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Gauteng sme study 2008


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Gauteng sme study 2008

  1. 1. Quantitative and qualitativeresearchon SMEs in Gauteng USAID Financial Sector Program <br />
  2. 2. CONTENTS<br />Acronyms<br />Background<br />The Financial Sector Program<br />Methodology<br />GIS findings and maps<br />Quantitative findings<br />Qualitative findings<br />Demographics<br />Need and use of financial BDS<br />Banking and financial services<br />Legal and regulatory matters<br />Knowledge and information management<br />Analysis and conclusions<br />Key Recommendations<br />
  3. 3. ACRONYMS<br />
  4. 4. BACKGROUND<br />The Small Business Act (1996) and subsequent legislation gives recognition to the important role played by SMEs in the South African economy<br />It is estimated that SMEs account for 41.7% of private sector employment in South Africa.<br />Increasingly, government has looked to this sector (as opposed to micro enterprises) as the source of job creation in the country.<br />In Gauteng alone there are about 1 053 818 small business owners <br />However, as (very often) members of the second economy, the challenges faced by SMEs (both historically and currently) have to do with, for example, access to markets, finance, business opportunities or business support services<br />Small businesses were ranked based on their level of business sophistication in Gauteng (BSM) in the 2006 FinScope study. SMEs mainly belong to BSM 6 and 7<br />
  5. 5. BACKGROUND<br />Small and Micro-Businesses by Sophistication Segment<br />Source: FinScope, Small Business Survey Report Gauteng 2006 (Johannesburg: FinScope, 2006)<br />
  6. 6. BACKGROUND<br />
  7. 7. BACKGROUND<br />Small business and the formality of the business<br />
  8. 8. FINANCIAL SECTOR PROGRAM (FSP)<br />The FSP is funded by USAID. The objective of the program is to:<br />expand access to financial services and lower financing costs for small and medium enterprises (SMEs) through<br />reforming the legal and regulatory framework affecting the financial sector and business environment and<br />improving the commercial viability of lending to historically-disadvantaged SMEs in South Africa.<br />The ultimate result is to mitigate market credit risk leading to increased SME access to a range of quality affordable financial services.<br />
  9. 9. FSP Workstreams: <br />Financial business development services<br />Financial management, business planning, access to and use of support organisations<br />Banking and financial services<br />Financing from outside the business, use and constraints of loans.<br />Legislative and regulatory matters<br />Improve financial sector legal and institutional framework; enhance regulatory environment for SMEs <br />Knowledge and information management<br />Access to and sharing of information, knowledge of changes in business environment, use of ICT<br />
  10. 10. RESEARCH BRIEF AND PURPOSE<br />Quantitative analysis of SMEs in the BSM 6 & 7 FinScope small business survey of 2006<br />Qualitative research by way of focus groups among HDI business owners with a turnover of more than R200 000<br />The purpose of the above was to provide the most relevant information that will enable the FSP team to accurately design and implement their work plan and determine the targets of the Performance Management Plan <br />
  11. 11. ASSUMPTIONS<br />The BSM model provides the most realistic segmentation of small businesses<br />Used adjusted Banking Association’s definition of SME<br />Turnover of R500 000 to R20 million per annum<br />Bottom threshold was decreased to R200 000<br />To include SMEs in transition to higher level<br />Includes the highest concentration of HDI SMEs<br />Expected that this group will need support the most<br />Excludes micro enterprises<br />
  12. 12. METHODOLOGY<br />Analysis of the 2006 FinScope small business survey for BSM 6 and 7<br />Identify areas were BSM 6 & 7 are located<br />Discussion guide<br />Questions pertaining to each of the 4 workstreams<br />Criteria for selection<br />HDI business owner<br />Annual turnover of more than R200 000<br />Recruitment of participants<br />Recruiters in selected areas<br />Recruitment questionnaire<br />Conducted 11 focus groups across Gauteng<br />
  14. 14. 2006 SMALL BUSINESS SURVEY<br />About 1 053 818 small businesses in Gauteng<br />109 441 are HDI BSM 6 & 7 SMEs<br />Awareness of support organisations is high<br />57% never used support organisations<br />42% need for capital most important problem faced<br />2% had a loan at the time of the survey<br />
  15. 15. 2006 SMALL BUSINESS SURVEY<br />
