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Big business giving SMEs a boost

Eskom Foundation helps to develop local SMEs across agri, manufacturing sectors.
The workers at National Manhole Covers in Cape Town manually piling covers. Picture: Moneyweb

Khayelitsha in the Western Cape bustles with energy. A woman sits behind a table, her hands busy in a bucket of water, while the table is covered in what appears to be sheep skin and wool. She is washing it, possibly to sell it, to earn an income. Next to her, there is a food shop. Someone else is operating from a small box-shaped store called Chips and Hamburgers.

On every corner, there is some kind of small, informal business operation; evidence of people trying to find ways to earn a living and beat their way out of unemployment.

In the third quarter of 2017, unemployment rates in South Africa came in at 27.7%, which is neither an increase nor a decrease from the two previous quarters in that year. Trading Economics has indicated that this remains the highest rate in 13 years. A total of 6.21 million South Africans are unemployed.

While the unemployment problem rages on, Eskom has recognised the role small businesses play in growing South Africa’s economy. The latest Global Entrepreneurship Monitor report for 2016/17 indicates SMMEs in South Africa contribute 36% to GDP.

The Eskom Development Foundation, through the Business Investment Competition (BIC), set up a corporate social investment programme in 2008 which comprises of an entrepreneurship competition to develop small- to medium-sized, black-owned enterprises in agriculture, agro processing, construction and engineering, manufacturing and trade services sectors.

Enterprises that make their way onto the list of finalists are offered the opportunity to showcase their business at Eskom-sponsored expos to build their customer base and increase their reach. The winning business receives R150 000 in cash, while first runner-ups receive R50 000 each and all other finalists take home R5 000.

Speaking at a media roundtable, independent economist, Xhanti Payi said individuals often start their own business after being laid off and realising that they need to provide for themselves and use the opportunity to support and hire more people to grow the business.

Payi said when it comes to selecting businesses in the BIC, they often look out for those that are scalable.

“It’s about businesses that will grow and actually hire people,” he said.  

On a recent media trip to the Western Cape, the Eskom Development Foundation took reporters around the now very arid province to see how 2017’s winning enterprises were blooming through the help of CSI and funding.

eDen All Natural Butter

About 20 minutes North of the Mother City is Kensington, where the winner of the BIC entrepreneurship competition, Brighton Matake, operates. Matake is the founder and owner of eDen All Natural Butter, a manufacturer of preservative-free, flavoured peanut butter. Speaking to the media in his modest peanut butter “factory”, Matake said the idea started as a home-based business. He, alongside his wife, received praise over their products, and began introducing their natural peanut butter to food markets. In 2016, they began their supply to major retailers. eDen All Natural supplies to Pick n Pay, Spar and Wellness Warehouse as well as restaurants and schools.

“It was really a journey, we didn’t have money, we only had our little salaries that we were earning somewhere. We started working on our own factory and we developed it into a full, certified premise,” he said.

eDen All Natural peanut butter, based in Cape Town was founded by Brighton Matake. Picture: Moneyweb

The business is going into its third year, and is gaining traction from the CSI programme. Matake said they are still playing around in the market, and pricing their products competitively.

“We want to have our footprint in the whole of South Africa, because currently we are predominantly in the Western Cape,” he said.

In the three years, he was also able to create eight jobs. The labour is still very manual as jars are filled, sealed and labelled by hand. He added that he hoped to one day work alongside smalltime farmers on contractual basis, where he can buy his peanut produce.

National Manhole Covers

Farouk Shaik identified a need for alternative manhole covers after noticing an increase in thefts of metal manhole covers. Shaik founded the business ten years ago and manages it alongside his wife and a team of 26 employees. They are based in Kraaifontein.  

The manhole covers are SABS approved and are made from polymer-concrete, resin. Some also use fibreglass. Shaik was rewarded the prize for first runner-up in the BIC entrepreneurship workshop, in the manufacturing category.

Farouk Shaik the owner of National Manhole Covers. Picture: Moneyweb

He supplies to industries in South Africa, including Eskom, Joburg Water, private developments, hardware stores and various other institutions. His supply also extends to neighbouring countries, and has international reach to Brazil and the United Arab Emirates.

As the workers manually fitted and piled manhole covers in the outdoor workspace, Shaik told reporters that he has the social responsibility to uplift the community through job creation and to further invest in community projects.

The company has invested in creches, in schools, in places of worship and has also issued bursaries to university students. It has also helped its own employees with additional funding, said Shaik.

Starting a small business comes with many challenges. There are many barriers that they need to overcome along the way. Payi explained that small businesses have “less comfort levels at being able to sustain difficult trading conditions”.

GlobeScope Security

Taking a male-dominated industry by storm is Glynn Mashonga, the founder and owner of GlobeScope Security, which provides electronic systems in homes, schools, private businesses and universities. Mashonga began her journey as an entrepreneur, and learnt technical skills from a technician she would follow around on jobs. Carrying ladders on her shoulders and installing sophisticated alarm systems for different buildings, Mashonga said growing in the field was hard and “even more so for a woman”.

The company has been operating for ten years now and has an employee count of 15. She operates from a modest office in industrial Cape Town. Mashonga is the senior technician of the team. Her business model has a training academy where candidates are taught the science and skills of doing the installations. She takes in candidates regardless of their educational background and experience in the field.

Glynn Mashonga, founder and owner of GlobeScope Securities with her trainees. Picture: Moneyweb

Mashonga was the winner of a Woman in Tech Award and a Woman in Business award in 2011. She received training through the Eskom project and was helped by corporates like Eskom and Absa who invested and helped with funding her business.

“Corporates help small businesses keep things in place, they keep things going,” she said.

Her plans are to expand her business into Johannesburg in 2018 and build a bigger base and footprint in South Africa. Ultimately, she said she wants to change the perception of the security sector.

“I would like to have a team of women going out and changing the game of security,” she said.

Role of big business

The small businesses sector in South Africa is making good paces but skills, mentorship and networking are the enablers that will encourage funding. Payi said small businesses should really be driven by bigger businesses.

“Big businesses should allow small businesses into their value chain,” he said. 

He added that the private sector really has not come to the party about being able to give skills and training opportunities to smaller and up and coming businesses. Doing so will benefit business divisions in the corporate companies themselves.

“I think we underestimate the role of bigger businesses and why they should play that role, part of it is that [small businesses] need those skills. We all need to contribute towards the skill-giving so we can draw from it,” he added.

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No… big businesses have continuously been shutting down small businesses in townships and dorpies

Instead of support through partnerships; they rather use their economies of scale to shut down spaza shops. Where they claim to partners, they dictate pricing (e.g low margins on supply of fruits and veg by emerging black farms to Woolies, Shoprite etc; in turn they package and sell the same goods at higher profit margins)

Similarly, MTN, Voda & cellC closed down public phones market (township small businesses where making a loads of money from this model) by selling less than R10.00 airtime (government should have regulated this in a way that it benefits rather than close small businesses down

The list is endless…

End of comments.

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