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
SAIBL OPERATIONS
Facilitates and leverages:
• business linkages between South African blackowned/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
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
Significant procurement
available to BEE SME
companies from private and
public corporations
Support & incentives for
SME procurement
(BBBEE codes)
Small and Medium
Enteprise Development
A growing number of
competitive BEE SME
companies
Effective entrepreneur and
SME development support
programs
Policy and Regulatory Frameworks
KEY FACTORS IN SME PERFORMANCE
Enabling business environment
and conditions (policies, legal,
skills, infrastructure, etc)
Access to market information,
and opportunities (local and
export)
Small and Medium
Enteprise Development
Access to and cost of finance
(risk finance, loans & working
capital)
Transparency, confidence,
energy, vision
Changes in knowledge
attitudes and behaviour
Access to and affordability of
business development
support services
Improved strategies,
processes, investment
capacity & performance
Increase in sales, profits
and employment
Linkage Framework
Corporate expectations
•Quality;
•Cost;
•Delivery [time; spec]
SME
Supply
Of Goods &
Services
Linkage
Program
SME expectations
•Information
•Skills
•Finance [s/up & w/capital]
Large Company
Demand for
Goods and
Services
FIGURE1: SAIBL BUSINESS LINKAGES
MODEL
DEMAND SIDE
Linkage team meets senior
management to secure
commitment for SME outsourcing
Existing SME
Suppliers
SUPPLY SIDE
New SME Supplier
Companies
Company diagnostic/ audit of SMEs
Prepare compliance/
deficiency report
Linkage team meets procurement
managers to quantify non-core &
core business available to SMEs
e.g services, components, etc
Team works with procurement
managers/engineers on prequalification, qualification &
tendering requirements
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
Needs Additional
Assistance
No Progress
Drop from list
Requirements established and
agreed and made available to
SMEs
INCREASED BUSINESS LINKAGES
Assisted by
local
Business
Dev. Service
Providers
Periodic
Reviews To
Monitor
Progress
Local SMEs competent to
bid and deliver on
standards required by
large corporations
SAIBL DIAGNOSTIC & CAPACITY
BUILDING AREAS
Mentorship and Training
Business Management
Skills
Business Linkages
Matchmaking
Tender preparation
Marketing and Sales
Production and Capacity
Improvements
Business Planning and
Sourcing Finance
Financial & Working
Capital Management
Management Information
Systems & Accounting
Quality Management &
Assurance
Certification (ISO)
SME DEVELOPMENT PATH
+
ult
Co
ns
g&
ali
Entrepreneurs
with specific
demands and needs
zat
ion
Ma
na
ge
me
nt
-
Entrepreneurs with
basic demands and needs
ce
Entrepreneurs who don't know what they
don´t know about managing a modern
business
-
of
n
rie
pe
Ex
ss
Tr
ain
in
rm
e
sin
Bu
ing
Fo
-
CHAINS OF SERVICES
Enterprise
Level I
don´t
know what
they don´t
know
about
running a
modern
company
Promotional
Actions
Radio program
Focused on
the product
Consult via phone
and internet
Involved in
all aspects
Business roundtable
Don't
understand
the
magnitude of
their
problems
Group and self
diagnostics
Don't easily
accept they
have
problems
Workshops
Enterprise
Level II
Basic
demands
and
needs
Personalized
style with little
delegation
Poor
administration
Confuse
symptoms
with problems
Interventions
TRAINING &
MENTORSHIP
Customer Support
Sales Management
Interventions
CONSULTING &
COACHING
Customer Service
Specific
demands
and
needs
Company
Diagnostics
Organization
Entrepreneur
Level IV
Enterprises
with
verifiable
economic
improvement
(impact)
Management
Marketing Plan
HR Management
Business
Management
Leadership
Negotiating
Techniques
CONSULTING
Diagnostic Services
Organization
Access to credit
Enterprise
Level III
Marketing
Production &
Process
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
Marketing & Sales
Finances
Production & Process
Quality Assurance
MIS
Technological Innovations
Internet Commerce
Work Safety, Health,
HIV/AIDS
Environment & Clean
Production
Financing
Linkages & Outsourcing
MIS
SME Clusters
Competitive
Enterprises
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 market
Synchronization 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 penetration
Market 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 Wines
Impact: 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.
THANK YOU
South African International Business Linkages
(SAIBL)