  17. 17. BSM Maps<br />Created from the 2006 FinScope SME survey using small area estimation techniques<br />Maps show percentage households falling into BSM 6 and 7 within an enumeration area<br />Most of the focus group areas were selected using BSM 6 map where highest concentration of HDI small businesses are found<br />More African and Coloured SMEs found in BSM 6 while Asian SMEs mainly found in BSM 7<br />BSM maps enabled focus group areas to be selected and provided epicentres for HDI small businesses to be found <br />
  18. 18. Distribution of BSM 6 households<br />Inset: Location of Gauteng province in South Africa<br />
  19. 19. Distribution of BSM 7 households<br />Inset: Location of Gauteng province in South Africa<br />
  20. 20. SELECTED FOCUS GROUP AREAS<br />Pretoria<br />Pretoria CBD – African<br />Eersterust – Coloured<br />Mamelodi – African<br />Soshanguve – African<br />Laudium - Asian<br />Johannesburg<br />Eldoradopark - Coloured<br />Florida - Coloured<br />Lenasia - Asian<br />Soweto – African<br />Alexandra – African<br />Tembisa - African<br />
  21. 21. Focus Group Area Maps<br />Focus group area maps show selected enumeration areas from BSM 6 and 7 maps in Google Earth<br />Examination of focus group area maps show that selected enumeration areas are generally located near the commercial and industrial centres<br />Asian and Coloured focus group areas tend to be larger in extent than African areas<br />African focus group areas differ from one another depending on levels of urbanization and formal settlement<br />African focus group areas tend to have several separate areas where SMEs are concentrated<br />
  29. 29. SOWETO FOCUS GROUP AREA 1<br />
  30. 30. SOWETO FOCUS GROUP AREA 2<br />
  33. 33.
  34. 34. DEMOGRAPHICS<br />
  35. 35. COMPANY TURNOVER<br />
  37. 37. BUSINESS SECTOR<br />
  38. 38. YEARS IN BUSINESS<br />
  40. 40. Financial Business Development Services<br />By Financial Business Development Services (BDS) we mean a range of services that are intended to develop/improve business performance. These services are provided by government agencies, private sector and NGOs. Financial BDS focuses on:<br /> Financial management, which includes budgeting, costing / pricing, cash flow management, records keeping, book keeping, preparing and analysing financial statements, auditing and tax submissions<br /> Provision of consulting and advisory services, training and mentoring<br /> Key issues relating to financial BDS that need to be assessed include access to information and financial ‘intelligence’; and proximity/accessibility, affordability and relevance of services<br />
  41. 41. Aware of Financial BDS<br />Aware of following support/advice services (in order of prominence):<br /><ul><li>Khula Enterprises
  42. 42. SETAs
  43. 43. DTI
  44. 44. Umsobomvo Youth Fund
  45. 45. NAFCOC
  46. 46. GEP
  47. 47. DBSA
  48. 48. FNB, ABSA, Nedbank
  49. 49. NEF</li></ul>Aware through advertising, offices nearby, forums and consultants<br />Mostly approached for loan but not successful<br />SETA approached for training and professional advice<br />Others approached for business and marketing plans, support in running businesses, training and education<br />
  50. 50. Aware of Financial BDS<br />BDS support not up to standard and not making a difference or fulfilling their mandate<br /><ul><li>Resulting in SMEs doing their own financial management, development of business and marketing plans
  51. 51. SMEs have closed down because of a lack of support</li></ul>Support from BDS institutions must be systematic and over a period of time<br />BDS providers not keeping pace with needs and expectations of SMEs<br />Unrealistic expectation of BDS for SMEs to develop ‘big’ and ‘beautiful’ business plans<br />
  52. 52. Need for Financial BDS<br />Financial support the most important need<br />Advice and training on the step-by-step procedures needed to start and run an SME including:<br /><ul><li>Determining if a business is viable
  53. 53. Securing start up and longer term funding
  54. 54. Determining the legal vehicle to use
  55. 55. Setting up and structuring the business
  56. 56. Developing business plans and profiles
  57. 57. Locating the business
  58. 58. Securing and maintaining clients</li></ul>Need for bookkeeping services to assist with VAT, PAYE, SDL, UIF, etc<br />Affordability of bookkeeping services identified as a concern<br />
  59. 59. Need for Business Plans<br />SMEs understand the value of business plans<br />Need for business plans is increasing because they are needed to access finances, support services and to tender for work<br />One SME indicated that the business plan was needed to grow the business and keep it sustainable into the future<br />Advice on developing business plans from business associates, financial advisors, advocates, family and friends<br />Some SMEs use professionals to develop business plans but some question the ability of SMEs to operationalize these<br />Many SMEs don’t develop business plans because they are ‘too busy’.<br />
