Why effective communication is important for SMEs

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Communication is an important part of marketing – how you communicate your message in terms of what your business offers and your value add is crucial.

Is there consistency to your messaging, which helps in building a good solid brand; whether it is on your website, your sales brochure or when you speak directly to your clients, and is it clear and easy to understand?

Communication is important in building strong customer/client relationships and retention.  All SMEs want to keep their existing clients as well as grow their client base.

Your clients will be more forgiving if for example, you are late on a delivery but you communicate this beforehand rather than just not saying anything. Don’t cause your suppliers, customers and staff frustration by not communicating timeously. Your customers will lose trust in you and you will lose them to your competitors in no time.

It is also important to get your communication foundation right from when you are small, because otherwise when you grow as a business, your communication issues and challenges will grow with you.

Practical tips for small business owners to become better communicators

  1. Create a communication- friendly environment. If you as the owner, value good communication, you will set the tone and encourage others to follow you.
  2. Hold useful weekly meetings with staff (time is money, so get to the point and don’t waste time talking about irrelevant items)
  3. Listen (news flash: you may not have all the answers) and if you don’t understand something, then ask for clarity and seek to understand.
  4. Ask for feedback. Yes- I this might be very uncomfortable for some of you, but you have to do this. This opens communication with customers and staff and will build trust and loyalty in your business.
  5. In the event of a crisis or conflict – Respond quickly; acknowledge what is going on and that you are attending to the issue. Don’t ignore the feedback or be in denial.
  6. Read objectively through all of your marketing material and customer communication – is it concise, clear and consistent? If not, review and make changes. You may need some help with this.
  7. Stop assuming everyone knows what is going on in your head. As small business owners, you are often having to run around performing many of the roles in the business, so you may be too busy to notice that not everyone is up to speed with what you are busy with, important information or challenges you are facing. No one is a mind reader. 
  8. Combine a few communication methods or different channels to best suit your clients & prospective clients. Not everyone loves email newsletters, but perhaps your clients prefer short mobile communication.
  9. Be aware of your body language (this speaks to non-verbal communication).  Actions speak MUCH louder than words, so make sure you are aware of what your body language is communicating, as it might be negative. Be professional at all times.

I do believe that as a small business owner, you need to be very honest with yourself– do a communication check, and what I mean by this is, how do you rate yourself as a communicator and communication levels in YOUR business? How do staff rate you, what are your customers saying? What do you need to improve, to help your business grow?

The good news is that every small business owner can improve on this. And you will improve in your personal life too. After all – we all want to be better communicators at home, with our kids, our spouses, our partners, family and friends.

Remember, the way you communicate will either enhance or inhibit your success and growth as a business. Paul J Meyer said “COMMUNICATION- The human connection – is the key to personal and career success. We couldn’t agree more! Jessica Cilliers is head of Marketing and Communication for SAICA Enterprise Development. Our vision is to play an active role in economic transformation in South Africa through advancing the sustainable growth of entrepreneurial Black businesses

Are ratings agencies too powerful?

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The rising gap between developmental needs and available financial resources – including poor revenue collection – has pushed sub-Saharan African governments to consider different options to support their budgets.

One route to raise capital has been the issuing of sovereign bonds on international financial markets. But to do this successfully, governments need a sovereign credit rating from at least one of the three dominant international credit rating agencies. These are Standard & Poor’s (S&P), Moody’s and Fitch. The number of African countries seeking a sovereign credit rating has increased from one in 1994 to 31 in 2018.

There’s been growing dissatisfaction with the three agencies. A number of rated countries on the continent, such as Nigeria, are unhappy, joining a chorus of dissatisfied voices around the world. Their unhappiness stems from the fact that, outside the US and the European Union (EU), the agencies don’t subscribe to any international regime or governance body. This means that their misconduct remains largely unchecked.

The international rating agencies have operated unregulated even though the need for them to be regulated has become apparent.

The EU and US provide examples of how it can be done. After the 2008 crisis the EU introduced regulations and several directives to manage the agencies more tightly. In the US, the Dodd-Frank & Consumer Protection Act of 2010 expanded the regulatory power of the Securities and Exchanges Commission to enforce full disclosure about the rating agencies’ methodologies.

