organizations who are
innovators in the field of ICT4D.
The infoDev Secretariat is housed in the Global ICT
Department (GICT) of the World Bank Group.
For additional information about this study or more
general information on infoDev, please visit
www.infodev.org/publications or contact
us at [email protected] or tel: +1.202.473.4868.
Information for Development Program (infoDev)
1818 H Street NW
Washington, D.C. 20433
Phone: +1 202 458 4070
Fax: +1 202 522 3186
www.infodev.org