  60. 60. Need for Marketing Plans<br />SMEs see marketing plans as important in reaching potential customers<br />Marketing plans must be ‘workable’ considering limited turnover of SMEs (ie use appropriate marketing tools – pamphlets, wall signage, etc)<br />Location of SMEs in relation to their customers was seen as critical<br />All focus groups indicated need for training in developing business and marketing plans<br />
  61. 61. Use of Financial BDS<br />Limited knowledge and infrequent use of BDS institutions and service offerings now and in the past<br />Needs of SMEs not being met when approaching BDS institutions because:<br /><ul><li>No feedback given on application
  62. 62. Given the run around and staff not helpful
  63. 63. Bureaucratic processes and lack of capacity
  64. 64. Deposit and documents required too restrictive
  65. 65. Assisting too few SMEs because of restrictions
  66. 66. To get assistance must have developed business plan (catch 22 situation)
  67. 67. Location of BDS must be closer to SME business premises
  68. 68. Need for support/advice in own language</li></li></ul><li>Business Records<br />Some SMEs have bookkeepers and keep records<br />Family members<br />Self<br />Many others not keeping records because they are too busy or have not been trained to do so<br />Most SMEs are using manual systems – few have progressed to using computerized systems<br />
  69. 69. Communication with BDS institutions<br />Communication problems include:<br /><ul><li>Inability to get hold of BDS providers, especially in government:</li></ul>the “phone will ring until hallelujah”<br /><ul><li>Inability to be put through to the right person
  70. 70. Time to get feedback is lengthy and sometimes the issue is not addressed at all
  71. 71. Only way is to know someone in the BDS institution
  72. 72. BDS staff are often unfriendly</li></li></ul><li>RECOMMENDATIONS<br />Strategy to improve awareness of BDS support/services offered by organisations<br />More communication, advertising and coordination of BDS offerings required<br />Training of BDS staff in addressing needs and being responsive to SMEs<br />Development of simple information products on the availability of BDS – institutions to contact and individuals to speak to<br />Booklet on how to set up and manage small businesses and how BDS providers should communicate with SMEs<br />Integrated approach in the provision of BDS support/advice in different sectors – government to facilitate<br />
  73. 73. RECOMMENDATIONS<br />SMEs identified need for dedicated capacity building on:<br /><ul><li>business planning
  74. 74. financial management
  75. 75. day-today business management</li></ul>Sector specific mentoring required<br />Location & quality of support to be improved through training of BDS staff<br />Research into BDS provided in public and private sectors to determine what they offer, effectiveness of services and medium used to communicate with SME<br />
  77. 77. Banking and Financial Services<br />Banking and financial services covers the areas of:<br /> Existing use of finances from formal and informal institutions and under what conditions<br /> Suitability of financing from an amount and repayment perspective<br /> Need for financing<br /> Past experience in applying for financing and reasons for being declined<br /> Reasons for not applying for financing<br />
  78. 78. Access to Finance<br />Majority of SMEs have personal bank account, business bank account or both<br />Type of account is mainly a savings or ATM<br />Black SMEs and females have less access to bank accounts and have greater challenges in getting access to financing<br />Need for finance to enable:<br /><ul><li>Businesses to grow
  79. 79. Improve workplace conditions
  80. 80. Buy stock and equipment
  81. 81. Find bigger and better premises</li></ul>“Yes, we are always short of cash flow. The more money you have the more stock you can buy. In a business you can never have enough money” (Laudium businessman)<br />
  82. 82. Obstacles to accessing finance<br />Many indicated that they could not get funding and found financing/ BDS support a challenge<br />There are numerous reasons why SMEs have difficulty getting access to financing including:<br /><ul><li>No accounts with institutions – must have an account for at least 6 months
  83. 83. No credit history
  84. 84. Poor credit history
  85. 85. Lack of security/collateral
  86. 86. Not enough cash flow
  87. 87. Not enough equity in their business
  88. 88. Inadequate financial records and no accountant – needed 3 years of bank statements for business
  89. 89. Poor financial literacy
  90. 90. Not in business long enough
  91. 91. Blacklisting
  92. 92. Business owners don't have always have title deeds to their residential properties
  93. 93. Feel intimidated by financial institutions </li></ul>“They [financial institutions] have a fear when you dressed like that [in a suit and tie with a briefcase]” (Tembisa businessman)<br />