The only country in Africa that has comparable laws is South Africa –although there is still very weak to no civil liability of rating agencies. These laws were passed partly to make it easier for European countries and the US to litigate against rating agencies in cases of misinformation, as well as controlling their influence.

There are no laws elsewhere in Africa to hold the rating agencies’ operations on the continent to account. And there’s no central coordination of their activities within individual African countries. This is because no single institution is responsible for administering their regulations or managing them. Either the ministry of finance, or sometimes the central bank, works hand in hand with rating agencies and liaises on issues relating to a sovereign’s rating profile.

So what can African countries do? The problem is that, as the influence of international rating agencies continues to expand, individual African countries have limited power to act against them. One possibility is that the continent establishes collective and well defined ways to ensure they present a common front to the rating agencies.

In 2015, the Zambian government urged investors to ignore unsolicited credit downgrade from the rating agencies. It challenged the correctness of its rating, which it said hadn’t been discussed with the country’s representatives.

In 2017, Namibia rejected Moody’s decision to downgrade the country’s credit rating to junk status. It said the downgrade was contrary to its generally stable economic outlook.

The government of Nigeria also strongly disagreed with its downgrading. It questioned both the general rating premises as well as the agency’s conclusions. The government believed the economy had successfully emerged from a recession and recorded important improvements across a broad range of sectors.

In 2018, Tanzania criticised Moody’s decision to assign a low credit rating with a negative outlook on the country’s first international credit rating. Tanzania rejected the rating. It argued that it hadn’t been thoroughly consulted.

There are more general complaints too. Judging from the way in which African countries are rated, an argument could be made that rating agencies view the African continent as a homogeneous entity.

They appear to consider all African economies as unstable. Only three – Mauritius, Morocco and South Africa – out of 31 rated countries have a rating just above “junk status”. Only one – Botswana – has an A-class rating. Compared to other regions, 87% of African countries are rated “junk status”. That’s compared to approximately 19% in Western Europe, 27% in the Middle East, 38% in Central and Eastern Europe, 54% in Asia Pacific and 55% in Latin America and The Caribbean.

The effect of this is that African countries have to issue sovereign bonds at high discounts, and are subject to higher interest rates.

Another area of contention is that credit rating methodologies consistently over-emphasise political risk in the rating criteria. Political components constitute approximately 50% of the composite rating. Other components such as financial and economic components each contribute to the remaining 50%. While the qualitative factors are judged purely based on the ideology of the credit analysts, their perception towards the political institutions in Africa is generally negative.

The data shows that the rating agencies have downgraded more countries than they have upgraded over the past 24 years. There have been 47 downgrades, compared to only 22 upgrades and 113 negative changes in outlooks; only nine positive changes have been recorded.

Solutions and action plan

African countries should design a collective response mechanism to save the continent from rating abuse. This mechanism can also be used to bring the operations of agencies under control. The aim should be to avoid unfair and exploitative business practices.

One option would be for the African Union to establish a continental regulatory authority. It could govern the cross-border activities of international rating agencies, administer a prudential standard framework and evaluate the accuracy and fairness of ratings assigned to particular countries.

Dr Misheck Mutize

Lecturer of Finance, Graduate School of Business (GSB), University of Cape Town

This article is republished from The Conversation under a Creative Commons license.

OppiKoppi cancellation: hard knock on SMEs

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This week’s OppiKoppi cancellation is yet another example of how crime affects South Africans, particularly, small businesses.

Matchbox LIVE CEO Theresho Selesho, organiser of OppiKoppi announced in a statement on Wednesday that the 25th OppiKoppi music festival in the mining district of Northam, Limpopo, will not take place this year – after the 2018 event was ruined by criminals targeting attendees.

Having being expected to take place between August 8 and 10, Business Day says that the cancellation brings forth disappointment for SMEs who worked in preparing goods, designers, promoters and other creatives who had been part of the festival with the hope of strengthening their brand at the festival this year.

