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