  94. 94. Further obstacles to accessing finance<br />Banks only allow savings accounts to start up businesses that don't provide statements<br />High interest rates<br />Institutions only fund large projects and in specific sectors<br />“With Umsombovu you have to understand that they are interested in big projects, like manufacturing. They will send you to Gauteng Shared Services, the DTI, or Gauteng Growth something. They’ll tell you that those people will be able to help you with those small funds, but they are not interested in those projects.” (Alexandra businessman)<br />
  95. 95. Obstacles to accessing government finance<br />“ .. I am aware of all of those, I am in business for a long time now, I went to KHULA and they told me that they will provide a loan, but they want security. It is a long process. When you go to them they will assist you and then they send you there and then they decide if your business is worth it, it is a waste of time. Maybe it is where we come from and we are used to struggling to make ends meet and then maybe in the end we will grow.”<br />“What happens here is that they all have different names, they but they all want the same. If you have a bad experience with one of them, you look at them as just another one.”<br />“Umsombovu, yes, but it’s not more of a financial assistance if you are in services. They are also not interested in something less than R60 000. If you come up with a need for a small amount like R45 000 they say go to a financial institution. You must remember they are a bank themselves and need to make a profit. Even Khula is also not funding on a small scale”.<br />
  96. 96. Sources of finance used by SMEs<br />Because it is so hard for SMEs to access financing from formal and informal institutions they secure funding from:<br /><ul><li>Family and friends
  97. 97. Retrenchment packages
  98. 98. Pensions and other savings
  99. 99. Other sources of finance
  100. 100. Bond on their home
  101. 101. Use property as surety
  102. 102. Loan taken in personal capacity
  103. 103. From industry
  104. 104. Black listed SMEs forced to use informal money lenders</li></li></ul><li>Support from financial institutions<br />SMEs reported working through consultants and filling in applications but still not getting support<br />SMEs informed to come back after 3-6 months once had enough bank statements<br />SMEs requested institutions to visit their premises to see potential of businesses<br />Indication of cultural/racial issues in securing funding<br />“There was a white relationship manager at the bank … I needed a cheque that had been deposited into my bank account cleared urgently … there was a big problem … if I had a Black relationship manager there would not have been a problem” <br />
  105. 105. Opinions on financial institutions<br />Banking is only for the good times<br />“....for a long time my account was okay and then I ran out of money, so I went to the bank to ask them for money and they said no”. <br />Banks are perceived to be a good place to get finance<br />“We normally approach the bank because it is the trustworthy party.” (Soshanguve business women)<br />Banks don't consider SMEs important<br />“I suppose I am a small thing” (Lenasia business man)<br />
  106. 106. Opinions on financial institutions<br />Banks don't provide the full loan amount required by SMEs<br />“Yes I had an account, I still remember I borrowed only five thousand Rand; they didn’t give me more and couldn’t cover everything.” (Soshanguve business women)<br />Banks don't reject loan applications because of race/cultural considerations but because of ineffective communication on their side<br />“I don’t think it is based on colour, it is based on risk but they don’t go to the level where they explain to you what makes you a high risk.” (Eersterust businessman)<br />
  107. 107. Deficiencies in SMEs<br />Lack of financial education and literacy<br />Lack of business training<br />Highly competitive and undiversified markets<br />Lack of record keeping and proper documents (eg company documents, tax clearance, UIF, etc)<br />Inability to present formal business plans<br />Poor credit ratings<br />Lack of collateral/security for loans<br />Limited capital bases and ability to grow capital<br />Misconceptions about the risk analysis process<br />
  108. 108. Deficiencies in financial institutions<br />Rigid credit scoring policies<br />Rigid collateral requirements<br />Reluctance to provide small loans<br />Rigid repayment schedules<br />Support organisations acting like banks<br />Lack of understanding of cultural differences<br />Poor report-back to applicants on loan refusals<br />Poor communication of services offered<br />Lack of differentiation of product and approach offered to clients<br />Restrictions placed on lending via the National Credit Act - additional documentation, calculations and checks<br />