Hezron Louw of Sumting Fresh told Business Live that his business will feel the impact of the cancellation‚ as the festival provided a major boost to annual turnover. “There are people who sell firewood‚ others that sell liquor and meat. Even supermarkets [will feel the pinch] because people travelling from outside don’t usually stock up on what they will need until they get to the area‚” he said.

There will be a negative impact on local job creation and employment because “we also employ local people from Northam for the festival‚ train them on food safety and get them on board to work with us. We have had regulars who have worked with us for three to four years, but this year there will be no work for them‚” said Louw.

Braai Guru, a new and authentic enterprising meat company in Randburg, also told Business Day that they had hoped to take their business to a festival in the Netherlands in 2020 and say that “attending the festival was not just about the immediate financial gain but was used as a “springboard” to get access to international festivals.”

Selesho said: “By taking a gap year, we are giving ourselves the breathing room to redesign the festival and bring in the necessary changes without impacting the festival-goer by increasing ticket prices.”

Times Live featured posts from the event’s Facebook page of people’s safety concerns:

  • “I had a great time last year but the theft was out of control, which is making me sceptical of ever going again.” – March 24
  • “Too much theft going on. I can’t fully relax knowing I have to be alert at all times. Looks like the best of ‘Koppi is in the past with these tsotsis flocking after all the big festivals.” – January 14
  • “It’s a thief paradise, guys. Used to be well managed, now they steal everything. Won’t recommend it to anyone with anything of value. They steal everything, from food and cooking equipment to smashing windows, taking everything in your car.” – November 2018

“We’ve had some crime issues in the past, but this year (2018) was the worst,” Selesho said. Speaking to News24, he promised that the festival would return in 2020.

To curb the increasing crime rate and safety of the festival goers, Selesho says that “we are even investigating bringing the festival to a venue closer to a major city, to enable day tickets, less travelling and other options for the attendees.

The SME Fund is great, but access to market still the big issue

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While President Cyril Ramaphosa’s launch of the R1,3 billion investment fund for SMEs is positive news, an economist has warned that this was not a silver bullet for all small business’ problems.

Andile Ntingi told Khwebo Online said the establishment of the fund is a step in the right direction because there is a scarcity of investment capital in South Africa to support black-owned enterprises.

“This development is exciting, but I am interested in knowing how is the fund different from the Credit and Equity Funding provided by the likes of National Empowerment Fund (NEF) and the IDC? How different is it to commercial banks? Will it provide cheap funding tailor-made for start-ups and businesses in their early stages”.

President Ramaphosa launched the fund at the Discovery’s head office in Sandton on March 29.

The fund will support prominent black businesses, five black entrepreneurs, and 200 SMEs giving them amounts ranging from R19.7 million to R495 million for the next five years. This funding also comes with mentoring programmes for these SMEs

Speaking at the launching Ramaphosa said: “This initiative is beginning to pay off and is operating at a level that matters most. SMEs create the jobs we need the most. It is the SMEs you are targeting, and that is precisely where we want you to keep your focus”.

“This will obviously boost SME sector, but I hope this fund will have a risk appetite to fund black businesses than what we have currently in the market. If the fund operates like other risk-averse funds, then it will not have an impact, said Ntingi.

He added that South Africa’s SMEs challenge is access to market opportunities. “Even if we address funding, there is also another bigger challenge of helping black businesses access procurement and supply chain opportunities in both the public and the private sectors. If you don’t have customers, you don’t have a business,” said Ntingi.

Ntingi felt opening up the economy to more black businesses to access procurement and supply chain is a better way to go. He said: “There are hundreds of thousands of black owned businesses in South Africa and R1.3 billion will never be enough to cater for all of them, some of these companies do not need capital, they just need contracts that get them to the next level”.

He added: “I hope the government also prioritises expanding the preferential procurement policy to ensure that it truly opens up the economy to black suppliers. This could be the most important thing that helps black businesses get to the next level”.

Ramaphosa appoints Fourth Industrial Revolution commission

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President Cyril Ramaphosa has appointed members of the Presidential Commission on the Fourth Industrial Revolution (4IR) which will assist government in taking advantage of the opportunities presented by the digital industrial revolution.

