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Small Enterprises, Big Changes – How Mentoring Makes a Difference

Last Updated Jan 2011

Thirty hours may feel like a lifetime if you're spending it on an aeroplane en route to a far-off land, but it's a drop of time in an average working person's life. Spend that time mentoring an entrepreneur and you will have made a difference that is timeless.

Small to medium enterprises (SMEs) play a vital role in the development of the South African economy. According to a report from the Policy Board for Financial Services and Regulation at the South African Reserve Bank, the total economic output of SMEs is approximately 50 per cent of our gross domestic product (GDP). In addition, this sector employs more than 60 per cent of the total labour force. It follows that unemployment - a serious concern in our economy - can be reduced through the successful promotion of SME output.

Furthermore, the 2009 Executive Report of the Global Entrepreneurship Monitor (GEM) has shown over the last 10 years that entrepreneurship is essential for economic development. "Business entrepreneurs drive and shape innovation, they speed up structural changes in the economy, and they introduce new competition, thereby contributing to productivity."

South Africa's entrepreneurs, however, face formidable challenges, not least of which is the historical disadvantage for some of having been on the receiving end of the apartheid stick. Recent research by Magda Hewitt on behalf of the Small Enterprise Development Agency (SEDA) looked at factors affecting the success or failure of SMEs. Hewitt, a Senior Lecturer at the University of Johannesburg (UJ), Department of Entrepreneurship, found that by comparison with countries such as Chile, Thailand, Mexico and other emerging markets, South Africa "establishes, sustains and grows fewer businesses per head of population".

More startling was the fact that according to GEM, South Africa's entrepreneurial levels have actually declined since 2001. A number of factors may contribute to this, says Hewitt, including a lack of formal education and useful business networks, especially among black entrepreneurs. "The need to learn the skill on how to network was identified among black African men, women and white women," she concludes.

An initiative launched three years ago by the South African Institute of Chartered Accountants (SAICA) provides established black entrepreneurs with access to networks that can make a difference to their business. The Black Entrepreneur Initiative (BEI) works with small to medium-sized enterprises (SMEs) with an annual turnover of between R1-million to R5-million. SAICA members who are Chartered Accountants [CAs(SA)] provide 30 hours of mentorship, either as individuals or as a company, to tackle a range of business issues from VAT registration and returns, budgeting, pricing, cash flow planning, to more complicated issues such as strategic planning, management structures, identifying potential new markets and marketing.

SAICA's objective is to ensure that the chartered accountancy profession is a socially responsible driver of business and skills development; its strategy is to develop and empower previously disadvantaged South Africans. The BEI project sets out to achieve this and encourage companies to expand their social objectives by supporting and encouraging Enterprise Development, a component of Broad Based Black Economic Empowerment (BBBEE).

The BEI is simple and very effective by providing financial advice to emerging entrepreneurs and their businesses through mentorships, and in so doing contributing towards business sustainability, job creation and economic growth. Workshops attended by suitable mentors and selected business people are used to explain the process. Mentors are then assigned to suitable candidates and both parties sign an "expectations contract". This identifies the key focus areas that will be dealt with for the duration of the assigned 30 hours. It also provides a vehicle for managing expectations and ensures that a regular feedback reports are submitted to SAICA.

SAICA insists that Enterprise Development is a two-way street that benefits all the parties involved. Entrepreneur Lebo Malepa of Soweto Backpackers - the only backpacker hotel in Soweto - joined the BEI programme in 2008. His mentor was Gary Nelson of Primedia's Face-To-Face division. The key focus areas they agreed on were to improve the financial aspects of the business as well as branding, marketing and promoting the hotel.

The mentorship programme has Malepa to put his business on a good footing, getting the tax right and doing the books. Through the initiative Malepa's company has grown, enabling him to have a clear and manageable plan for the future. Soweto Backpackers went on to win second place in the 702 Small Business Awards and it is now ready for the influx of visitors for the FIFA Soccer World Cup.

Raj Kumar, co-founder and president of Devex, a social enterprise serving the international development, humanitarian aid and global health communities, writing in the McKinsey Quarterly points out; "it is difficult to have a social impact by yourself". Social enterprises - business with a social mission - achieve their goals as a result of "influencing others to follow their lead". The BEI programme highlights the fact that the network of SAICA members acts as social entrepreneurs by "filling gaps in social needs that are left unfilled or poorly addressed by both business and governments"

It is an overlooked truism that, as Kumar says, "social impact happens more through influencing others than through direct action". And what better influence can you have than to be part of a network of mentors who want you to do better.

Marion Pearce is Project Director: Enterprise Development at The South African Institute of Chartered Accountants (SAICA).


Edward Makwana
Project Director: Communication
The South African Institute of Chartered Accountants (SAICA)
Tel: 011 621 6713