  109. 109. Recommendations<br />Investigate possibility of informal lenders being part of credit scoring system in future<br />Develop clear step-by-step guidelines on what is needed to secure funding from institutions<br />Provide guidelines to staff in financial institutions and government organizations on communication standards<br />To address deficiencies on the supply and demand side as regards access to finance<br />
  110. 110. Recommendations<br />Develop equity accumulation programs – subsidized share schemes – include in Financial Sector Charter requirements<br />Government funded equity/asset base creation program – fund fixed assets development for SME's (start-up capital)<br /> Re-design collateral scoring techniques – consider "non-western" collateral<br />Provide tax incentives on mentoring programs from bigger business<br />Relaxation on re-payment "holidays", interest rate capping, extended re-payment periods<br />Extensive financial literacy training programs<br />Easy/cost free access to firm's credit rating information<br />Develop the third tier banking system granting smaller loans with short repayment periods – create Micro Banking/Divisions<br />Encourage formal banks to finance third tier banking<br />More flexible interpretation of National Credit Act for categories of small business<br />Change mindsets of the formal banking institutions vis-a-vie small business<br />
  111. 111. Recommendations<br />Fund technology drive in small business<br />Develop creative funding approaches learned from informal/NGO schemes:<br />Repayment in public<br />Notional collateral<br />Targeting women's groups<br />Develop market access programs<br />Encourage segmentation of Donor/Support Agencies against specifically targeted SME segments – using the BSM<br />Simplify the "business plan" requirements process<br />Expand geo-graphic coverage of Micro Bank/Division coverage from formal banks<br />Subsidised/lower interest for start-up capital/technology purchases for small business<br />Better training of bank staff to understand small business needs<br />Government capital injection incentive program for small business - -for every compliance registered get 10 points – 100 points equals computer<br />
  113. 113. Legal and regulatory matters<br />Legal requirements and compliance<br /> knowledge of benefits and liabilities associated with different types of companies; knowledge of regulatory requirements; need of legal/regulatory training.<br />Relationships with public institutions<br />At the national, provincial and municipal levels<br />Knowledge of BEE legislation<br />Awareness of business opportunities and benefits associated to BEE legislation. Need for training<br />Association membership and Advocacy<br />Capacity of associations to help and defend members<br />
  114. 114. Legal requirements and compliance<br />SMEs were registered mainly as close corporations (CC) and sole proprietors <br /><ul><li>Larger SMEs tended to register as CCs</li></ul>Benefits of registering as a CC were listed as:<br /><ul><li>Made business sense
  115. 115. Get access to VAT number and Tax Clearance certificate
  116. 116. Better positioned to get access to government work
  117. 117. Some were not aware of the benefits
  118. 118. Few knew that it reduces risks and liabilities of SME</li></ul>SMEs started business because wanted to own their own business<br />Advice received from business associates, family and accountants in selecting legal vehicle<br />
  119. 119. Legal requirements and compliance<br />Reasons why SMEs were not registered included:<br /><ul><li>Limited time available to SMEs
  120. 120. Limited knowledge of registration process – registration process is not complicated or expensive
  121. 121. Saw themselves as too small a business
  122. 122. Did not see the benefits of registering</li></ul>Most participants did not understand the benefits associated with the different types of companies <br />
  123. 123. Legal requirements and compliance<br />Most SMEs try to respect their obligations towards SARS, but were not aware of the new VAT threshold in 2009<br />SMEs knew to register their employees for UIF<br />SMEs more likely to comply in paying income tax and PAYE<br />Reasons for non-compliance was indicated to be a lack of knowledge<br />
  124. 124. Relationship with public institution<br />SMEs indicated that public institutions were not very useful<br />SMEs raised several concerns about public institutions:<br /><ul><li>Were not accessible as they were located in major urban centres
  125. 125. Did not understand SMEs so they were not able to help them properly
  126. 126. Needed to communicate with them better and within local languages
  127. 127. Did not know where to find public institutions
  128. 128. Bureaucratic and length procedures, not transparent and practiced nepotism
  129. 129. Staff needed to be trained in understanding policies/regulations and how to deal with customers