The task of the Commission, which will be chaired by the President, is to identify relevant policies, strategies and action plans that will position South Africa as a competitive global player.

The Deputy Chair of the Commission is University of Johannesburg Professor Tshilidzi Marwala, whose expertise spans the theory and application of artificial intelligence to engineering, computer science, finance, social science and medicine.

In his State of the Nation Address to a Joint Sitting of Parliament on Thursday, 7 February 2019, President Ramaphosa said South Africa had chosen to be a country of the future at a time when the world was changing at a pace and in a manner that was unprecedented in human history.

He said revolutionary advances in technology were reshaping the way people work and live.

“Unless we adapt, unless we understand the nature of the profound change that is reshaping our world, and unless we readily embrace the opportunities it presents, the promise of our nation’s birth will forever remain unfulfilled,” the President said.

In the same Address, the President announced the establishment of a Presidential Commission on 4IR.

In establishing the Commission, a public consultation process was undertaken to attract eminent people who possess relevant skills and knowledge required to drive 4IR.

The 30-member Commission, Chaired by the President, comprises eminent persons from different sectors of society and reflects a balance in gender, youth, labour and business including digital start-ups as well as digital entrepreneurships.

The commissioners (whose profiles can be viewed in an annexure at https://bit.ly/2ELYzQ8) are:

– Prof Tshilidzi Marwala (Deputy Chair)

– Prof Chris Michael Adendorff

– Ms Beth Arendse

– Mr Thulani Humphrey Dlamini

– Mr Abdul Razak Esakjee

– Dr Bernard Lewis Fanaroff

– Mr Michael Gastrow

– Mr Xolile Christopher George

– Ms Charmaine Houvet

– Dr Prince Senyukelo Jaca

– Mr Tervern Liaan John Jaftha

– Mr Mohamed Shameel Joosub

– Ms Marinda Kellerman

– Ms Nomso Kana

– Mr Baxolile Mabinya

– Mr Rendani Mamphiswana

– Ms Lindiwe Matlali

– Mr Calvo Mawela

– Ms Busisiwe Mbuyisa

– Ms Nomvula Mkhonza

– Mr Vukani Mngxati

– Mr Joseph Ndaba

– Mr Andile Ngcaba

– Dr Nompumelelo Happworth Obokoh

– Mr Rendani Praise Ramabulana

– Mr Leon Desmond Rolls

– Dr Sibongiseni Thotsejane

– Mr Gerhard van Deventer

– Mr Ben Venter, and

– Ms S’onqoba Vuba

Operational support to the Commission will be provided by a secretariat of officials of various national departments, led by the Department of Communications.

President Ramaphosa has wished the Commission well in its endeavours and has expressed his appreciation to commissioners for availing themselves to serve the nation in an important determinant of South Africa’s development trajectory in the coming years and decades.

Minister of Communications Ms Stella Ndabeni-Abrahams, who is the coordinator of government’s 4IR programme, is due to convene an induction session with appointed commissioners, after which the Commission will have its inaugural meeting with the President.

Issued by: The Presidency

Taxi fare is going up

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Taxi commuters need to brace themselves for an increase in taxi fare prices, this after a petrol hike of R1.31 more per litre and electricity of over 9.4%.

Speaking to Khwebo Online, Chief Strategic Manager at the South African National Taxi Council (Santaco), Bafana Magagula says that “when crisis such as the main commodity, fuel and electricity go up, it affects our main tool to commute people. This not only means that commuters need to pay more money, but the cost in maintaining taxis and buying parts becomes expensive.”

The price hike in petrol and electricity will directly affect public transport commuters. Santaco understands that commuters may not afford another taxi fare increase, however, because they are not subsidised by the government, “we rely on commuters to pay for transport and bear with us when the taxi fare goes up,” Magagula says.

Energy hikes go deeper in the pocket of the operator as they too are providing a service. Santaco thus says that if taxi associations feel it is the appropriate time to increase the fare price, they may do so.

Magagula notes that Santaco and taxi associations have been empathetic to the needs of commuters. “We have tried to not go up each time the price of petrol goes up because we think of our commuters. For example, a taxi fare which was R8.00 five years ago is now only R11.00.”

