START-UP KICK­START

Financial Mail - - FEATURE - Mudiwa Gavaza [email protected]­day­times.co.za

Don’t be ego­tis­ti­cal about own­ing 100% of your busi­ness,” says Candice Thurston, CEO and founder of Candi & Co. It was through a part­ner­ship with beauty fran­chise Sor­bet — not dis­count­ing her ex­pe­ri­ence in mar­ket­ing and brand­ing at com­pa­nies such as MTN and Unilever — that she was able to give life to her vi­sion of run­ning an eth­nic hair and beauty sa­lon. Four years on, Candi & Co op­er­ates seven stores in Gaut­eng and has served thou­sands of cus­tomers.

Dig­i­tal pay­ments com­pany Snap­scan presents a sim­i­lar pic­ture of the pay­off that can come from solid cor­po­rate back­ing. When mo­bile pay­ments firm Fire­pay launched Snap­scan in 2013, Stan­dard Bank pro­vided sup­port, pro­cess­ing pay­ments for the plat­form.

The part­ner­ship gave the start-up much­needed vis­i­bil­ity, as well as ac­cess to Stan­dard Bank’s sub­stan­tial client base. It proved so suc­cess­ful that the bank bought a con­trol­ling stake in Fire­pay in 2016, and Snap­scan now op­er­ates as an in-house Stan­dard Bank prod­uct.

For years, the gov­ern­ment has sought so­lu­tions to the is­sue of how to grow SMES. It’s some­thing that seems to have been passed on to the pri­vate sec­tor in re­cent years, with BEE leg­is­la­tion man­dat­ing large cor­po­rate en­ti­ties to sup­port small busi­nesses.

Partly as a re­sult, busi­ness de­vel­op­ment sup­port (BDS) — in­ter­ven­tions to help start-ups struc­ture, scale and fund their op­er­a­tions — has be­come a R20bn in­dus­try, says Si­fiso Nd­wandwe, ex­ec­u­tive di­rec­tor of Cat­a­lyst for Growth (C4G), a non­profit or­gan­i­sa­tion con­cep­tu­alised by Jpmor­gan and ad­vi­sory firm Dal­berg that has de­vel­oped an an­a­lyt­ics plat­form for BDS providers serv­ing SMES. Even so, the money spent on BDS reaches just 5% of lo­cal start-ups, C4G’S re­search has found, leav­ing the vast ma­jor­ity un­sup­ported.

The busi­ness case for cor­po­rates in­vest­ing in SMES would seem sim­ple: start-ups of­fer in­no­va­tion, lead­ing to op­por­tu­ni­ties for mar­ket dis­rup­tion or in­creased mar­ket share. They also cre­ate jobs, which cor­po­rates are not able to do fast enough in the face of SA’S un­em­ploy­ment cri­sis.

“Small-busi­ness own­ers want to gain ac­cess to mar­kets and net­works, and in­te­grate into value chains,” says Bule­lani Bal­a­bala, founder of the Town­ship En­trepreneurs Al­liance (TEA), an ini­tia­tive aimed at de­vel­op­ing town­ship en­trepreneurs.

An ef­fec­tive BDS pro­gramme strikes a bal­ance be­tween these needs, en­sur­ing en­ter­prise de­vel­op­ment, where busi­nesses are built from the ground up, and cre­at­ing op­por­tu­ni­ties for SMES to ac­cess mar­kets. And the value they of­fer can be sub­stan­tial in terms of ma­te­rial in­puts and busi­ness guid­ance. Thurston, for ex­am­ple, says Sor­bet

CEO Ian Fuhr told her that she would not fail with Candi & Co, as Sor­bet had al­ready done the “fail­ing” for her.

Bal­a­bala’s print­ing busi­ness found sim­i­lar suc­cess through BDS. It was in­cu­bated through Raiz­corp from 2011 to 2013, which “re­ally did help me to get my busi­ness to the next level and think out of the box”, he says. As a re­sult, his busi­ness grew from be­ing a bro­ker of print­ing ser­vices to run­ning its own ma­chines and of­fer­ing an in-house ser­vice.

But BDS doesn’t nec­es­sar­ily work in ev­ery­one’s favour.

“Some en­trepreneurs move from one

BDS or in­cu­ba­tion pro­gramme to an­other,” says Sele­bogo “Dr­lifes­gud” Molefe, founder of The Hookup Din­ner, a net­work­ing com­mu­nity of en­trepreneurs that hosts monthly busi­ness events.

He be­lieves en­trepreneurs need to man­age their ex­pec­ta­tions about BDS pro­grammes, as these are of­ten treated as a tick-box ex­er­cise for cor­po­rate so­cial in­vest­ment spend in large or­gan­i­sa­tions.

“The prob­lem is that BDS is a cost cen­tre item and not a profit cen­tre item,” says Molefe. To be suc­cess­ful, com­pa­nies need to re­think their ap­proach to SME sup­port: if they go into their SME in­vest­ment not ex­pect­ing to make a re­turn, they will not work to en­sure that the sup­ported busi­ness thrives, he says.

Bal­a­bala shares Molefe’s scep­ti­cism about BDS. He says there are op­er­a­tors in the BDS mar­ket that should not be al­lowed to as­sist SMES, as they don’t know what they are do­ing and of­ten don’t have the in­ter­ests of the SMES they are sup­posed to sup­port at heart.

Matsi Modise, a small busi­ness de­vel­op­ment and pol­icy ex­pert, and vice-chair of en­tre­pre­neur as­so­ci­a­tion

SIMODISA, says the same prob­lems that plagued the gov­ern­ment in the SME sec­tor have car­ried for­ward into pri­vate sec­tor sup­port. She be­lieves a sig­nif­i­cant num­ber of cor­po­rate ex­ec­u­tives and pub­lic sec­tor ad­min­is­tra­tors pro­vid­ing de­vel­op­ment ser­vices have never started their own busi­nesses. This makes it hard to re­late to and un­der­stand the needs of SMES, which can lead to in­ef­fec­tive in­ter­ven­tions.

While many of the plans in place for BDS pro­grammes tend to be sound, Modise says the sec­tor “faces a prob­lem of im­ple­men­ta­tion”, some­thing best solved through col­lab­o­ra­tion be­tween start-ups and cor­po­rates.

Through the TEA, Bal­a­bala is do­ing just that, work­ing with a num­ber of BDS providers to cre­ate more ro­bust and in­clu­sive pro­grammes for SMES.

For Thurston, it was such col­lab­o­ra­tion that en­sured suc­cess. She cred­its her part­ner­ship with Sor­bet for Candi & Co’s growth. “I could not have done it any other way,” she says.

The prob­lem is that busi­ness de­vel­op­ment sup­port is a cost cen­tre item and not a profit cen­tre item Sele­bogo Molefe

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