  130. 130. Did not follow-up with SMEs after initial engagement</li></li></ul><li>Relationship with public institution<br />Government should assist SMEs by:<br /><ul><li>Facilitating access to loans from financial institutions
  131. 131. Providing training and education in the setting up of SMEs
  132. 132. Providing access to business premises
  133. 133. Providing access to relevant information in local languages</li></ul>“Most important thing is that they must make information more easily accessible in all the languages; some off us has difficulty in finding the right information”<br />
  134. 134. Knowledge of BEE legislation<br />SMEs generally don’t know the BEE legislation - they think it is biased and reserved for big companies<br />SMEs were not aware that they had to register to be BEE<br />“Yes, I haven’t register for it, I thought being black you are automatically registered as BEE”<br />Almost all SME were not registered as a BEE company and most of them did not know how to do it.<br />SMEs don’t see how they can benefit from the BEE legislation. <br />
  135. 135. Knowledge of BEE legislation<br />SMEs were not registering to be BEE because:<br /><ul><li>They were too busy running their business
  136. 136. BEE is a mechanism whites use to get government business</li></ul>SMEs indicated they needed more information and training on the benefits of BEE<br />Some SMEs felt that BEE only benefitted Africans<br />“BEE is a waste of time for us, for me, myself because first of all it hasn’t been marketed properly. We - I’m talking as a young Indian businessman – we haven’t been educated as to what resources we can get w.r.t. BEE. I think to be quite frank it is only beneficial to the Black man in the country. In the old government I wasn’t white enough, now I am not Black enough. That’s my view.”<br />SMEs felt that they were overlooked because they were located in townships and were too small<br />
  137. 137. Association membership or professional association<br />Limited membership of professional associations with no advocacy role<br />Women, colored and Asian seem more likely to participate in business forums and associations<br />“I think communication is a problem, especially in the taxi industry. The only time we communicate with them is when we strike.”<br />“On the issue of communication between the community and the government, the communication does reach us, and it goes back to them. The problem is that there is a messenger in-between, so there is a break-down, so it’s not sufficient.”<br />
  138. 138. Conclusions<br />SMEs need:<br /><ul><li>More information and training on all aspects relating to registering of businesses, Labour Relations Act
  139. 139. Training on BEE legislation and business opportunities created by BEE legislation
  140. 140. More support of public institutions in their neighbourhood.
  141. 141. More support to strengthen their business/community associations and forums.</li></li></ul><li>KNOWLEDGE AND INFORMATION MANAGEMENT<br />
  142. 142. Knowledge and information management<br />Knowledge and information management focuses on:<br /> Mechanisms of sharing knowledge and experiences between organizations<br /> Support being provided by government and other organizations<br /> Needs, capacities and challenges in sharing knowledge and learning<br /> Best practices being used amongst SMEs in sharing knowledge and learning<br /> BEE businesses and influences from a cultural, identity and learning perspective<br /> ICT support for SMEs<br />
  143. 143. Sharing of knowledge and learning<br />Learning of SMEs obtained mainly from previous employer<br />SMEs generally not sharing knowledge and learning with one another<br />Type of sharing mechanisms suggested<br /><ul><li>Regular production of bulletins and pamphlets
  144. 144. Simple step-by-step procedures in handbook
  145. 145. Use of Internet (E-mail and web)
  146. 146. Business EXPOs
  147. 147. Organize forums and workshops</li></li></ul><li>Mechanisms of sharing knowledge and learning<br />SMEs not participating fully in Chambers of Commerce and other associations because<br /><ul><li>Not aware of them
  148. 148. Too busy to attend
  149. 149. Too far away from their business premises
  150. 150. See them as a waste of time</li></ul>SMEs acknowledge need for forums and workshops<br /><ul><li>SMEs are willing to share ideas
  151. 151. Must be close to their business premises</li></li></ul><li>Government support<br />“Cascading information” down to SMEs on running businesses<br /><ul><li>VAT and BEE benefits
  152. 152. Who to contact and where to go
  153. 153. Pamphlets
  154. 154. Provide hands on training
  155. 155. Develop database of small businesses
  156. 156. Follow-up and monitoring of SMEs
  157. 157. Financing and subsidies of access to ICTs