“As Santaco we have discussed this issue to say that commuters must expect an increase and we appeal to taxi associations to give a seven – day notice before the taxi fare increases and put notices on their vehicles as well as local newspapers and stores,” Magagula says.

There is no set date of when the taxi fare is set to go up. Santaco’s Public Relations Officer, Midday Mali, says that should the decision be made to increase fares, the hike would be expected to happen between June and July.

Some taxi associations have expressed that they cannot increase the taxi fare because the communities in which they transport cannot afford to pay more.

Mali says that they are still deliberating on prices and “we are going to bring the matter down to the ground so that they can propose the percentages that they are looking at. These will differ from one route to another as there are local operations, regional operations as well as long-distance operations.”

Taxi associations are running their business at a serious loss. “Ten years ago the price to travel by taxi was a lot cheaper but has now gone up by 50%. The extra costs of increased fuel have amounted to a 25% increase in taxi fares in the past 5 years,” adds Magagula.

Mali concludes that they “are not just going to increase to make profit but the increase is to cover our costs that we are incurring in the business.”

Corruption and the cost to business

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I am sure like everybody else, you have been reading about the massive corruption being unearthed by the various investigative bodies and journalists in our country.

Just this past week the Zondo Commission was in full cry, and Pieter-Louis Myburgh released his book on Ace Magashule. The numbers are astronomical. Depending on who you believe – South Africa has lost R30-R300 billion per year because of corrupt practises. Horrifying.

But for me the bigger loss is the loss of opportunity.

The past eight years have been described as the “forgotten years” or the “lost years”.

This phrase really hurts my heart because it is so true. R30 billion across eight years is R240 billion that could have solved so many of our country’s ills. Imagine that sort of investment in youth education, housing or the medical field.

But Chris, you are a media guy, what’s this got to do with anything. Well, everything I would postulate.

The impact on advertising investment: firstly, while the world markets are all ticking up, our markets continue to tick down.

Business confidence and performance has a direct link on ad spend. Net effect is a direct impact on advertising investment.

I have had numerous discussions with South Africa’s biggest media owners, all of whom without exception stating that this is the hardest economic climate they have ever traded in.

In years gone by the adage “flat is the new up” was jokingly bandied about. Now it is cried out in desperation and frustration.

Lost revenue means less investment in content, less investment in production, less investment in acquisition, and less investment in developing the new, smart, and amazing.

Only the strong, nimble, agile and intelligent will survive. The end is nowhere in sight. Buckle up boys and girls, this ain’t getting better any time soon.

Electricity supply and your TV ratings: Britta Reid recently wrote an excellent article on the impact of load shedding on TV ratings.

The numbers are scary. In heavy load shedding weeks, up to 35% of audiences are lost. As with the overall corruption problem, that is also a lost opportunity.

An opportunity that businesses would have had to sell more products, make more money, and invest in our country. TV stations have for the most part dug in their heels when it comes to compensation (rightly or wrongly). But lower ratings will no doubt impact them down the line as rate setting and projecting will become even more of a gamble.

Are your magazines reaching their readers? Many magazines use the South African Post Office to deliver to their most loyal readers, their subscribers. Advertisers gladly pay for their ads assuming that it lands in every hand promised at the right time.

Well, considering the challenges at SAPO that is no longer a straight guarantee. Some magazines probably arrive months later due to the inefficiencies. Opportunity lost once again…

The challenge with corruption is that it permeates and impacts every fibre of our business. Whether it’s ratings on TV, magazines (or lack thereof) in the hands of consumers, illegal billboards, fake news stories being broadcast, or real news stories not being broadcast – there is no getting around it. Corruption has a deep impact on what we do every day.

President Ramaphosa has a massive task ahead of him. He will need time, backing, investment, and a brave soul to turn this country around. Most importantly, this is not a problem solely solved by government. Government simply can’t. Private enterprise and big business needs to jump in. It affects all of us.

One has to believe that it is not all doom and gloom going forward. As an industry we are a collective of creative genius! We are diverse, and inspired.

This year should be the year where we launch new agencies (like Meta Media), where we inspire our staff, where we lift up the youth in our industry. Where media owners need to help build our nation through education and inspiration.

We have access to the whole country through our platforms. So let’s get our hands dirty. Bring on May 8. Thuma Mina.

Chris Botha is Group Managing Director of Park Advertising

Is your SME credit worth?

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At some point, every small business will require some form of credit which will be instrumental in enabling it to grow to the next level.

Valentine Jingura, Head of Pricing at FNB Business, said that without knowing and understanding the different forms of loans or funding mechanisms available, SMEs won’t be able to fully leverage credit to scale-up their businesses.

“Certain loans are suited for specific uses depending on the nature of the business and its requirements,” said Jingura, as he unpacks different forms of loans:

Alternate funding options 

Entrepreneurs often mistakenly assume that credit from banks is suitable for all their needs. In some instances your own equity, loans from private investors, family and friends, government funding and grants from Corporate Enterprise and Supplier Development Programmes (ESD) may be more suitable for early stage funding. 

Secured 

Businesses are required to provide some form of collateral which financial institutions can use as security for the loan amount being provided. Security can be physical assets like property or financial instruments such as a savings account or share portfolio. 

Unsecured 

This form of loan requires no collateral. The loan is granted based on the business’ financial standing and ability to repay the loan in the future. For example, short-term credit for an emergency or unforeseen event.  

Credit facility 

Allows the business the flexibility to withdraw, repay and re-use credit at its convenience. i.e. a business credit card or overdraft.

Commercial property finance 

This type of loan is used to finance the building or premises where the business will operate. i.e. a small office or large warehouse.

Asset finance

Is used to finance business equipment, vehicles and machinery.

When applying for credit it is essential for entrepreneurs to understand what lenders lookout for when reviewing a credit application. 

This can be practically achieved by answering these four questions:

1. How much money is needed and what for?

2. Does the business have a good credit standing or collateral if required?

3. Does the business understand its current vs future cashflow – and has the affordability of the loan instalments been stress tested?

4. How quickly will the loan be paid back?

“Before deciding on the type of loan you need to do your research and speak to your banker or expert to ensure you are utilising the best form of credit for your business,” concluded Jingura.

Bridging the formal and informal jobs sector

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South Africa has a jobs crisis. In the fourth quarter of 2018, 6.14 million people were out of work, an unemployment rate of 27.1%, which is one of the highest rates in the world, along with sub-Saharan African countries like Lesotho, Mozambique and Namibia.

South Africa’s labour market has another important distinction. Only about three million people who are working – about 18% of all employed (16.53 million) – are in the informal sector. That’s much lower than other developing countries. For example in India and Ethiopia, up to 50% of those with jobs are employed in the informal sector. The figure is as high as 90% in Ghana and Mali.

There are two schools of thought around the role and value of a country’s informal sector. Some argue that it’s an important alternative to the limited opportunities available in the formal sector; a survivalist strategy that allows those without much formal education to work and earn money. In addition, others argue, the informal sector is also an important space for entrepreneurs.

But there are some who disagree, arguing that employment in the informal sector tends to be poorly paid and precarious. A mere 20% of informal sector employees are hired permanently, compared to 70% of those in the formal sector.

Little is known about how many people transition between the two sectors, a phenomenon called “churning”. Addressing this knowledge gap is important for a number of reasons. These include the fact that informal workers may be spending some time in the formal sector, getting valuable skills and work experience to boost their chances at formal employment, with the hope that they eventually settle permanently in the formal sector, which would be good news.

Conversely, knowing whether there’s a high rate of transition from the formal to the informal sector would be cause for concern because it would suggest high rates of retrenchment and fewer formal job opportunities.

We set out to understand “churning” between South Africa’s formal and informal sectors. To do this we analysed data from the country’s National Income Dynamics Study – a study that was conducted four times between 2008 and 2015 by the Southern Africa Labour and Development Research Unit based at the University of Cape Town’s School of Economics.

We found there was a lot of movement between the informal and formal sectors during these years. But there were very few instances of people making successful, lasting transitions from informal to formal sector employment.