  158. 158. Advertising on TV, radio and in newspapers</li></li></ul><li>Needs, capacities and challenges<br />Skills development in all aspects of SME management<br />Basic literacy training on computers<br /><ul><li>Use of the Internet
  159. 159. E-mail clients and suppliers</li></ul>Public institutions where SMEs can access ICT facilities free of charge<br />
  160. 160. Culture, identity and religious influences<br />Soshanguve women said:<br />“We never come across it at all”<br />Women in central Pretoria said:<br />“but with identity you are more likely to get a bank loan if you are white than you are black”<br />Knowing someone in a financial institution is seen as a way to get assistance<br />“....through knowing the people at the bank we were able to open a bank account.”<br />An Asian man said: <br />“We need advice on how to grow as a business and how to become a BEE? We don’t know the procedures. How do we qualify, first we are not white enough now we are not black enough”<br />
  161. 161. ICTs in sharing knowledge and learning<br />SMEs use of computers:<br /><ul><li>Internet banking
  162. 162. Not many use it for financial management purposes
  163. 163. More advanced uses are for bookkeeping, income and expenditure, tracking profits, monitoring sales and stock taking</li></ul>E-mail is used to communicate with clients and suppliers<br />Web is used to access information and place orders with clients<br />Internet and phones can be used to hold teleconferences<br />
  164. 164. ICTs in sharing knowledge and learning<br />Mobile phones used to do banking and SMSs used to send and receive relevant information, monitor bank transaction and check bank account balances<br />Radio can be used to: <br /><ul><li>present short programmes in appropriate time slots (e.g. after 8pm) on running businesses
  165. 165. Have invited guests with people phoning in to ask questions</li></ul>Similar programmes can be presented on TV<br />
  166. 166. RECOMMENDATIONS<br />
  167. 167. Analysis and conclusion<br />Quantitative analysis has allowed us to get a ‘handle’ on what is a small business in Gauteng<br />Developed an understanding of the characteristics of these SMEs and the size of the sector<br />Enables areas to be identified for selection of qualitative focus groups<br />Qualitative research enabled researchers to develop more nuanced understanding of SMEs in relation to:<br /><ul><li>Financial business development services
  168. 168. Banking and financial services
  169. 169. Knowledge and information management
  170. 170. Legal and regulatory matters</li></li></ul><li>Analysis and conclusion<br />Financial BDS services are there but not being used as effectively as should or in addressing needs of SMEs <br />This is because they are:<br />Unfocused<br />Many factors inhibiting the use of financial BDS<br />Most important need is for financial support but also training, advice and services (eg bookkeeping)<br />Need for business plans is increasing to enable SMEs to access finance and work<br />Communication is a major stumbling block between financial BDS and SMEs<br />Key recommendations made in relation to issues identified in focus groups<br />
  171. 171. Analysis and conclusion<br />SMES generally have personal or business bank account<br />Many obstacles to SMEs getting finance but there is a distinct need<br />SMEs are not well positioned to access financing from institutions – deficiencies in supply and demand <br />Consequently, SMEs are getting finance from other informal sources<br />Many recommended opportunities for intervention – most of all FSP workstreams <br />
  172. 172. Analysis and conclusion<br />Sharing of knowledge and learning not happening amongst SMEs<br />Mechanisms for improving knowledge and learning clearly articulated<br />Government has a distinct role to play in providing information, training, databases, monitoring, facilitating access to finances and communication<br />Needs of SMEs in the knowledge and learning arena clearly articulated<br />ICTs being used but there is a need for more use and training<br />Key recommendations made with the development of a knowledge portal being at the forefront<br />
  173. 173. Analysis and conclusion<br />Although SMEs are formally registered – great need for training and education in benefits and mechanisms of establishing legal vehicles<br />Generally there is good compliance amongst SMEs in registering with the various regulatory bodies, especially SARS<br />Public institutions are not assisting SMES as much as they should - facilitate access to loans, training and education and to relevant information <br />SMEs simply don’t know enough about BEE, its legislation and its potential benefits<br />More developed SMEs part of professional associations but not bodies that act in an advocacy role<br />Many opportunities for input by FSP but especially in conduct research into making SME associations and forums more effective<br />
  174. 174. Discussion.<br />