This emphasises South Africa’s skills mismatch. The formal sector requires skills that those in the informal sector simply don’t have. More education and support is necessary to bridge this gap.

Our data were drawn from the National Income Dynamics Survey, which is the first national household panel study in South Africa. It examines the living standards of individuals and households over time.

By analysing data from the four waves of the study we were able to make some key findings about churning, and about the informal sector more broadly. These included:

  • Only 8% of those surveyed were inactive (7%) or unemployed (1%) in all four waves – that is, throughout the seven-year period. About 54% were employed in one to three waves, meaning they worked transitorily but not continuously;
  • only 3% worked in the informal sector in all four waves;
  • only 12% always worked in the formal sector during the seven years under review; and,
  • 8% of individuals worked throughout the seven years under review but transitioned between the two sectors.

These results clearly indicate that a high proportion of the labour force participants have been in and out of employment (which is not surprising, given the country’s high unemployment rate), some workers enjoy the privilege of always working in the formal sector, and most importantly, churning between the informal and formal sectors definitely takes place to some extent.

The findings also emphasised how precarious the informal sector is. For instance, 67% of those who started off working in the formal sector in 2008 remained there seven years later. This suggests that for those who initially secured work in the formal sector, retrenchment likelihood is not as high as perhaps anticipated. The retention figure in the informal sector was just 39%. Only 27% of those in the informal sector successfully transitioned to the formal sector.

The country’s many social inequalities were evident in the data. Black women without school leaving certificates aged between 25 and 44 years were most likely to remain in the informal sector. Highly educated white men living in the urban areas of Gauteng and KwaZulu-Natal provinces were most likely to successfully transition from the informal to the formal sector.

Given what we’ve learned from this research, how might the government and policy makers deal with those who “churn”?

First, the country’s education system must do more to produce skilled labour in the areas the economy requires. Formal firms could help here, by providing assistance and information on what skills are needed and how to develop these. This implies that strengthening the partnership between industry and universities is important, as this would help those who are able to access higher education.

Those who don’t go on to higher education, or don’t complete their secondary schooling, also need to be helped. The government should more actively provide workshops and specialised assistance to enhance entrepreneurship skills and advise small informal firms on growth strategies. These incentives will assist in their growth, long-term sustainability and successful transition to the formal sector.

In addition, larger, more established formal firms can also play a role by helping to develop and train informal sector workers and providing expert guidance to informal firms. This assistance can be incentivised through tax reductions and the prospects of a larger collective market via the informal sector.

Lastly, the government should continuously alleviate the numerous barriers to the informal economy. These include limited credit and training opportunities, poor infrastructure and the red tape that makes it difficult to start a business.

Written by Moegammad Faeez Nackerdien, Lecturer, University of the Western Cape and Derek Yu, Associate Professor, Economics, University of the Western Cape

This article is republished from The Conversation under a Creative Commons license.

SAICA makes more entrepreneurs financially savvy

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The South African Institute of Charted Accountants (SAICA) today graduated 29 entrepreneurs from its Enterprise Development programme. This is part of the institute’s quest to make small business people financially savvy.

 “This is one of the favourite highlights of our year, when we get to celebrate the growth and development of these amazing entrepreneurs. What a privilege to have watched their journey over the past year, and they are praised for their tenacity and commitment to the programme. We believe that through our Financial Excellence programme, these entrepreneurs will be better positioned to access funding, to take their business to the next level,” says SAICA Enterprise Development CEO, Annie McWalter.

SAICA Enterprise Development (SAICA ED) believes that creating financially savvy entrepreneurs will help businesses grow sustainably and ultimately employ more people.

According to the institute, 90% of SMEs who received financial coaching in 2018 say their effectiveness and ability to achieve their business objectives have improved while 96% of the graduates say their business experienced a growth in turnover. Also, 62% of the participants recorded growth in Profitability and created additional jobs.

“My main obstacle was my lack of overall business and financial acumen, as well as understanding compliance and tax. But thanks to the SAICA Enterprise Development programme, I have turned my adversities into success.” Said Tshepo Molewa of E2tu, one of the beneficiaries of the programme.